Employment Law

AGs Urge Legislation Ending Arbitration for Sexual Harassment Claims

Why it matters

In a letter to congressional leadership, the attorneys general of all 50 states, the District of Columbia and five territories urged lawmakers to enact legislation that would eliminate mandatory arbitration agreements when workers present sexual harassment claims. The letter expressed concern about the use of nondisclosure provisions in cases of sexual harassment, particularly because the arbitration requirement is typically found in “fine print” and “take-it-or-leave-it” language. “As a consequence, many employees will not even recognize that they are bound by arbitration clauses until they have been sexually harassed and attempt to bring suit,” according to the letter. While the AGs recognized arbitration may provide benefits in other contexts, it is not the right fit for sexual harassment claims, they said, as it effectuates a disservice to the public interest by keeping both the harassment complaints and any settlements confidential. “[W]e strongly support appropriately-tailored language to ensure that sexual harassment victims have a right to their day in court,” the AGs said.

Detailed discussion

The #MeToo movement continues, with state attorneys general throwing their support behind legislation to end arbitration agreements in workplace situations involving sexual harassment. In December, Sens. Kirsten Gillibrand (D-N.Y.) and Lindsey Graham (R-S.C.) introduced the Ending Forced Arbitration of Sexual Harassment Act of 2017.

Senate Bill 2203 states that “no predispute arbitration agreement shall be valid or enforceable if it requires arbitration of a sex discrimination dispute,” defined as “a dispute between an employer and employee arising out of conduct that would form the basis of a claim based on sex under Title VII.”

The bill is pending before the Senate Health, Education, Labor, and Pensions Committee. But it received some high-profile backing when the National Association of Attorneys General sent a letter to the leadership of both the Senate and House of Representatives asking “for your support and leadership in enacting needed legislation to protect the victims of sexual harassment in the workplace.”

Many employers require that their employees, as a condition of employment, sign arbitration agreements mandating that sexual harassment claims will be resolved through arbitration instead of judicial proceedings, explained the AGs of all 50 states; the District of Columbia; and the territories of American Samoa, Guam, Northern Mariana Islands, Puerto Rico and the Virgin Islands.

“These arbitration requirements are often set forth in clauses found within the ‘fine print’ of lengthy employment contracts,” the AGs wrote. “Moreover, these clauses typically are presented in boilerplate ‘take-it-or-leave-it’ fashion by the employers. As a consequence, many employees will not even recognize that they are bound by arbitration clauses until they have been sexually harassed and attempt to bring suit.”

While there may be benefits to such arbitration provisions in other contexts, they do not extend to sexual harassment claims, according to the letter. “Victims of such serious misconduct should not be constrained to pursue relief from decision makers who are not trained as judges, are not qualified to act as courts of law, and are not positioned to ensure that such victims are accorded both procedural and substantive due process,” the AGs told lawmakers.

Additional concerns arise with the secrecy of mandatory arbitration provisions, the letter noted, “which disserve the public interest by keeping both the harassment complaints and any settlements confidential. This veil of secrecy may then prevent other persons similarly situated from learning of the harassment claims so that they, too, might pursue relief. Ending mandatory arbitration of sexual harassment claims would help to put a stop to the culture of silence that protects perpetrators at the cost of their victims.”

The 56 AGs praised Microsoft Corp., which recently announced that it will discontinue the use of arbitration requirements with respect to sexual harassment claims and support the federal legislation.

“Congress today has both opportunity and cause to champion the rights of victims of sexual harassment in the workplace by enacting legislation to free them from the injustice of forced arbitration and secrecy when it comes to seeking redress for egregious misconduct condemned by all Americans,” the AGs concluded. “We are aware that the Senate and House are considering legislation to address this issue. Whatever form the final version may take, we strongly support appropriately-tailored legislation to ensure that sexual harassment victims have a right to their day in court.”

To read the letter, click here.

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Second Circuit Declares Title VII Prohibits Sexual Orientation Discrimination

Why it matters

The U.S. Court of Appeals for the Second Circuit ruled that discrimination based on sexual orientation violates Title VII, making clear this issue splits the circuits and increasing the probability that the Supreme Court will ultimately have to resolve this issue.

Donald Zarda filed suit against Altitude Express Inc. alleging that he was fired after revealing his sexual orientation to a skydiving client. A district judge granted summary judgment to Zarda’s former employer on the ground that the statute does not prohibit discrimination on the basis of sexual orientation. A three-judge panel of the Second Circuit affirmed, but after an en banc rehearing, the court reversed. “We now hold that sexual orientation discrimination constitutes a form of discrimination ‘because of … sex,’ in violation of Title VII,” the majority wrote, reversing precedent in the circuit and reinstating the plaintiff’s claim. The Seventh Circuit has issued a similar decision, while the Eleventh Circuit has reached the opposite conclusion. With the split widening, the issue is likely headed to the Supreme Court.

