In the third of a trio of significant recent decisions arising out of EEOC v. JBS USA, LLC, No. 10-CV-02103 (D. Colo. August 8, 2011), Judge Phillip Brimmer granted in part and denied in part the EEOC’s motion to bifurcate trial and discovery. For our previous posts on the case, see here and here. This latest ruling addresses the statutory underpinnings of an EEOC pattern or practice case, and is a valuable read for employers facing large-scale EEOC litigation.

It is also a window into the EEOC's regular practice of seeking "punitive damages in stage 1" bifurcation, a device which entails significant litigation leverage depending on how a judge reacts to the litigation gambit.

Bifurcation Framework

In this latest decision, the Court tackled the knotty concept of bifurcation in EEOC pattern or practice claims. The EEOC can bring both representative claims (generally called “Section 706” claims) – where the EEOC stands in the shoes of one or more individual claimants to prove a violation of the law  –  and pattern or practice claims (typically termed “Section 707” claims), where the EEOC attempts to prove that discrimination or retaliation was systemic and the “standard operating procedure” of an employer. Section 706 claims use the familiar McDonnell-Douglas burden shifting method of proof; the same framework is used in individual discrimination claims. Section 707 claims, however, have a significantly different framework first articulated in the U.S. Supreme Court case of International Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977).

In a pattern or practice claim, the EEOC must first demonstrate in Phase I of a trial that unlawful discrimination has been a regular procedure or policy followed by an employer. If the EEOC carries this burden, the employer can attempt to defend itself by challenging the EEOC’s proof or providing non-discriminatory explanations for its procedures. If the employer cannot mount such a defense, the Court can conclude that a widespread violation of the law has occurred, and it is presumed that all of the members of the class are victims of that violation. In Phase II of the trial, an employer may rebut individual claims and or challenge the award of damages to individual claimants, but it is an uphill battle at that point given what is known as the "Teamsters presumption."

In EEOC v. JBS USA, LLC, the EEOC brought both Section 706 and Section 707 claims based on what it claimed was widespread religious discrimination against Muslims, harassment, and retaliation, all turning mainly on events surrounding Ramadan in 2008.

The EEOC’s Proposal And The Court’s Decision

The EEOC proposed to the Court that all of its pattern or practice claims be tried in the two-phase Teamsters model. The EEOC also pushed for the jury in Phase I to make a determination of punitive damages, before the employer was able to challenge individual claims in Phase II - the so-called "punitive damages in stage 1" bifurcation device. In addressing the EEOC’s proposal, the Court analyzed each of the EEOC’s pattern or practice claims in turn.

The Court first determined that the bifurcation model simply broke down for a pattern or practice harassment claim. Id. at 12. The Court held that the very nature of hostile work environment claims was too individualized to decide on a class-wide basis. The Court did not, however, decide what framework it intended to use for the harassment claims, tabling that issue for Phase II of any trial in the case.

Over JBS’s objections, however, the Court decided it would – for the most part – apply bifurcation to the religious accommodation, retaliation, and disparate treatment claims.  Id. at 13-15.  It excluded certain specific individualized or undeveloped allegations (e.g., whether employees were denied bathroom breaks) from the bifurcation model, though. In other words, the jury would decide in Phase I if there was widespread discrimination against Muslims, and if the EEOC met its burden, it would be presumed that all Muslim employees were victims of that discrimination. Those victims would move to Phase II with the presumption that they were entitled to damages, and the employer would be forced to attack those individual claims by each employee one by one.

Importantly, the Court held that the EEOC could not seek punitive or compensatory damages for individuals pursuant to its pattern or practice claims, noting that the statute’s plan language did not authorize those damages in a Section 707 claim. Id. at 16. Claims for those damages must come, if at all, in the more individualized Phase II proceedings. Id. at 18.

Finally, the Court granted the EEOC’s request for bifurcated discovery, and set up specific parameters of depositions and written discovery to match up with the parties’ burdens at the two phases of the case. Id. at 17.

Implications Of The Court’s Decision

This is a complicated and technical ruling. What it highlights, however, is that an EEOC pattern or practice claim is a powerful device, and litigation that poses significant risks for employers. Under the Teamsters model, a prima facie showing of a pattern or practice creates an early presumption that the employer violated the law for a broad class of alleged victims. It is potentially difficult to un-ring that bell at Phase II. Fortunately, the standard for demonstrating a pattern or practice in Phase I is high, and judges - like Judge Brimmer here - can and do narrow the bifurcated Teamsters framework to only those claims truly susceptible to class treatment.

JBS also argued in its legal papers - although Judge Brimmer did not focus on it in his order - that the so-called "punitive damages in stage 1" bifurcation device is improper due to additional statutory or constitutional grounds, especially in light of two rulings that have rejected the EEOC's strategy based on the Rules Enabling Act and the due process clause. See EEOC v. Sterling Jewelers,  2011 U.S. LEXIS  44255 (W.D.N.Y. April 25, 2011); EEOC v. McCormick & Schmick's, 2008 U.S. Dist. LEXIS 112283 (D. Md. Nov. 4, 2008). Employers are well served to utilize those arguments, for bifurcation with "punitive damages in stage 1" can be a "game-changer" for defense of these types of claims.