Vol. 29, No. 3 march 2012

(Continued on Page 6)

In its latest Strategic Plan, the Equal Employment opportunity commission has indicated it will dedicate significant resources to focus on remedying systemic discrimination. Under the agency’s Strategic Plan for years 2012-2016, approved on February 22, 2012, the EEoc will target widespread patterns or practices of discrimination, such as discriminatory policies having a broad impact on an industry, profession, company, or geographic area.

The agency first announced its campaign against “high impact” systemic discrimination cases in 2005, when it established its Systemic Discrimination Task Force. Since then, employers have increasingly seen the EEoc use individual charges of discrimination as launching pads for broad investigations into policies and practices affecting large classes of applicants or employees, regardless of whether the underlying charge had merit.

according to the 2012-2016 Plan, the agency has seen a dramatic increase in the number of discrimination charges filed since the economic downturn. This, along with a recent cut of over $7 million in its budget, according to the agency, has “created a need for the

SPEcIal FocUSEEoc to think strategically about how best to target its efforts to ensure the strongest and broadest impact possible in its efforts to stop unlawful employment discrimination.” The EEoc concluded that the most efficient way to target discrimination is to find and pursue big cases.

That is not to say the agency will not pursue individual claims of discrimination. The Plan states, “Even as the EEoc increases its percentage of these cases, it will continue to pursue individual cases of discrimination. Strategic selection of individual cases furthers the agency’s statutory mandate of preventing unlawful employment discrimination.”

Still, the EEoc’s heightened emphasis on systemic discrimination should lead employers to consider that every charge has the potential for company-wide ramifications. Thus, responses to discrimination charges should be drafted with this in mind. For example, an employer’s volunteering statistical data in a position statement may tempt the EEoc to request additional information regarding any larger samples, even that for the entire workforce. With advancements in technology, large data sets on workforces are readily available and easily producible. The EEoc has taken advantage of this and will not hesitate to request data on classes of individuals to search for trends indicating potential discrimination.

In the same vein, employers also should exercise caution when using such language as “pursuant to our consistently applied policy” when defending against allegations potentially applicable to groups of applicants or employees (e.g., those concerning pre-employment screening, employee testing requirements or triggers for automatic discipline). This type of defense may open the door to a broad request for information regarding all employees affected by the same policy or procedure.

What Can Employers Do Now?

Employers should consider steps to protect their companies from allegations of systemic discrimination, including:

• Ensure all employment policies and practices are job-related, contain sufficient flexibility to comply with the americans with Disabilities act and other prohibitions against discrimination, and do not adversely affect members of a protected class.

EEOC TO FOCUS ON SYSTEMIC

DISCRIMINATION

WHAT’S INSIDEEEOC Entitled Only To Employer’s Information Relevant To Charges Under Investigation, Court Rules ................................................................2

Prearranged Rehire Of Retirees Could Disqualify Your Pension Plan ...3

Enforcement Of Whistleblower Laws Becomes Higher U.S. Department Of Labor Priority ....................................................................5

2

practices … and is relevant to the charge under investigation.” Therefore, “when a court is asked to enforce a commission subpoena, its responsibility is to “satisfy itself that the charge is valid and that the material requested is relevant to the charge.” University of Penn. v. EEOC, 493 U.S. 182, 191 (1990).

Relevance Necessary

The EEoc argued on appeal that the information requested was relevant because the six charges, taken together, warranted an investigation into what it saw as an apparent pattern or practice of discrimination by the company. The appeals court disagreed.

The subpoena involved only the two charges filed by Graves and Palizzi and contained no reference to “any other charge—by way of a reference to any other charging party, an additional charge number, or anything else—that might indicate that an additional charge is at issue.” The court therefore concluded that “the charge[s] under investigation” were those filed by Graves and Palizzi, and it was “against those charges that the relevance of any information sought by the EEoc must be measured.” calling the EEoc’s demand for nationwide recordkeeping data “incredibly broad,” the court found the information sought was not relevant to charges of individual disability discrimination filed by two men who applied for the same type of job in the same state. The court also chastised the commission for seeking unauthorized plenary discovery – that is, conducting a fishing expedition for evidence against the company before the EEoc actually filed a pattern or practice case against it. The court noted that any act of discrimination could be part of a pattern or practice of discrimination, but not every charge of discrimination warrants a pattern or practice investigation. as the Supreme court explained in EEOC v. Shell Oil Co., 466 U.S. 54, 69 (1984), courts should not construe relevance so broadly as to render its requirement a nullity. accordingly, the court held that the district court correctly denied enforcement of the EEoc’s subpoena.

The Tenth circuit has jurisdiction over colorado, Kansas, New mexico, oklahoma, Utah, and Wyoming.

