Courts Can Dismiss EEOC Litigation If The EEOC Did Not Try To Resolve The Issue Via A Settlement; EEOC Denied Inspection Of Employers Premises; EEOCs Proposed Rule On Wellness Programs Offers Some Clarity, More Uncertainty

By: Lawrence P. Postol, Vice President For Legislative AffairsLpostol@seyfarth.comCourts Can Dismiss EEOC Litigation If The EEOC Did Not Try To Resolve The Issue Via A Settlement

On April 29, 2015, the U.S. Supreme Court issued its long-awaited decision in Mach Mining, LLC v. EEOC, No. 13-1019 (U.S. 2015), and concluded, in a unanimous opinion authored by Justice Kagan, that federal courts have the authority to review the EEOCs conciliation efforts. In language that is sure to be repeated back to the EEOC for years to come, the Supreme Court held that [a]bsent such review, the Commissions compliance with the law would rest in the Commissions hands alone. This, the Supreme Court said, would be contrary to the Courts strong presumption in favor of judicial review of administrative action.While the Supreme Court did not rule that the intensive review that Mach Mining argued for was required, the case nevertheless represents a significant win for employers and resounding defeat for the EEOC. The EEOC will no longer be able to file suit against employers after paying mere lip-service to its conciliation efforts, and to give them the back of the hand in response to requests for fulsome information about liability and exposure in a threatened lawsuit. And employers will as a result be in a better position to settle meritorious claims on reasonable terms before the EEOC files suit, thus saving employers from unnecessary litigation expense.

Case BackgroundThis ruling is a big case for employers and for government enforcement litigation. In a game-changing decision in December 2013, the U.S. Court of Appeals for the Seventh Circuit ruled that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the EEOC. That decision had far-reaching, real world significance to the employment community because it meant that the EEOC was virtually immune from review in terms of the settlement positions it takes often: pay millions or we will sue and announce it in a media release.We have kept our blog readers up to date on this litigation as it wound through the lower courts and progressed at the Supreme Court. Readers can find the previous posts here, here, here, here, here, here, and here. In addition, Seyfarth filed an amicus brief supporting Mach Minings position, a copy of which can be found here. In essence, the Seventh Circuit determined that the EEOCs pre-lawsuit conduct in the context of conciliation activities was immune from judicial review, and the Supreme Court granted certiorari to determine whether that was correct and, if not, what standard federal courts should use to review the EEOCs conciliation efforts.The Supreme Courts RulingThe Supreme Court unanimously rejected the Commissions position that its conciliation activities are beyond judicial review. It began by discussing the fact that Title VII of the Civil Rights Act requires the EEOC to endeavor to eliminate [the] alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion. Mach Mining, No. 13-1019, at 2 (quoting 42 U.S.C. 2000e-5(b)). The Supreme Court observed that Congress rarely intends to prevent courts from enforcing its directives to federal agencies, and that, for that reason, the Supreme Court would appl[y] a strong presumption favoring judicial review of administrative action. Id. at 4.The Supreme Court reasoned that [c]ourts routinely enforce . . . . compulsory prerequisites to suit in Title VII litigation. Id. at 5. As an example, the Supreme Court pointed to the fact that courts routinely dismiss discrimination complaints of parties that failed to file a timely charge of discrimination with the EEOC. Id. The Supreme Court found that this supported judicial review of the EEOCs compliance with the conciliation requirement. Id. at 6.The Supreme Court also rejected the EEOCs argument that Title VII provides no standards by which to judge the EEOCs performance of its statutory duty, thus showing that Congress demonstrated its intent to preclude judicial review. Id. at 6. The Supreme Court concluded that the EEOCs position was incorrect because, while the lack of a standard might indicate Congresss intent to give the EEOC wide latitude in conducting the conciliation process, it did not give the EEOC the authority to ignore the conciliation process. Id. at 6-7. Specifically, the Supreme Court opined that, if the Commissions position were correct, the EEOC could file suit without any attempt at conciliation, and federal courts could do nothing to remedy the failure to engage in conciliation. Id.The Supreme Court then addressed the proper scope of judicial review to determine whether the EEOC had met its conciliation obligation. The Supreme Court declined to adopt the standard offered by Mach Mining as well as the Commission. The Supreme Court started with the plain language of the statute, noting that Title VII describes the statutory obligation as requiring conference, conciliation, and persuasion. Id. at 7. Those specified methods must therefore involve communication between the parties, including an exchange of information and views about the alleged unlawful employment practice. In sum, the EEOC must tell the employer about the claim essentially, what practice has harmed which person or class and must provide the employer with an opportunity to discuss the matter in an effort to achieve voluntary compliance. Id.In defining the scope of judicial review, the Supreme Court threaded a line between the EEOCs position and the position of the defense. The EEOC argued for the most minimal review possible facial examination of documents prepared and submitted