On the Legal Front

Rich Tonowski

It’s relatively quiet on the Watch this quarter—a good time to catch up on things that have been slowly simmering as the weather gets warmer.

Let’s take up where we left off:  the Equal Employment Opportunity Commission’s (EEOC’s) proposal to require pay data on the annual EEO-1 reporting form.  A public hearing was held with the expected results:  the civil rights community praised the effort and the business community pointed out problems ranging from the usefulness of the information to the burden of reporting it.  Technical comment has been minimal.  However, Bronars, Blom, and King (2016) implemented a suggestion from critics-- that EEOC try out its methodology on available federal agency data.  The authors noted that the pilot sponsored by EEOC explained data collection but did not consider the quality of the data.  In their study, five agencies with the most significant gender pay gap were identified by the Mann-Whitney test mentioned by the EEOC.  Using multiple regression and controlling for explanatory factors (age, age squared, tenure, tenure squared, education, and occupation), the authors came up with different rankings of gender pay disparity for the agencies; in one case, a 29% initial pay gap was entirely accounted for.  The study indicated that the analyses were not thorough enough for conclusions on pay discrimination but were sufficient to show that a more detailed methodology would lead to conclusions different from methodology proposed by EEOC.  The proposed pay categories were also criticized as being broader than the differences EEOC was trying to detect.

The unresolved question is what can reasonably be expected from the pay data proposal.  There will be new data available by industry and location, two factors mentioned in pay gap discussions.  Presumably egregious outliers regarding pay disparity will get special enforcement attention.  Perhaps the biggest payoff would  come from self-audit as employers note suspicious numbers and investigate further and fix as needed, informed by their own data and policies not shared with EEOC.  Critics have protested that EEOC’s proposal is vague and does not fully follow the recommendations from the National Academy of Sciences that EEOC previously solicited; it is hard to know what to expect.  The relatively low level of enforcement activity by EEOC and the Office of Federal Contract Compliance (OFCCP) regarding pay, presumably where more detailed data than what would be collected on the EEO-1, suggests that a big uptick in pay cases may not be in the offing.

At some point EEOC will finalize its proposal; the proposal will then go to the Office of Management and Budget for approval, likely with another public hearing.

Until then, we can always count on the federal judiciary for interesting news.

The U.S Supreme Court resolved a wage-and-hour dispute (see Banks and Hanvey, 2016 for background) involving “donning and doffing” (D&D). The term refers to putting on and taking off protective gear at the worksite and paying hourly workers for the time it takes.   The plaintiffs in Tyson (2016) worked in a slaughterhouse; they alleged that they were not given enough paid time for D&D.  The unaccounted time would have put them over 40 hours per week and so would have entailed overtime. The company had set a time but it was disputed whether it was adequate.  Plaintiffs arranged for consultants to observe D&D for most of the workers; the average time was way above what the company paid for.  A jury found for the plaintiffs, with the cost to Tyson set at $5,785,757.40; the Eighth Circuit affirmed on a split decision and declined to rehear the case en banc (all the appellate judges, rather than the usual three-judge panel) on a 5-6 vote.  The Supreme Court took up the case to resolve whether “statistical techniques that presume all class members are identical to the average observed in the sample” were lawful and whether the class could include people who may not have a legal claim.

The statistical issues as stated by Tyson require explanation.  Tyson was arguing that the case was akin to “trial by statistics,” something which the Court disfavored with Wal-mart v. Dukes (2011).  Essentially, the notion is that where there are too many individual claimants to manage the trial efficiently, a way out is to take a representative sample of claimants and from that determine how many claims were valid and what the monetary relief should be.  Defendants have objected that this deprives them of their legal right to confront each individual’s claim and that average liability with average payouts means that meritorious claims are under-compensated while invalid claims are rewarded.  Here, the argument was that basing claims on average time meant that the slow pokes were entitled to more money; those that donned and doffed within the compensable time limits should not be entitled to any money, but could still receive a payout.

The underlying problem was that Tyson had not established a defensible time period and had not tried to rebut the technical adequacy of the plaintiffs’ study.  Everything rested on the legal argument.  The Court reached back 70 years (Anderson v. Mt. Clemens, 1946) for precedent where the employer had made no effort to establish D&D time and used that to dispute that the employees were entitled to anything.  The Court had recognized back then that this simply rewarded employers for not paying D&D.

