In June 2023, the US Supreme Court voted 6-3 in a decision that significantly changed the way colleges and universities used affirmative action in their admissions. The targets of the lawsuit were Harvard University and University of North Carolina for alleged racial discrimination in admissions.
The Ruling
The Court ruled that race conscious college admission policies aimed at maintaining racially diverse student bodies violated the Equal Protection Clause of the Fourteenth Amendment. The court, though ruling out admissions solely based on race, did state, “Nothing in the opinion should be construed as prohibiting universities from considering an applicant’s discussion of how race affected his or her life.” It should be noted that court did not impose the same ruling on military academies because of their “distinct interest” in the benefits of a diverse officer corp. Though the ruling has caused an uproar in both academic and business communities, we need to remember the ruling does not significantly impact effect corporate America, yet.
Race Based Employment
The affirmative action ruling only applies to colleges and universities admissions processes. Employers are subject to Title VII of the Civil Rights Act of 1964, which is a federal law that prohibits employment discrimination based on certain factors which include race, color, religion sex (including pregnancy, sexual orientation, and gender identity) and national origin. Further, Title VII applies to all aspects of employment, including, but not limited to recruiting, hiring, promoting training and discharge. Several states, like Massachusetts, have their own version of Title VII to protect both employers and employees. Despite these protections, employers are still cautious with implementing and maintaining diversity equity and inclusion (DEI) programs. This is probably true because most companies do not see the difference between the two. Though they are similar, Title VII protects the employer and employee, while DEI programs aim to enhance the workplace experience and to some extent maximize profits. Plus, most DEI programs go beyond race based concerns and tend to embrace various other aspects of people’s lives that may be subject to bias.
Attack on DEI
Since the ruling by the Supreme Court, several state attorney generals sent letters to Fortune 500 companies stating that race-based preferences “whether under the label of diversity, equity and inclusion or otherwise” may violate federal and state antidiscrimination laws. In addition, corporations like Amazon and Comcast have had their DEI practices challenged. Several states like Florida have proposed and passed anti-DEI legislation banning certain DEI practices in state agencies. All this fervor has created the concern that the “right case” can outright destroy DEI practices and programs. Most recently, which seems like an act out of an abundance of caution, the well-known longstanding Society for Human Resources Management (SHRM) changed their focus from Inclusion, Equity and Diversity (IE&D) to Inclusion and Diversity (I&D). The concern relating to the future of DEI is palatable.
Safety Net for DEI Programs
The DEI movement is far from defeated, we must remember DEI and Affirmative Action are not the same. DEI programs, though want to ensure that various races feel accepted in the workplace, should focus on anti-bias, inclusion of all employees from various backgrounds, allyship and the appreciation of everyone’s professional and personal life experiences. You can call your program whatever you want, but it is really the approach used by employers that will survive future legal scrutiny.
Citing violations under the FTC Act, TILA, ECOA, and comparable Illinois laws, the complaint alleged that eight of the dealerships and two general managers of Illinois dealerships tacked on illegal fees for unwanted products to customers’ bills, often at the end of hours-long negotiations. These add-ons were allegedly buried in the consumers’ purchase contracts, which were sometimes upwards of 60-pages long, and sometimes added despite consumers specifically declining the products.
In addition, employees of the auto dealership also allegedly discriminated against black consumers during the process of financing vehicle purchases. On average, black customers at the dealerships were charged $190 more in interest and paid $99 more for similar add-ons than comparable non-Latino white customers.
The multistate dealer will have to pay $10 million to settle the lawsuit per the stipulated order, the largest monetary judgment ever required in an FTC auto lending case.
Putting it into Practice: From FTC Chair Lina Khan and Commissioner Rebecca Slaughter, the FTC appears poised to allege violations of the FTC Act’s prohibition on unfair acts or practices in light of discrimination found to be based on disparate treatment or having a disparate impact. Their statement discusses how discriminatory practices can be evaluated under the FTC’s three-part unfairness test and concludes that such conduct fits squarely into the kind of conduct that can be addressed by the FTC’s unfairness prong. This joint statement echoes similar announcements by CFPB Director Chopra about the use of unfairness to combat discrimination more broadly (we discussed Director Chopra’s statement and updates to the CFPB’s exam procedures in a recent Consumer Finance and FinTech blog post here).
The size of the financial judgment in this case underscores the seriousness with which the FTC takes discriminatory practices in consumer credit transactions entered into by entities over which they have authority, which includes auto dealerships. As the FTC becomes increasingly focused on enforcement of key laws to protect consumers against discriminatory conduct, companies should use these latest agency pronouncements as a reason to be on high alert for potential discriminatory outcomes in their business activities, even if unintentional.