by the agency itself. In this case, the EEOC argued that the Supreme Court should be satisfied with two letters sent from the Commission to Mach Mining: (1) the reasonable cause letter, which informed the company that the EEOC would contact the party to initiate the conciliation process; and (2) a second, later letter, which simply stated that the conciliation process had occurred and failed. Id. at 8. The Supreme Court rejected the EEOCs proposed level of review, holding that it simply fails to prove what the government claims, namely, whether the agency actually did what it said it did.Mach Mining argued for a more searching review. In its briefs, the company had argued that a federal court should satisfy itself that the EEOC had negotiated conciliation in good faith. Working off of a standard set forth in the National Labor Relations Act (NLRA), the company argued for some minimum prerequisites as to what good faith negotiation would look like, including setting forth the factual and legal basis for its positions and refraining from making take-it-or-leave-it offers. Id. at 9-10. The Supreme Court rejected that approach, holding that the NLRA is directed toward the process of negotiation itself. The laws purpose is to create a sphere of bargaining to address labor disputes. Id. at *10. Title VII, on the other hand, is about compliance with the law. While the law favors cooperation and voluntary compliance, it gives the EEOC wide latitude to pursue that goal, holding that Congress left to the EEOC such strategic decisions as whether to make a bare minimum offer, to lay all its cards on the table, or to respond to each of an employers counter-offers, however far afield. Id. at 11. Critically, the Supreme Court also held that the companys proposed standard of review would fall afoul of Title VIIs protection of the confidentiality of the conciliation process. A detailed review of that process would necessitate public disclosure of information in violation of the statutes non-disclosure obligations. Id. at 11-12.The Supreme Court concluded by adumbrating the future of litigation over this issue. The Supreme Court held that a sworn affidavit from the EEOC stating that it has performed its obligations often should be enough to show that it met its conciliation efforts. Id. at 13-14. But if employers counter with a credible affidavit of their own or other evidence that demonstrates that the EEOC did not provide the requisite information about the charge or attempt to engage in a discussion about conciliating the claim, then a federal court must conduct the fact-finding necessary to decide that dispute. Id. at 14. If the EEOCs efforts were inadequate, the federal court must then order the agency to undertake the necessary efforts to ensure that it has satisfied its conciliation obligations. Id.Implications For EmployersThe implications for employers as a result of this decision cannot be overstated. The EEOC has been arguing for years in courts across the country that its conciliation efforts and other pre-suit obligations are entrusted solely to its discretion and therefore are immune to any form of judicial review. That position has been squarely defeated. While the scope of review articulated in the Supreme Courts decision is a narrow one, the Supreme Court vigorously upheld the fundamental principle that judicial review of administrative action is the norm in our legal system. Given the often breathtaking scope of authority that the Commission seeks to carve out for itself, any reaffirmation of that principle comes as a welcome check on the EEOCs activities. Further, the EEOC now has to present its position in a federal court, and its litigation strategies are apt to be very different when it must justify and show the basis for its conciliation positions before a neutral fact-finder. We will have to wait and see exactly how this issue is litigated in the lower federal courts. Suffice it to say, employers defense of failure-to-conciliate is still alive and well, and the EEOCs litigation strategies are now likely to be in need of rebootingEEOC Denied Inspection Of Employers Premises In EEOC v. Vicksburg Healthcare, LLC, No. 13-CV-895 (S.D. Miss. Apr. 22, 2015), Magistrate Judge Michael T. Parker of the U.S. District Court for the Southern District of Mississippi denied the EEOCs request to be allowed to inspect and observe the defendants facility in an Americans With Disabilities Act (ADA) action. The EEOC has recently attempted to obtain discovery by invasive inspections of employers premises. Magistrate Judge Parkers decision to deny the EEOC this access represents another setback for the EEOC as it ratchets up the intensity of its discovery efforts in workplace litigation. It also gives employers a case they can use when the EEOC or other workplace plaintiffs seek intrusive inspections.Factual BackgroundThe EEOC filed suit against Vicksburg Healthcare, LLC d/b/a River Region Medical Center (River Region), claiming that River Region terminated Beatrice Chambers because of a disability in violation of the ADA. Vicksburg Healthcare, 13-CV-895, at 3. Specifically, the EEOC claimed that Chambers could perform the essential functions of a Licensed Practical Nurse (LPN) despite the fact that, because of shoulder surgery, Chambers was unable to lift ten or more pounds.During the course of the litigation, the EEOC served a request for entry onto River Regions premises for three hours so that it could observe the work of LPNs, inspect the type of equipment in use at River Region, and collect measurements about the amount of force required to push and pull certain equipment. Id. at 3-4. In addition, the EEOC sought to interview River Regions employees during the inspection. Id. at 6. River Region objected that the request was overly