On May 20, 2014, the California Department of Fair Employment and Housing (“DFEH”) announced the impending settlement of its high-profile systemic action against the Law School Admission Council, Inc. (“LSAC”). Our ongoing coverage of this case, DFEH v. Law School Admission Council, Inc., No. 12-CV-1830, can be found here and here. The proposed settlement will include payment by LSAC of upwards of $8 million in penalties, damages, costs and fees, as well as an exhaustive slate of injunctive relief.

This multimillion dollar settlement is a big win for the DFEH, and a clear warning to employers that state agency systemic enforcement is here to stay. The agency’s press release can be found here, and the U.S. Department of Justice’s press release is available here.

Background

The DFEH’s enforcement suit sought damages and injunctive relief for alleged failure by LSAC to provide disability-related accommodations to individuals taking its Law School Admission Test (“LSAT”). The DFEH brought its action both on behalf of seventeen named individuals, and also on behalf of a “group or class” consisting of all disabled individuals in California who have requested a reasonable accommodation for the LSAT since January 2009. During litigation, the U.S. Department of Justice and a number of individuals joined the DFEH as plaintiff-interveners.

The DFEH alleged that LSAC violates titles III and V of the Americans with Disabilities Act (“ADA”), 42 U.S.C. §§ 12181 et seq. and 12203—incorporated by reference in Unruh Civil Rights Act, Cal. Civ. Code § 51(f)—by (i) failing to provide required testing accommodations to individuals with disabilities; (ii) subjecting applicants requiring accommodations to excessive documentation demands; and (iii) annotating or “flagging” such individuals’ test results prior to sending their scores to law schools.

Over the course of the lawsuit, the DFEH flexed its newfound enforcement powers (see here for our prior discussion of the agency’s novel authority) in an attempt to lay further groundwork for future systemic actions. On April 22, 2013, Judge Edward Chen of the U.S. District Court for the Northern District of California held that DFEH collective enforcement actions are cut from the same cloth as EEOC enforcement suits, and therefore need not satisfy federal Rule 23 class certification requirements (see here for our analysis of Judge Chen’s order). The DFEH has already shown its eagerness to rely on this ruling as it looks to pursue future collective actions against large employers in California.

Terms Of Settlement

The parties in DFEH v. LSAC, Inc. memorialized the terms of their proposed settlement in a lengthy 61-page consent decree filed with the district court on May 20. Pending court approval of the consent decree, LSAC will pay over $8 million for costs and fees, civil penalties, damages payments to named claimants and plaintiff-interveners, and creation of a large monetary fund to compensate thousands of aggrieved claimants.

Major elements of the consent decree’s exhaustive slate of injunctive relief include: (i) creation of new policies and practices for processing accommodation requests; (ii) engagement of expert consultants for evaluation of testing accommodation requests; (iii) enhanced tracking of accommodation-related data; (iv) ADA notice posting, monitoring and reporting; and (v) alteration of LSAC’s score annotation practices.

Implications For Employers

Settlement of this high-profile case heralds a new reality in systemic enforcement litigation - the DFEH now has a model for engaging employers in “bet the company” systemic lawsuits on behalf of large swaths of employer workforces to which Rule 23 class certification requirements may not apply.

The question on employers’ minds nationwide now should be: “Will agencies in other states also join in the EEOC’s unwavering focus on systemic litigation?” Provided they have the statutory authority to so act, this settlement may well entice them. The best defense? As we discussed recently in our CalPecs blog, employers should ensure their policies and procedures strictly comply with state and federal law, and that managers receive the training they need to know, observe, and enforce these policies and procedures.