Detailed discussion

Donald Zarda worked as a skydiving instructor for Altitude Express and regularly participated in tandem skydives, strapped hip-to-hip and shoulder-to-shoulder with clients. As a result of the physical proximity, Zarda sometimes told female clients about his sexual orientation (he was a gay man) to assuage any concern they might have about being strapped together.

In June 2010, he told a female client that he was gay “and had an ex-husband to prove it.” She later complained that Zarda inappropriately touched her and made a reference to being gay to excuse his behavior. Zarda was terminated and filed suit alleging sex stereotyping in violation of Title VII and sexual orientation discrimination in violation of New York law. Zarda passed away in 2014, and his estate continued to pursue the action.

The district court granted summary judgment in favor of Altitude Express on the plaintiff’s Title VII claim, ruling that a gender stereotyping claim could not be predicated on sexual orientation. At trial on his remaining claims, the jury found for the defendant. Zarda appealed.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit affirmed summary judgment for the employer on Zarda’s Title VII claim, writing that it was bound by circuit precedent that could be overturned only by the court sitting en banc.

The en banc panel then ordered rehearing, revisited its precedent and reversed, reinstating Zarda’s claim.

Title VII sets forth a broad rule of workplace equality, the court emphasized, and the Supreme Court has recognized it applies to “not just ‘the principal evil[s] Congress was concerned with when it enacted’ the statute in 1964, but also ‘reasonably comparable evils’ that meet the statutory requirements.”

Sexual orientation discrimination is motivated, at least in part, by sex and therefore is a subset of sex discrimination, the majority wrote, because sex is necessarily a factor in sexual orientation.

“Because one cannot fully define a person’s sexual orientation without identifying his or her sex, sexual orientation is a function of sex,” the court said. “Indeed sexual orientation is doubly delineated by sex because it is a function of both a person’s sex and the sex of those to whom he or she is attracted. Logically, because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.”

Other types of claims initially believed to fall outside the scope of Title VII’s prohibition on sex discrimination—such as sexual harassment and hostile work environment—have been recognized as viable under the statute even though they were not plausible when it was enacted in 1964, the court noted. “[B]ecause Congress could not anticipate the full spectrum of employment discrimination that would be directed at the protected categories, it falls to courts to give effect to the broad language that Congress used,” the court said.

The Second Circuit’s conclusion was reinforced by the “comparative test,” in which the court considers whether the trait that is the basis for discrimination is a function of sex by asking whether an employee’s treatment would have been different “but for that person’s sex.”

“In the context of sexual orientation, a woman who is subject to an adverse employment action because she is attracted to women would have been treated differently if she had been a man who was attracted to women,” the court explained. “We can therefore conclude that sexual orientation is a function of sex and, by extension, sexual orientation discrimination is a subset of sex discrimination.”

Viewing the relationship between sexual orientation and sex through the lens of gender stereotyping provided yet another basis for the court’s ruling, as sexual orientation discrimination is almost invariably rooted in stereotypes about men and women. Courts across the country have struggled with this issue, laboring to distinguish between gender stereotypes that support an inference of impermissible sex discrimination and those that are indicative of sexual orientation discrimination, the majority wrote.

“In the face of this pervasive confusion, we are persuaded that ‘the line between sex discrimination and sexual orientation discrimination is ‘difficult to draw’ because that line does not exist save as a lingering and faulty judicial construct,’” the court said. “We now conclude that sexual orientation discrimination is rooted in gender stereotypes and is thus a subset of sex discrimination.”

The court found additional support considering associational discrimination, which it said extends beyond race to all of Title VII’s protected classes, including sex, as well as the “sea change” in the constitutional framework governing same-sex marriage and the Equal Employment Opportunity Commission’s decision in Baldwin v. Foxx, recognizing that “sexual orientation is inherently a ‘sex-based consideration’; accordingly, an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.”

“Since 1964, the legal framework for evaluating Title VII claims has evolved substantially,” the majority wrote. “Title VII’s prohibition on sex discrimination applies to any practice in which sex is a motivating factor. … [S]exual orientation discrimination is a subset of sex discrimination because sexual orientation is defined by one’s sex in relation to the sex of those to whom one is attracted, making it impossible for an employer to discriminate on the basis of sexual orientation without taking sex into account. Sexual orientation discrimination is also based on assumptions or stereotypes about how members of a particular gender should be, including to whom they should be attracted. Finally, sexual orientation discrimination is associational discrimination because association between members of particular sexes discriminates against an employee on the basis of sex. Each of these three perspectives is sufficient to support this Court’s conclusion and together they amply demonstrate that sexual orientation discrimination is a form of sex discrimination.

