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Sixth Circuit Excludes EEOC’s Unreliable Disparate Impact Expert

Decision: The US Court of Appeals for the Sixth Circuit in EEOC v. Kaplan Higher Education Corp. reinforced the Federal Rules of Evidence requirement that each part of a proposed expert’s methodology be reliable in order for the expert’s testimony to be admissible.

The EEOC’s lawsuit against Kaplan alleged that Kaplan’s use of pre-employment credit checks caused it to reject more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. To support its claim, the EEOC offered expert testimony in the form of statistical analysis that purportedly demonstrated the disparate impact. Because information about the race of the applicants was not available, the EEOC’s expert employed a “race rating” methodology under which five individuals referred to as “race raters” (who had no previous experience with methodologies to identify race by visual means) determined an applicant’s race by reviewing the applicant’s driver’s license picture. If at least four of the five race raters agreed, then the applicant was categorized for purposes of the statistical analysis as being a member of the identified race.

The district court excluded the expert’s testimony as unreliable. The Sixth Circuit affirmed because the race-rating methodology, which the expert had developed specifically for the EEOC’s case: (i) had not been generally accepted in the scientific community, had not been tested and did not have an acceptable rate of error; (ii) had not been subject to peer review and publication; and (iii) lacked standards for controlling the technique’s operation given that the five race raters used no standard for determining the applicant’s race other than their own visual impression of the applicant’s photo. Additionally, the sample of 1,090 applicants analyzed was not representative of the applicant pool as a whole because 23.8 percent of applicants in the sample had been rejected because of their credit history whereas only 13.3 percent of applicants overall had been rejected as a result of their credit history.

As the Sixth Circuit wrote, the EEOC “brought [a] case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted by only the witness himself.”

Impact: This is an important decision for employers facing expert testimony in employment claims. While it is a particularly helpful decision in combating claims of statistical proof that are not well supported, the decision will also support employer challenges to attempts to use expert testimony in non-statistical approaches. It confirms that all aspects of the expert’s methodology must meet the requirements of Federal Rule of Evidence 702, including the selection of data, the steps in the expert’s analysis, the choice of individuals who conduct any part of the analysis and the error correction method or cross-check performed in an effort to validate the methodology.

Class of 30,000 Costco Workers Decertified in California Because Individualized Inquiries Predominate

Decision: In Stiller v. Costco Wholesale Corp., the Southern District of California decertified a statewide class of approximately 30,000 employees who were allegedly required to remain inside Costco warehouses at the end of their shifts without pay while lockdown procedures were completed. The court also decertified a nationwide collective action under the Fair Labor Standards Act that had been conditionally certified in December 2010 concurrent with the California class certification. The decision was based on a finding that Costco’s liability hinged on individualized determinations as to “whether, how often, and for how long [individual] class members actually experienced unpaid [off-the-clock] time.”

The court agreed with the plaintiffs (and the prior class certification decision, which was made by a different judge) that common questions existed with regard to whether Costco had a de facto policy of “locking employees, who had already clocked out, in warehouses for a compensable amount of time without pay,” whether that policy was enforced on a companywide basis and whether it resulted in the employees being subject to Costco’s control . The court stated, however, that such common questions only addressed whether off-the-clock work resulting from the alleged policy constituted work and whether Costco took action to remedy any unpaid time, which are only two of three elements of an off-the-clock claim. As to the third element of an off-the-clock claim (whether an individual employee performed such off-the-clock work) the court determined “no common answer” existed. The court relied on evidence provided by Costco that the alleged policy did not always result in off-the-clock work, such as the discretion its managers had with regard to how often clocked-out employees were permitted to leave once warehouses were locked down.

The court concluded that, “at a minimum, the class would need to be redefined to include employees who were not only subject to the Alleged Policy, but who also experienced unpaid detention times as a result.” But defining the class this way would, the court further concluded, “require a liability finding as to each employee to determine whether he or she [was] even a member of the California Class. And undertaking individualized inquiries as to approximately 30,000 individuals … would result in the common questions here being overcome by individualized inquiries.” Importantly, the court cited the Supreme Court’s Comcast decision as overruling the Ninth Circuit’s decisions in Stearns and Yokoyama with respect to whether individualized damages issues can defeat predominance.