broad and intrusive, would reveal information protected by the physician-patient privilege and HIPPA, and would allow the EEOC to obtain statements from River Regions employees without the protections in the Federal Rules for deposing witnesses. Id. at 4. Subsequently, the EEOC moved to compel River Region to allow the inspection. Id. at 4-5.The Courts RulingThe Court began by noting that the EEOC did not identify any specific equipment that it wished to observe or measure. Id. at 6. The Court pointed out that this was problematic because a three-hour inspection would not reliably establish which tasks LPNs regularly performed or which equipment they regularly used given that the tasks LPNs performed were not necessarily performed on any given day. Id. at 6-7.The Court reasoned that the amount of force required to push, pull, and/or lift equipment such as gurneys, beds, and wheelchairs [would] depend on the weight of the patient in the gurney, bed, or wheelchair, and that it was therefore not clear whether a three-hour inspection would allow [the EEOC] to observe a representative sample of patients or duties. Id. at 7. It thus found that the requested inspection would likely be of limited use. Id.The Court further determined that the possible disruption of patient care and the risk of compromising patients rights to confidentiality [were] significant concerns that weighed against allowing the inspection. Id. at 8. With respect to disruption of patient care, the Court found that, because the EEOC would be testing equipment while the equipment was being used to treat patients, and because River Region personnel would be subject to roving depositions while they attempt to perform their duties, the proposed EEOC inspection would likely significantly disrupt River Regions operations. Id.With respect to confidentiality, the Court opined that the EEOC could receive confidential patient information as the result of the inspection. While the EEOC stated that it would not communicate with any patient or review medical records, the Court found that the normal operations of River Region would likely include the communication or observation of patients confidential information. Id.Based on the foregoing, the Court concluded that it would not permit the requested inspection. Id. at 9. It further found that the EEOC could try to obtain the information it desired through other means, such as interviews of Chambers and depositions.Implications For EmployersEmployers who are the subject of discrimination litigation or an EEOC investigation can use this case for authority if the plaintiff or the EEOC seeks to investigate their premises. While the case will be especially useful for employers in the healthcare industry (given the Courts concerns over patient confidentiality), other portions of the decision will be of use to employers in other industries. The Courts concern that a time limited inspection might not allow an inspecting party to observe a representative sample of a positions job duties would apply in many other industries, and the Courts conclusion that an inspecting party could obtain information about essential job duties through other, less invasive means of discovery would apply in most, if not all, other industries. Employers should also take heart that the courts are becoming increasingly wary of the EEOCs attempts to conduct invasive premises inspections.

EEOCs Proposed Rule On Wellness Programs Offers Some Clarity, More UncertaintyOn April 16, the EEOC published its much anticipated Proposed Rule regarding the interaction between wellness programs and the Americans With Disabilities Act (ADA). Though incentives or surcharges are permitted (indeed, encouraged) under the Patient Protection and Affordable Care Act (ACA), their uncertain status under the ADA has been a source of concern for the employer community. The EEOCs Proposed Rule clarifies some issues under the ADA, but raises or ignores additional employer concerns. The comment period on this Proposed Rule will close on June 19, 2015.What Makes a Wellness Program Voluntary? The ADA generally prohibits employee medical examinations or inquiries unless they are job-related and consistent with business necessity. The statute contains an exception for voluntary medical examinations, including voluntary medical histories, which are part of an employee health program . . . . The Proposed Rule recognizes that this language applies to wellness programs, and then identifies several requirements for establishing that a medical examination or inquiry is voluntary. Some are obvious: for example, an employer cannot require participation in the exam or inquiry or retaliate against employees for not participating (or participating, for that matter). To what extent does the carrot and stick approach of incentives and penalties common feature of wellness programs affect whether the program or related inquiries are voluntary under the ADA?Under the Affordable Care Act and its implementing regulations, employers may offer financial incentives to employees of up to 30% of the total cost of employee-only coverage for reaching certain health outcomes in a wellness plan (up to 50% for smoking cessation programs). The EEOCs Proposed Rule mostly follows the ACA, adopting a maximum of 30% as the limit on wellness program incentives. Unlike HIPAA and the ACA, however, the Proposed Rules 30% cap would apply both to health contingent and participatory wellness programs. Moreover, the EEOC has added a nuance to the nicotine prevention component of ACA and HIPAA. Under the Proposed Rule, if an employer conducts a biometric exam to test for nicotine, any incentive would be capped at 30% instead of 50%. (If no disability-related inquiry is made, a 50% incentive is permissible because the ADA is not