Implications

Since the EEoc established its Systemic Discrimination Task Force in 2005, employers increasingly have seen the commission use individual charges of discrimination to launch broad “pattern or practice” investigations into company-wide policies. according to its 2012-2016 Strategic Plan (http://www.eeoc.gov/eeoc/newsroom/release/2-22-12.cfm), the EEoc plans to continue to focus on

EEOC ENTITLED ONLY TO EMPLOYER’S INFORMATION RELEVANT TO CHARGES UNDER INVESTIGATION, COURT RULES

Finding that the Equal Employment opportunity commission’s subpoena for a company’s nationwide recordkeeping data was

“not relevant” to two individual disability discrimination charges, the U.S. court of appeals for the Tenth circuit, in Denver, declined to enforce the EEoc’s subpoena. EEOC v. Burlington Northern Santa Fe R.R. Co., 2012 U.S. app. lEXIS 3092 (10th cir. Feb. 27, 2012). The court chided the EEoc for asserting that the district court incorrectly interpreted its request as seeking plenary discovery, saying that “in reality . . . the EEoc did seek plenary discovery” when it has no power to seek it.

Background

Gregory a. Graves and Thomas a. Palizzi filed disability discrimination charges under the americans with Disabilities act against Burlington Northern Santa Fe railroad company in February 2007 and october 2007, respectively. In their complaints to the EEoc, they alleged that, after extending them conditional offers of employment for a conductor or conductor Trainee position, the company rescinded those offers because it perceived them as disabled following their failing a medical screening procedure. In response to the charges, the company said in a position statement that it did not view either applicant as “disabled” and it rescinded the offers based on medical requirements and safety concerns incident to those positions.

on February 2, 2009, the EEoc requested from the company “any computerized or machine-readable files . . . created or maintained by you . . .during the period December 1, 2006 through the present that contain electronic data about or effecting [sic] current and/or former employees … throughout the United States.” after the company objected to the broad scope of the request, the commission served a subpoena on it, again requesting the same information, explaining that it had broadened its investigation from the two individual charges to include “pattern and practice” discrimination. The commission, however, did not explain why, or on what basis, it was expanding its investigation. Following procedures, the company filed with the EEoc a petition to revoke or modify the subpoena, which was denied.

When the company did not comply with the subpoena, the EEoc applied to the district court for enforcement. It stated in an affidavit that it had four similar charges against the company in Kansas, minnesota, Texas, and Wyoming. The district court denied the EEoc’s enforcement request, holding the subpoena “pervasive,” “excessive,” and improperly sought “plenary discovery.” The commission appealed.

Standard

When conducting an investigation into alleged discrimination, the EEoc may request evidence that “relates to unlawful employment (Continued on Page 6)

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BENEFITS CORNER

Randy Limbeck is a partner in the Omaha, Nebraska office of Jackson Lewis LLP and has spent more than 25 years specializing in representation of clients in the areas of ERISA, employee benefits, and executive compensation.

benefit), the employer wanted to allow employees to “retire” on one day in order to qualify for the existing subsidized service pension benefit and return to work the very next day or a week later. Neither the employee nor the employer intended for these

“retirees” to actually terminate employment when they “retire” and qualify for their early retirement pension benefit. The taxpayer asked the IrS to rule on whether the plan would be disqualified under code Sec. 401.

The IrS privately ruled that the proposed arrangement would cause the plan to be disqualified. It interprets the law to require that when an employee legitimately retires, he separates from service with the employer. If both the employer and employee knew at the time of “retirement” that the employee, with reasonably certainty, will continue to perform services for the employer, a legitimate termination of employment has not occurred upon “retirement.” The IrS also said that under the regulations dealing with severance of employment, an employee retires on a severance of service date when his period of service ends with the employer.

The IrS concluded that because a qualified pension plan generally cannot pay benefits before retirement, an employee who “retires” with the explicit understanding between him and the employer that he will return to service immediately has not legitimately retired, and may not qualify for an early-retirement benefit under the plan. Because such employees do not actually separate from service and stop working for the employer when they “retire,” their supposed

“retirements” would not constitute a legitimate basis to allow participants to qualify for early-retirement benefits.

The bottom line: for an employee’s pension benefits to begin, the termination from employment must be a real severance from employment. The result of the private letter ruling illustrates the IrS position on any retirement with a prearranged rehire.

Employers have legitimate reasons to rehire an employee who actually retires. however, a prearranged agreement to rehire the employee risks the qualification of your pension plan.

-- randal m. limbeck omaha office limbeckr@jacksonlewis.com

PREARRANGED REHIRE OF RETIREES COULD DISQUALIFY YOUR PENSION PLAN

as an employee reaches retirement age, he may want to retire or cease working full-time. The employer, however, may need or want the employee to continue to work temporarily or on a part-time basis. The employee wants to begin to receive his pension plan payments. a frequent question in this scenario is, “can we employ the participant part-time or for a few more months, but begin the employee’s pension payments?”

The answer is “no.” a pension plan participant cannot begin to receive benefits before the earliest of death, disability or termination of employment. Benefits cannot begin unless there has been a termination of employment. (While there are exceptions, they are not practical for most plans.) The follow up question usually is,

“can the employee quit and we rehire him after he goes to Florida for a week, a month, six months?” The answers are “no,” “no,” and

“probably not.”