The legal industry continues to respond to larger forces in society, and along with our usual focus on law firm moves, hires, and accolades, we take a look at the specific ways law firms are pledging to combat racism and fight for social justice in their communities and across the country.
Law Firm Moves, Hires and Recognitions
Down in Texas, Erin England joined Katten’s Dallas office as a partner in the firm’s commercial finance practice. England represents alternative lending institutions and banks in negotiating and structuring domestic and international commercial transactions. She also has experience in the real estate finance industry, representing lenders and borrowers in real estate and construction loans involving retail space and industrial properties.
“In the last two years, we’ve added leading attorneys like Erin in key growth areas such as commercial finance,” said Mark S. Solomon, managing partner of Katten’s Dallas office. “As an active member of several organizations committed to the hiring, retention, and promotion of diverse lawyers, Erin also shares in Katten’s deep commitment to diversity and inclusion, which is a fundamental part of the culture in our Dallas office.”
Michael Gaston-Bell of Katten
Also joining the Katten Dallas is Michael Gaston-Bell, who is the first labor and employment attorney in the firm’s Dallas office. His previous experience includes representing clients on Title VII, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA) and the Family and Medical Leave Act (FMLA) and the Fair Labor Standards Act (FLSA) workplace matters in state and federal court, and working with corporate leadership on complex and often crisis level employment issues, including internal investigations, unfair competition and major transactions in health care, entertainment, banking, military contracting and retail industries.
“Michael is a talented attorney who will offer our clients in Dallas and across the country exceptional employment litigation counsel,” said David Crichlow, national chair of Katten’s Commercial Litigation group. “He has the skills to succeed and a track record for being a true advocate of his clients who often face tough, complicated issues.”
Katten opened the firm’s Dallas office with seven partners in 2018 and has grown to over 40 attorneys in the past two years.
George Howard joined the Restructuring & Reorganization practice of Vinson & Elkins (V&E) in their New York City office as a partner. Howard represents distressed debt investors, asset purchasers, companies, banks and secured lenders in out of court restructurings, chapter 11 reorganizations, distressed M&A, cross-border insolvency proceedings, and secured financing transactions.
“We are focused on growing the firm’s restructuring team particularly to meet increasing client demand for company and debtor side representations,” said V&E managing partner Scott Wulfe. “George is a great addition to the team not only because of his significant debtor experience, which perfectly complements our existing strengths but also because he is a natural team player and a great cultural fit for V&E.”
Matt Jones Ropes & Gray
Ropes & Gray’s Chicago office added Matthew (Matt) R. Jones to the firm’s employment, executive compensation, and benefits practice group. Jones advises private equity firms and their portfolio companies on executive compensation in relation to complex commercial transactions. Jones also advises clients on Securities and Exchange Commission executive compensation arrangement reporting obligations.
“We are very excited that Matt has joined the firm,” said global private equity practice co-chair Neill Jakobe. “Chicago is a priority market for our clients and our firm, and it is critical that we continue to attract the top talent in this market. Matt is an exceptional fit from a strategic and cultural perspective and he will further enhance the value we deliver to our clients locally, and globally.”
Christopher Passodelis Jr., James M. Sander, Brandon T. Uram and Megan L. Tymoczko-Korch joined Steptoe & Johnson PLLC, working remotely from the firm’s Southpointe office in Canonsburg, Pa., with plans to move to the downtown Pittsburgh office this fall. All four attorneys practice in the firm’s Business Department, handling business transactions and corporate services and tax. Uram focuses his practice on transactions and business litigation.
“Chris, Jim, and Megan bring an entrepreneurial spirit and many decades of diverse experience representing businesses large and small to our firm. Brandon is a creative and fierce advocate for clients who are faced with litigation,” said CEO Susan S. Brewer. “As Steptoe & Johnson grows its presence in western Pennsylvania, they will play a key role in helping us meet our clients’ needs.”
Immigration attorney Sarah Hawk joined Barnes & Thornburg (B&T) as a partner, along with Of Counsel Terra Martin and Paralegal Elizabeth Wei. She has 20 years of corporate immigration experience representing universities, corporations, and individuals, and leads the firm’s Southeastern immigration practice.
“In this critical time, we couldn’t ask for a better resource for our clients than Sarah,” said B&T’s labor and employment department leader Kenneth Yerkes. “COVID-19 has complicated many employees’ immigration statuses, whether it stems from remote work, reductions in force, border closings or shortened internship programs.”