Impact: This case follows Ortiz v. CVS Caremark Corporation, a Northern District of California decision from December 2013 denying certification of a proposed statewide class of more than 50,000 CVS employees, where the court determined that the commonality requirement was not met because CVS had provided evidence of written lawful policies and declarations showing that at least some managers and employees followed those policies. Stiller thus shows that employers are continuing to gain traction against class certification following the Supreme Court’s landmark decision in Dukes v. Wal-Mart, which emphasized the need for a classwide proceeding to produce common answers, not just common questions. The impact is not necessarily limited to wage and hour cases. In combating class actions, employers should continue to marshal evidence, as Costco did here, of variance from a purportedly established unlawful policy (or compliance with a written lawful policy), so as to demonstrate individualized inquiries that can defeat certification.

NLRB Strikes Grocer’s Online Communications Policy, Disregards NLRB General Counsel Memo

Decision: A National Labor Relations Board (NLRB) Administrative Law Judge (ALJ) recently ruled in Kroger Co. of Michigan and Anita Granger that the Kroger Co. maintained an overbroad online communications policy, in part, due to the policy’s requirement that workers use a specific disclaimer if they identified themselves as a company associate and “publish[ed] any work-related information online.” Noting that the issue was one of first impression, the ALJ held that the requirement placed an unreasonable burden on employees’ rights to engage in concerted activity under Section 7 of the National Labor Relations Act. According to the ALJ, “the requirement that a disclaimer be posted by the employee every time he or she speaks on work-related issues and is identifiable as an employee of the employer, is unduly burdensome, well beyond any legitimate interest of the employer, and will have a tendency to chill legitimate Section 7 speech by the burden it brings to it.” The ALJ did recognize that employers have a legitimate interest in “stopping unauthorized employees from speaking on behalf of the company, and indeed, from being perceived to have spoken on behalf of the company,” but determined that “much of the communications covered by [Kroger’s] rule reasonably could never be confused for employer sanctioned speech.”

Impact: This decision throws into question what had previously seemed to be a permissible policy provision. A May 2012 memorandum from the NLRB general counsel’s office discussing social media policies found permissible a policy provision requiring employees that make online statements about work-related matters to “make it clear that [they] are not speaking on behalf of [the Employer]” and suggesting that such employees include a disclaimer such as “‘the postings on this site are my own and do not necessarily reflect the views of [Employer].’” According to the ALJ in the Kroger case, however, this conclusion in the May 2012 memorandum was an “opinion” that lacked precedential value. Accordingly, employers must find a way to balance their legitimate interest with employees’ Section 7 rights. Given the uncertainty in this area, employers should regularly review their online communications and social media policies and consult with counsel to adjust policies to take account of the most recent pronouncements from the NLRB.

Employers May Seek a Second Opinion Regarding an Employee’s Post-FMLA Fitness to Return to Work Duties Even After Reinstating the Employee

Decision: In White v. City of Los Angeles, a former district attorney investigator took a medical leave of absence under the Family Medical Leave Act (FMLA). Prior to her FMLA leave, the investigator had behaved “erratically.” Upon returning from leave, she was advised that she would be placed on paid administrative leave and reassigned to her home pending an investigation related to her pre-leave conduct. The employer then required her to undergo a medical reevaluation, pursuant to the employer’s policy, to assess her fitness to continue working. The employee was advised that she could face disciplinary action if she failed to appear for the reevaluation. The employee then filed an action for injunctive relief to prohibit her employer from requiring her to appear for a medical reevaluation or disciplining her for failing to appear, asserting that requiring her to submit to a medical reevaluation violated her rights under the FMLA.

The California Court of Appeal disagreed, holding that, because the employee had been reinstated to work when she returned from her FMLA leave, the FMLA “return to work” requirement was not implicated. The court further held that employers are not prohibited by the FMLA from requiring a medical reevaluation of an employee related to the serious health condition for which the employee was granted FMLA leave. The court explained that the FMLA should be interpreted to render the employee’s health care provider’s opinion conclusive on the issue of whether the employee should immediately be returned to work, but permits the employer to thereafter require a second opinion, if it has a basis to question the employer’s health care provider’s opinion.

Impact: The court’s decision suggests that employers may have additional leeway in administering FMLA leave by permitting employers to take steps to ensure that their employees are truly capable of performing their duties upon returning to work. Once the employer reinstates the employee, the employer can take steps to confirm, via a secondary medical opinion, that the employee is fit for work provided that the assessment is consistent with the employer’s business needs.