Government lawsuits challenging businesses on employment-related issues are raking in the money thanks to aggressive litigation and innovative “push the envelope” legal theories. And by plowing new legal ground, the Obama administration is driving up the costs for businesses facing private class-action cases as well.
Under President Obama, lawyers at the Labor Department and the Equal Employment Opportunity Commission have been pursuing cases involving violations of wage, employment and anti-discrimination laws using novel legal theories and new interpretations of old rules, experts say. New strategies designed to bring in larger awards are being used as well, and the efforts are spilling over into the private sector.
“They are providing the blueprint for certain sorts of litigation that are coming about,” said Barry Hartstein, a top lawyer with the management-side firm Littler. He added that more is on the horizon. “I certainly anticipate that the EEOC is going to have a very aggressive and activist year this year.”
The Department of Labor and the Equal Employment Opportunity Commission won awards totaling a combined $82.8 million in 2015, more than double 2014’s take of $39.5 million.
The government’s penalties are relatively modest, but they have ripple effects. The top 10 settlements in class actions reached a combined value of $2.48 billion in 2015, up from $1.87 billion the previous year. The number of Fair Labor Standards Act cases, which focus on wage issues, filed by the plaintiffs’ class-action bar has jumped from 6,761 in 2010 to 8,964 last year.
The increase is expected to continue thanks to the Labor Department’s new regulations on overtime exemptions and, more recently, its expansion of the definition of “joint employer.” That’s when one business is legally responsible for violations by another to include situations involving contractors and subcontractors.
The EEOC has been pursuing more cases charging “systemic violations” by employers, essentially class-action suits, rather than individual cases. Of the 142 lawsuits it filed in 2015, 42 involved 20 or more alleged victims. The agency is aggressively looking for those cases, closing 268 investigations and finding reasonable cause in 99 of them.
The number of charges the EEOC is filing overall has fallen from just under 100,000 in 2011 to just under 90,000 last year. But going after bigger cases is bringing in more money. The agency recovered more than $33 million in 2015, up from $13 million the previous year.
The agency also is expanding the definition of what counts as discrimination. The Supreme Court handed the agency a victory last year in the case involving Abercrombie & Fitch stores when it ruled that an employer can’t engage in religious discrimination even if it has no knowledge of a worker’s faith but adopts a policy, such as a dress code, that clashes with his religion.
Republicans have fumed. “EEOC is still spending its time looking for investigations where there are no complaints, while a backlog of complaints grows. Still receiving embarrassing rebukes from the court. Still experimenting with ‘developing the law’ and guidance free from public comment. And still ignoring the intentions of Congress,” said Senate Health, Education, Labor and Pensions Committee Chairmain Lamar Alexander, R-Tenn., during a hearing last year.
The EEOC also has begun pursuing cases involving transgendered discrimination, arguing it counts as sex discrimination. It has expanded the Americans with Disabilities Act to include health conditions related to pregnancy. It has used its subpoena power to vastly expand cases, citing a single allegation of discriminatory firing by an employee for health reasons by Royal Carribean Cruises as a rationale to request all information regarding discharges for medical reasons in the past year.
The strategies haven’t always worked. Some courts have been quick to dismiss some of the government’s more inventive legal maneuvers. In a case last year called Mach Mining, the Supreme Court rejected the EEOC’s claim that courts could not review whether the agency had tried to settle cases. But it has been able to establish legal precedents in other cases.
“It is regulation through enforcement litigation. Where Congress won’t act to do anything, the agency is taking a novel view of the construction of the laws they enforce and trying to secure settlements or court precedents” that will change it, said Gerald Maatman, an attorney with the management-side law firm Seyfarth Shaw.