One troubling aspect of this case is that the framing of the questions for the Court, amplified by some commentary in the employment law press, could call into question job analysis results that did not apply uniformly to every employee.  Here, there was something of a job analysis (or time-and-motion study) on D&D.  Arguably, some people chose to take longer than others, which would distort the “true” time required.  But since the company had allegedly not set reasonable standards for D&D and the employees knew they were getting only an allegedly inadequate payment regardless of how long they took, time had to be based on what was actually observed.  Several economists had filed an amicus curiae (friend of the court) brief to express their concern that the case had invited far-reaching implications for the use of statistical evidence.

In the end the Court upheld the verdict in a 6-2 decision, finding that common issues of D&D predominated over differences in specific job and protective gear and so allowing for a class action (here, under the Fair Labor Standards Act [FLSA], a “collective action”).  Since Tyson did not keep records of D&D, the work done by the plaintiffs’ consultant was appropriate.  The case did not allow for (or require) broad findings on the use of statistical evidence.

One commentary suggested that the case should alert employers to bring in their own experts to refute the plaintiffs’ experts.  With all due respect, this is wrong.  Bring in the experts beforehand to establish reasonable D&D time; if necessary, train the employees so they can meet those reasonable standards.

One of the issues highlighted at the legal workshop during the recent SIOP conference was EEOC’s use of subpoenas to get their hands on employer and test-publisher information.  Confirmation of that broad authority recently came in EEOC v. Maritime Autowash (2016), a case involving unequal working conditions and retaliation against Hispanic unauthorized workers.  The appellate court overturned the district court, which had found that because the charging party had no legal right to employment there was no valid complaint.  The appellate court found that the agency could enforce a subpoena to investigate discrimination; whether there were grounds for a subsequent suit or whether people not authorized to be employees could collect monetary relief  if they successfully sued were not germane to enforcing the present subpoena.  The court noted that EEOC would have an interest in investigating and stopping discrimination regardless of what relief individuals might claim.

The proverbial other shoe was dropped three days later by EEOC v. Nucor Steel Gallatin (2016).  The case involves disability discrimination over rescinding a job offer for alleged safety reasons.  With judicial review, the agency can conduct a warrantless, nonconsensual search of private commercial property to inspect the facility and to interview employees.  The recent decision calls to mind the Fourth Amendment’s prohibition of unreasonable searches and the U.S. Supreme Court’s invalidating a portion of the Occupational Safety and Health Act that permitted warrantless searches to catch safety violations because the law conflicted with the U.S. Constitution.  That was more than a quarter century ago.  However, as the Gallatin court noted, there was no blanket prohibition of court-authorized inspections under the equivalent of a warrant.  The agency has broad authority to gather information, there is a procedure for an employer to dispute the necessity of the subpoena, and only a federal court (not the agency) can finalize subpoena enforcement.  Here, the court granted subpoena enforcement but limited the investigation to what reasonably pertains to the position at issue.  Whether this makes for a change in investigative procedure remains to be seen.  EEOC argued that on-site investigative activity is routine.  But the case indicates that EEOC’s reach is not limited to job descriptions or other second-hand job information.  Notwithstanding the employer’s (unpersuasive) objections regarding burden and safety, investigators can go on-site to check out the job for themselves.

EEOC was not totally successful with the courts.  The U.S. Supreme Court unanimously (8-0, with the late Justice Scalia’s seat vacant) overturned the Eighth Circuit’s canceling a $4.7 million bill for attorneys’ fees (EEOC v. CRST Van Expedited, 2016).  The trial court had bounced the agency’s sex discrimination suit and awarded costs to the company.  The Court of Appeals reversed on grounds that the award was appropriate only if the company had prevailed on the merits of the case.  Since the case had been tossed for lack of investigation and conciliation regarding a putative class of women, there had been no trial and so no merits determination.  The Supreme Court noted that no other appellate circuit had made this merits distinction.  The agency does not have to fork over the money yet.  The case will go back to the lower courts to determine if EEOC’s suit was frivolous; or, if had it started out legitimately, the agency dragged it out when it knew there was no substance.  EEOC may still prevail.  The case will play out under the Court’s determination in Mach Mining (2015) that the judiciary can conduct only a “bare bones” review of EEOC’s conciliation efforts.