David F. Johnson of Winstead was named to the Board of Directors for the Texas Board of Legal Specialization (TBLS). Established in 1974, the TBLS is a certifies lawyers and paralegals in their specific area of law, bestowing certification upon demonstration of expertise, after passing a rigorous exam and demonstration of completion of CLE continuing education credits. Out of 110,000 attorneys licensed to practice in Texas, only 7400 are board-certified. Johnson, who writes extensively on Fiduciary law in Texas, is also Board Certified in Civil Appellate Law, Civil Trial Law, and Personal Injury Trial Law. He will serve a three-year term on the TLBS beginning July of 2020.
Law Firm Contributions to Social Justice
Law firms have responded in a variety of ways to the recent protests, civil upheaval, and calls for change surrounding the murder of unarmed minorities at the hands of police. Many law firms announced Juneteenth observances, and encouraged their employees to use the day as a chance to reflect on how to best encourage tolerance and justice in their lives and through their legal work.
Below is a sampling of some initiatives, pro-bono efforts, and other steps towards positive change announced by law firms.
One thousand attorney law firm BakerHostetler announced the firm’s intention to develop firm-wide plans to become a more “inclusive, diverse and successful place to work and thrive.” The firm announced plans to partner with civil and human rights organizations to develop an environment welcoming of honest conversations about race and discrimination, as well as resources to educate firm-wide to effect change. As an initial step, the BakerHostetler Foundation is donating $100,000 to the Equal Justice Initiative, a non-profit dedicated to justice, ending mass incarceration and police reform. Along with the donation, BakerHostetler acknowledges “like many other law firms, we have work to do to increase diversity among our attorneys and leadership, and we will not stop working to address these issues.”
A global law firm focused on technology and innovation, Orrick has also announced plans to advocate for racial equality and diversity in the legal industry. Along with increased resources devoted to the firm-wide pro-bono program, Orrick Cares, Orrick has also announced the Orrick Racial Justice Fellowship Program. This program will allow at least five attorneys within the firm to devote a year each to focus on social justice and civil rights issues.
Additionally, two associates with Orrick, Tatyanna Senel and Yasmina Souri rallied almost 1,000 attorneys to provide pro-bono representation to protesters in Los Angeles. Senel and Souri helped formalize a working relationship between Orrick and the National Lawyers Guild, an established bar association with a mission of using the power of the law for the people, by bringing together lawyers, law students, legal workers and jailhouse lawyers to work together on a wide spectrum of issues, and create change on the local, regional, national and international levels. The National Lawyers Guild (NLG) is one of the most progressive bar associations in the country, as well as one of the oldest, and the first to be racially integrated. Additionally, Senel and Souri activated their own networks to rally friends and colleagues to the cause. Senel says, “We’re [Senel and Souri] both passionate about the message, and we felt like there was something we could do with our law degrees.”
According to the LA Times, almost 3,000 protesters were arrested in Southern California during the upheaval surrounding George Floyd’s death. Through this partnership, NLG is able to deploy almost 1,000 attorneys with varying levels of expertise to provide legal defense to protesters arrested. Criminal Defense attorneys will handle the more complex matters, while attorneys with limited or no experience in criminal law will handle lower-level issues, like curfew violations. Additionally, the volunteers will provide training on how to act as a legal observer.
Wiggin and Dana LLP, in response to racial inequalities brought to the forefront by recent events, has announced the Wiggin Opportunity Initiative, a pledge to provide $10 million in pro-bono legal services to minority-owned businesses over the next decade. Managing Partner, Paul Hughes, said, “While born of current events and frustrations, the firm wants to do something that will outlast the spotlight of this particular moment and support long-term improvement in opportunity and equality in our communities. By leveraging the particular skillset of our sophisticated lawyers in a sizeable, sustained and focused effort over time, we hope to make real change in a way that we could not achieve by more modest, incremental efforts.”
The next step in the initiative is to identify, through collaboration with community partners businesses that could benefit from the initiative. The legal services will be available across a variety of practice groups in order to meet a variety of needs in the business community. With a ten-year commitment, the firm is hoping to develop long-term relationships with the minority businesses to form partnerships to amplify the success of the businesses, to best impart lasting change on the landscape.
WilmerHale is a full-service, international law firm with 1,000 attorneys is focusing their racial equality efforts on police reform. WilmerHale announced their intention to donate at least a quarter of a million dollars to organizations working on police reform efforts, and select two fellows to work with civil rights groups addressing issues related to systemic racism, criminal justice and holding police accountable.