implicated.Notably, the Proposed Rule does not specifically adopt the HIPAA/Affordable Care Act standard but instead imposes hard percentage caps. If the percentages rise or fall in the future at the behest of other federal agencies, EEOCs caps would remain in place, putting the Commission again at odds with other agencies.Agency Would Saddle Employers With HIPAA Privacy Requirements Perhaps more surprising than EEOCs adoption of the 30% incentive cap is its proposal to engraft HIPAA privacy requirements onto existing ADA confidentiality requirements. Current regulations, like the statue itself, mandate that disability-related medical information be kept in separate medical files apart from personnel records and that access to such information be limited to supervisors and managers with a need to know it. The Proposed Rule would add new restrictions regarding medical information obtained in connection with wellness programs. In brief, EEOC proposes to extend HIPAA privacy rules and procedures to ADA-covered employers entities not otherwise governed by HIPAA. More specifically, under the Proposed Rule, in order for a wellness program to be truly voluntary (and thus ADA-compliant), the employer must: (i) provide a notice that clearly explains what medical information will be obtained, who will receive the medical information, how the medical information will be used, the restrictions on its disclosure, and the methods to prevent improper disclosure of the medical information; and (ii) receive medical information obtained by wellness programs only in aggregate form, except as needed to administer the health plan. In what will be solace for some employers, the Proposed Rules interpretive guidance states, where a wellness program is part of a group health plan and required to comply with HIPAA, its obligation to comply with [the proposed new ADA medical information requirements] generally may be satisfied by adhering to the HIPAA Privacy Rule.What does all this mean? For (typically large) employers whose group health plan is self-funded, the Proposed Rule may not be news at least not in this regard. Although employers as such are not covered by HIPAA, their group health plans are. Thus, a self-insured company is already familiar with HIPAA privacy because the plan is covered by HIPAA; these employers (more precisely their health plans), therefore, already have HIPAA disclosure rules, privacy firewalls, and the like in place. However, for (typically smaller) employers whose health plans are self-insured, the Proposed Rule could impose a new set of compliance requirements. For these employers, wellness programs maybe offered through their health insurance carrier or a third party vendor. In that context, responsibility for complying with the HIPPA Privacy Rule rests with the carrier or vendor. The EEOCs Proposed Rule would make the employer responsible for ensuring compliance, and on the hook in the event of breach.EEOC Cavalierly Rejects Statutory Safe HarborThe Proposed Rules detailed explanation of what makes a wellness program voluntary was necessitated by EEOCs rejection of the widely- recognized Section 501(c) safe harbor defense. That section of the ADA instructs that the Acts substantive provisions (including the restrictions on medical exams and inquiries) do not apply to benefits actions whether in the insured or self-funded context unless the action is used as a subterfuge to evade the purposes of the ADA. At least four federal circuit courts have held that subterfuge under the ADA means adverse action in a non-benefits context, e.g., termination, failure to promote. The Eleventh Circuit most recently reached this conclusion in Seff v. Broward Cty., 691 F.3d 1221 (11th Cir. 2012). The EEOC dismissed this view in a footnote, placing it at odds with every federal appeals court to have addressed the issue.According to EEOC, applying Section 501(c)s safe harbor defense to wellness programs would make the word voluntary superfluous. By its approach, however, EEOC effectively reads an entire section out of the statute, depriving employers of a well-recognized defense.Significance For EmployersWhile the Proposed Rule, if promulgated, would provide some clarity for employers, it could undermine employers statutory safe harbor defense, at least in some jurisdictions. Moreover, the proposed new medical privacy requirements could make wellness programs more burdensome for insured employers, who would for the first time be responsibe for satisfying HIPAA privacy requirements. Whether those requirements would discourage smaller employers from adopting or expanding wellness programs we cannot say; they certainly wont facilitate those programs. Given these potential issues and more that will inevitably arise in the coming weeks, it is important for the regulated community employers, wellness program providers, and others to consider submitting comments for the record regarding pros and cons of the Proposed Rule. As we have throughout this process, we will keep you informed of significant developments. 2015 by Lawrence PostolMr. Postol is the Vice President for Legislative Affairs on the NOVA SHRM Board, and a partner in the Washington, D.C. office of Seyfarth Shaw LLP. If you have any questions about the information in this article, you may e-mail Mr. Postol at Lpostol@seyfarth.com or call him at 202-828-5385.Disclaimer: This newsletter does not provide legal or other professional services. This newsletter is made available by the lawyer publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this newsletter you understand that there is no attorney-client relationship between you and the newsletter publisher. The newsletter should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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