And there was an amicus brief that EEOC filed in a case involving obesity (Morriss v. BNSF, 2016); the Court of Appeals did not buy its argument.  Morriss had a conditional employment offer as a machinist rescinded because his body mass index was over 40 (Class III obesity).  District court ruled, and the Eighth Circuit affirmed, that the Americans with Disabilities Act (ADA) comes into play only if weight is outside the normal range and it is the result of a physiological disorder.  What is particularly interesting is the argument regarding whether Morriss was “regarded as” disabled by BNSF.  The appellate court reasoned that the perception that a physical characteristic (as distinct from physical disability) “may eventually lead to a physical impairment defined under the Act” does not mean currently “regarded as” disabled.   EEOC‘s argument was that a predisposition to illness must be understood in the context that discrimination based on the consequences or attributes of a disability is equivalent to discrimination based on the disability itself.  Also, obesity itself can be viewed as an illness.  The court’s view was that the employer’s concern, a current non-disability (obesity) would present an unacceptable risk of developing certain medical conditions in the future, with consequences for what was classified as a “safety sensitive” job , does not constitute “regarded as” having a disability.  In contrast, the EEOC’s position would seem to be that perceived risk is perceived disability. 

Implications for I-O

The addition of pay data to the EEO-1 report continues to be controversial.  Assuming that some regulation will ultimately be implemented, the I-O concern is having a data collection tool that produces meaningful, actionable data.  And actionable does not necessarily mean increased EEOC litigation.  Likely both the agency and employers’ legal counsel will be promoting self-audit, with the employers able to bring in data and compensation strategy not subject to disclosure.  Of course, those who find burdensome pay reporting for the EEO-1 may not be inclined to burden themselves further with self-audit.  Still, there she should work for I-Os in this area, and also for attorneys to maintain non-disclosure of sensitive internal information.  Discussion in professional circles regarding statistical analyses of pay discrepancies, performance assessments to determine who gets what monetary rewards, career paths, and everything else in personnel management that affects pay should be welcome.

Tyson illustrates the wage-and-hour realm that Banks and Hanvey have marked as ripe for I-O attention. Job analysis, job design, and work methods training all figure in this.  Suits over who is exempt from FLSA and therefore not entitled to overtime have skyrocketed. 

EEOC’s zealous (some would say aggressive) pursuit of systemic discrimination cases has raised concerns regarding what material the agency can get and how secure is that material in the agency’s custody.  This writer has fought his share of disclosure fights.  There is a need, and a right, to protect proprietary information owned by the employer, consultant, or test publisher.   At the same time, enforcement agencies have a need, and a right, to information for pursuing discrimination charges.  Formulating a plan regarding what to provide, under what safeguards, should be done before it is needed.  This is primarily a legal issue, but the I-O may be the one who can articulate the consequences of inappropriate disclosure and suggest means of satisfying the agency’s information need while protecting the information holder’s interest.  It would also be prudent for the employer and the employer’s experts to know what’s going on in the organization before they hear it from the EEOC.

The notion of risk under the ADA may be in for discussion, especially since the implications of the amendments enacted in 2008 are yet being explored in the courts.  At issue is EEOC’s interpretive guidance, 29 C.F.R. 1630 Appendix § 1630.2(h), that states in relevant part: 

It is important to distinguish between conditions that are impairments and physical, psychological, environmental, cultural and economic characteristics that are not impairments.  The definition of the term “impairment” does not include physical characteristics such as eye color, hair color, left-handedness, or height, weight or muscle tone that are within “normal” range and are not the result of a physiological disorder The definition, likewise, does not include characteristic predisposition to illness or disease.

  The Eighth Circuit’s reading is that predisposition is not impairment, and so is not under the ADA.  Here, Morriss argued that obesity was a disease, but did not satisfy the “result of a physiological disorder” clause.  Does the argument work if the characteristic disposition qualifies as disability?  Does it fail if the present disability is of no consequence to the employer, but the predisposition to something worse is of concern?   The amicus brief indicated (disapprovingly) that a risk argument might be applied to an actual disability, not just to “regarded as” disabled. 

REFERENCES

Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946).

Banks, C. & Hanvey, C. (2016). Legal Watch: Wage and hour litigation developments and trends. The Industrial Psychologist, 53, 80-87.

Bronars, B., Blom, E., & King, A.G. (2016, May 11). EEO-1 pay reports: Rulemaking in the absence of evidence.  Law360.  Retrieved from www.law360.com.

EEOC v. CRST Van Expedited, No. 14-1375 (U.S. 5/19/2016).

EEOC v. Maritime Autowash Inc. , No. 15–1947 (4th Cir., opinion and order 4/25/2016).

EEOC v. Nucor Steel Gallatin, No. 3:15-cv-00053 (E.D. Kentucky, opinion and order 4/28/2016).

Mach Mining v. EEOC, No. 13–1019 (U.S. 4/29/2015).

Morriss v. BNSF Railway Company, No: 14-3858 (8th Cir. 4/5/2016). Rehearing and rehearing en banc denied, 5/19/2016.

Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (U.S. 3/22/2016).

Wal-mart v. Dukes, 131 S.Ct. 2541 (2011).