Focusing on WilmerHale’s proven track record in Police Department Counseling, the firm has established a pro bono client initiative focusing on police reform and social inequities affecting minorities, focusing on police accountability—using WilmerHale’s long-standing expertise in advising police departments in Baltimore and Chicago under Department of Justice (DOJ) investigation to assess practices and bolster public safety by helping departments adopt best practices. WilmerHale indicates these steps are just the beginning, saying: “These are our initial steps in our efforts to ensure meaningful change. We plan to build on and expand this work.”
Many law firms have announced their intention to contribute financially as well as look internally and find ways to make their own workplaces more inclusive, by formalizing initiatives to increase diverse attorney representation across the industry. In fact, to further this goal, over 125 law firms have joined the Law Firm Antitracism Alliance, with the purpose of:
. . . leveraging the resources of the private bar in partnership with legal services organizations to amplify the voices of communities and individuals oppressed by racism, to better use the law as a vehicle for change that benefits communities of color and to promote racial equity in the law.
Through coordination of Pro-bono efforts, law firms will partner with legal services organizations to “identify and dismantle structural or systemic racism in the law.”
Akin Gump, wrote an amicus curiae brief on behalf of the respondents, in conjunction with the American Historical Association, the Organization for American Historians and the Fred T. Korematsu Center for law and Equality, along with over 40 individual historians, supporting the legal challenge to the Trump Administration’s decision to rescind the DACA program. The brief looks at the historical context of decisions such as these, with a focus on the coded language and implicit bias used by the government to support policies. The brief indicates, in part:
. . . [A]mici seek to ensure that this Court understands the ways in which racially coded language has been used by government actors, both past and present, to mask illicit discriminatory motives—particularly in the immigration context, including the rescission of DACA.
Pratik Shah, co-head of Akin Gump’s Supreme Court and appellate practice, pointed out that many DACA recipients have only ever known the United States as their home, and all who earn DACA protection had done so by furthering their education or serving in the military. He says, “The Court’s decision that the administration cannot arbitrarily upend the lives of hundreds of thousands who arrived in our country as children . . . is a victory for both the rule of law and common decency.”
The U.S. Court of Appeals for the Fourth Circuit issued a decision (Haynes v. Waste Connections, Inc.) this week that reversed in the employee’s favor. The opinion tackles many commonly-used defenses by employers in employment discrimination and retaliation cases. In particular, the Fourth Circuit analyzed whether:
established that he was performing his job satisfactorily when the employer fired him; and
produced any evidence of pretext, which looks to whether the employee can show that the employer’s stated reason for the adverse employment action (termination, demotion, etc.) was meant to disguise a discriminatory intent.
Ultimately, the court found in favor of the employee and sent the case back down to the trial court.
Background
Jimmy Haynes, who is African-American, claimed that his former employer, Waste Connections, Inc. (WCI), discriminated and retaliated against him when it fired him. Haynes alleged that WCI violated Title VII of the 1964 Civil Rights Act and 42 U.S.C. §1981 (Section 1981) as a result. Notably, while Title VII and Section 1981 have many similarities in terms of prohibiting race discrimination in employment, a number of significant differences exist that can impact how a court reviews these claims, as discussed here.
The key facts had to do with Haynes reporting to work one evening and then leaving the job site. According to Haynes, he left work due to a stomach virus and told his supervisor about this. WCI, on the other hand, claimed that Haynes walked off the job because he was frustrated that his normal truck was not ready. Two days later, WCI fired Haynes for job abandonment. WCI did not mention any other reason for terminating Haynes’ employment at the time. During the course of his lawsuit though, WCI claimed that Haynes had also committed other violations during June and August 2015.
After Haynes filed his lawsuit in court and the parties exchanged information during the discovery process, WCI filed a motion for summary judgment arguing that no disputed material facts existed and thus a jury trial was unnecessary. The trial court granted summary judgment to the WCI and dismissed Haynes’ lawsuit. Haynes then appealed this decision and the appellate court reversed the trial court’s decision.
The Fourth Circuit’s findings
Valid comparator/similarly situated employee
The Fourth Circuit first analyzed whether Haynes had established a proper comparator who was not African-American and was treated better than him. Noting that comparing similar employees will never involve exactly the same offenses occurring over the same time period with the same set of facts, the court explained that showing someone is a valid comparator involves:
evidence that the employee and the comparator dealt with the same supervisor;
were subject to the same standards; and
engaged in the same conduct without such differentiating circumstances that would distinguish their conduct or the employer’s treatment of them
Haynes v. Waste Connections, Inc., Case No. 17-2431 at p. 8, (4th Cir. April 23, 2019). The appellate court found that a white employee, who had the same supervisor as Haynes, had several workplace violations. These violations included twice using a cellphone while driving, driving while distracted, and responding to a traffic situation late. Id. It also appeared that this white employee had yelled at the supervisor before quitting his job. Yet the white employee was allowed to return to work and Haynes, who had not yelled at his supervisor and had fewer infractions, was fired.