The Internal revenue Service has issued a private letter ruling that a pension plan would cease to be qualified under code Sec. 401(a) if it allows workers who are under age 62 to “retire” in order to lock in an unreduced early retirement pension benefit, and then be rehired.

The arrangement presented to the IrS and considered in the private letter ruling involved an employer that wanted to eliminate a subsidized, early-retirement benefit under its pension plan. The employer proposed to give participants notice 60 days before the date that the benefit is eliminated. Eligible participants who retire during this 60-day window would then return to employment and have their benefits suspended while working.

Before eliminating the benefit (i.e., the right of participants with 20 or more years of service to retire early with an unreduced pension

4

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ENFORCEMENT OF WHISTLEBLOWER LAWSBECOMES HIGHER U.S. DEPARTMENT OF

LABOR PRIORITYThe U.S. Department of labor has announced that its Whistleblower Protection Program (WPP) will report directly to the agency’s office of the assistant Secretary — a higher administrative level than the Directorate of Enforcement Programs to which it formerly reported. This restructuring is only the latest example of the obama administration’s efforts to strengthen the WPP. according to the Dol’s march 1, 2012, news release, the “move represents a significantly elevated priority status for whistleblower enforcement.”

For years, the occupational Safety and health administration (oSha) investigated claims of retaliation by workers reporting safety concerns through its WPP. Following passage of the Sarbanes-oxley act (SoX) in 2002, oSha also took responsibility for investigating SoX claims. The WPP now enforces 21 different whistleblower laws.

The plan to bolster the whistleblower program includes for the first time a separate line item in the budget for fiscal year 2012 and a request for a budgetary increase of more than $6 million for an additional 45 investigators. The Dol says this latest move resulted from an internal top-to-bottom review completed in 2011 and audits in 2009 and 2010 that revealed problems with the Program.

In addition to its increased budgetary request, oSha released a new edition of its Whistleblower Investigations manual (http://www.osha.gov/oshDoc/Directive_pdf/cPl_02-03-003.pdf) on September 21, 2011, to update case handling procedures and address laws and amendments enacted since the manual’s last update in 2003. among other things, the new manual requires investigators to attempt to interview the complainant in all cases, expands guidance for dealing with uncooperative respondents, details new procedures for review and approval of settlements, explains changes to handling Privacy act files and Freedom of Information act requests, clarifies that whistleblower complaints

may be filed orally or in writing in any language, and updates chapters on SoX resulting from the Dodd-Frank Financial reform and the consumer Protection act.

These latest oSha changes mean employers can expect more aggressive efforts by the agency to enforce the 21 whistleblower laws under its jurisdiction. The re-alignment of the WPP is consistent with other indicators that oSha is ramping up its WPP efforts. organizations should note the heightened attention to whistleblower claims by the media and the increased attention to such claims by oSha. Now is the time to update company whistleblower policies and related anti-retaliation controls.

-- Jill Poole omaha office PooleJ@jacksonlewis.com

-- Nick m. Beermann Seattle office BeermanN@jacksonlewis.com

-- V. John Ella minneapolis office EllaJ@jacksonlewis.com

-- David r. Jimenez hartford office JimenezD@jacksonlewis.com

-- l. Dale owens atlanta office owensD@jacksonlewis.com

6

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EEOC TO FOCUS ON SYSTEMIC DISCRIMINATION (Continued from page 1)

• conduct statistical analyses on the impact of employment policies and practices to find barriers to equal employment opportunities, and use outside counsel to ensure such analyses are protected by the attorney-client privilege.

• Examine responses to individual charges of discrimination and avoid defenses that may result in heightened scrutiny of the impact of policies on large segments of the workforce.

• Train managers to make decisions on an individualized basis and take the facts specific to the situation into consideration.

If you receive a request for information from the EEoc, consult experienced employment counsel who can assist in preventing the agency from overreaching.

-- Susan m. Schneider omaha office SchneidS@jacksonlewis.com

-- mickey Silberman Denver office Silbermm@jacksonlewis.com

EEOC ENTITLED ONLY TO EMPLOYER’S INFORMATION RELEVANT TO CHARGES UNDER INVESTIGATION, COURT RULES

(Continued from page 2)

systemic discrimination. (For more information on the Strategic Plan, see our article in this edition of Laborwatch.)

This Tenth circuit decision provides good authority for employers to challenge overbroad discovery requests from the EEoc that do not appear relevant to the charges at issue. This decision also may require the EEoc to identify potential pattern or practice claims early in its investigation and prior to pursuing plenary discovery in support of such claims. Employers should consult with experienced employment law counsel on whether to challenge such requests from the commission. Jackson lewis attorneys are available to answer questions about this decision.

-- Kenneth m. Wentz III omaha office WentzK@jacksonlewis.com

-- Danny W. Jarrett albuquerque office JarrettD@jacksonlewis.com

-- Victor P. montoya albuquerque office montoyaV@jacksonlewis.com