Because both employees had the same supervisor, were subject to the same standards, and engaged in similar conduct, the court found the white employee to be a valid comparator. In making this decision, the appellate court rejected WCI’s argument that the white employee’s infractions did not cause any damages whereas Haynes’ violations did. It also turned away WCI’s claim that the white employee had notified the employer that he was resigning while Haynes simply walked off the job.
Was Haynes performing his job satisfactorily
WCI also argued that Haynes had not demonstrated that he was performing his job satisfactorily at the time WCI fired him. The Fourth Circuit pointed out that Haynes was not required “to show that he was a perfect or model employee;” rather, he need only show that he was qualified for the position and meeting WCI’s legitimate expectations. To support his contention that he was satisfactorily performing his job, Haynes produced evidence that:
his supervisor told him the month before Haynes was terminated that “everything looks good” and “nothing to worry about” in terms of his upcoming job performance evaluation; and
Haynes received bonuses during the relevant time period
The court thus ruled that Haynes had presented enough evidence to demonstrate satisfactory job performance.
Evidence of pretext
To show pretext, “a plaintiff may show that an employer’s proffered non-discriminatory reasons for the termination are inconsistent over time, false, or based on mistakes of fact.” Haynes, Case No. 17-2431 at 12. If the employee does so, then summary judgment should be denied and the case should proceed to trial.
The most important factor to the Fourth Circuit was that WCI came up with a new reason why it claims it terminated Haynes’ employment: his poor attitude. The only reason given at the time of Haynes’ termination, however, was job abandonment. Further, the company policy on job abandonment defines it as three days with no call or no show, yet Haynes had called and texted within one day. Ultimately, the Fourth Circuit found too many inconsistencies with WCI’s purported reasons for firing Haynes and thus ordered that a jury should decide whose version is correct.
Key takeaways
Some important factors can be gleaned from the Fourth Circuit’s decision here:
For the comparator/similarly situated analysis, you’re more likely to meet this test if you and the other employee(s) you’re comparing yourself to:
share the same supervisor;
perform very similar job tasks and responsibilities (both the number and weight) as the other person;
if the case involves discipline, then the number and severity of the infractions should be relatively similar;
have similar job performance evaluations and disciplinary history; and
your experience level (including supervisory experience) the same as the other person
To demonstrate that you were performing your job satisfactorily, evidence that you received bonuses, awards, and/or average (or higher) job performance ratings will be important;
Regarding pretext, the more inconsistencies you can show the employer’s reasons for firing you, the better off you will be.
In Martinez v. Cracker Barrel Old Country Store Inc., Case No. 11-2189 (6th Cir. Jan. 10, 2013), in a published decision, the Sixth Circuit affirmed the dismissal of a “reverse” racial discrimination claim arising out of Cracker Barrel’s termination of the plaintiff’s position as a retail manager at a Flint, Michigan Cracker Barrel.
The plaintiff was a general manager of a Cracker Barrel store for ten years. Cracker Barrel terminated the plaintiff because she violated company policy when she made remarks during conversations regarding the Haiti earthquake, the plight of those in Haiti, and the use of a “bridge card” as a “ghetto card.” The plaintiff, a Caucasian, contended that similarly situated African Americans were treated more favorably than her—i.e., not fired for making similar remarks.
Interestingly, the Sixth Circuit noted that a claim of “reverse” racial discrimination under federal law requires a showing of “background circumstances supporting the suspicion that the defendant is that unusual employer who discriminates against the majority.” Because the plaintiff also brought a claim alleging race discrimination under Michigan’s law, however, she did not need to satisfy this heightened standard of proof to establish a claim because Michigan does not require a heightened standard of proof for reverse discrimination claims.
The Sixth Circuit dismissed the claims because, first, the plaintiff did not come forward with direct evidence of reverse discrimination because her evidence required an inference that Cracker Barrel terminated her based on race. Second, the plaintiff did not come forward with sufficient evidence that another similarly situated employee was treated more favorably—the plaintiff was differently situated in the management structure of the store and also engaged in more pervasive and severe conduct. Therefore, the Sixth Circuit found that the plaintiff could not establish a prima facie case of discrimination.