“Although sexual orientation discrimination is ‘assuredly not the principal evil that Congress was concerned with when it enacted Title VII,’ ‘statutory prohibitions often go beyond the principal evil to cover reasonably comparable evils.’ In the context of Title VII, the statutory prohibition extends to all discrimination ‘because of … sex’ and sexual orientation discrimination is an actionable subset of sex discrimination. We overturn our prior precedents to the contrary to the extent they conflict with this ruling.”

Vacating the district court’s judgment, the Second Circuit held that Zarda was entitled to bring a Title VII claim for discrimination based on sexual orientation.

To read the opinion in Zarda v. Altitude Express, Inc., click here.

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Supreme Court: Dodd-Frank Doesn’t Protect Internal Whistleblowers

Why it matters

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) does not protect internal whistleblowers who do not report their concerns to the Securities and Exchange Commission (SEC), the Supreme Court has ruled, settling an issue that split the circuits. Paul Somers shared with senior management his suspicions that a supervisor was violating the Sarbanes-Oxley Act. He was fired shortly after and then sued for retaliation under Dodd-Frank. His employer moved to dismiss the action, arguing that Somers was not entitled to protection from alleged retaliation because he had not reported his concerns to the SEC, as required by Dodd-Frank. A district judge denied the motion, and the U.S. Court of Appeals for the Ninth Circuit affirmed. But in an opinion authored by Justice Ruth Bader Ginsburg, the Supreme Court reversed. Dodd-Frank’s antiretaliation provision does not extend to those who have not reported the violation to the SEC, the justices held. Therefore, an individual like Somers, who only reported his concerns internally, is ineligible to seek redress under Dodd-Frank. While a victory for the employer, the decision could lead to more whistleblowers reaching out to the SEC with their concerns.

Detailed discussion

Enacted in 2010, Section 78u-6(a)(6) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) defines a whistleblower as “any individual who provides or two or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”

The statute provides employees with a private right of action against employers who retaliate against the whistleblower for engaging in certain protected activity. While two subsections specifically reference working with the SEC, the third provides protections more generally “in making disclosures that are required or protected” under the Sarbanes-Oxley Act, the Securities Exchange Act, “and any other law, rule, or regulation subject to the jurisdiction of the Commission.”

Dodd-Frank also affords covered whistleblowers incentives, with an award program operated by the SEC that will pay 10 to 30 percent of the monetary sanctions collected in an enforcement action and offers the possibility of double back pay with interest for a prevailing whistleblower. These aspects of Dodd-Frank stand in contrast to the whistleblower provisions found in Sarbanes-Oxley, which contains an administrative exhaustion requirement, allows a shorter time period in which to file suit and limits recovery to actual back pay with interest.

Complicating the issue further, the SEC promulgated Rule 21F-2, which provides antiretaliation protection without requiring the whistleblower to provide information to the SEC, provided the whistleblower provides information in a manner shielded by one of three clauses in the rule.

With that background, the Supreme Court considered the case of Paul Somers, a former vice president at Digital Realty Trust. Somers claimed that over the four years he worked for the company, he made several reports to senior management regarding possible securities law violations and was fired as a result.

Somers sued Digital Realty, alleging violations of various state and federal laws, and seeking the protections afforded to whistleblowers under Dodd-Frank. Digital Realty moved to dismiss, arguing that because Somers reported the alleged violations only internally and not to the SEC, he was not a “whistleblower” pursuant to Dodd-Frank.

The district court denied the motion, and the U.S. Court of Appeals for the Ninth Circuit affirmed.

Recognizing that the Ninth Circuit decision widened a circuit split (with contrary authority from the Fifth Circuit, the Supreme Court granted cert and heard oral argument in the fall.

In a unanimous opinion authored by Justice Ruth Bader Ginsburg, the Court reversed. The fact that the statute includes an explicit definition of a “whistleblower” resolved the question, the justices said.

“Our charge in this review proceeding is to determine the meaning of ‘whistleblower’ in Section 78u-6(h), Dodd-Frank’s anti-retaliation provision,” Justice Ginsburg wrote. “The definition section of the statute supplies an unequivocal answer: A ‘whistleblower’ is ‘any individual who provides … information relating to a violation of the securities laws to the Commission.’ Leaving no doubt as to the definition’s reach, the statute instructs that the ‘definition shall apply’ ‘[i]n this section,’ that is, throughout Section 78u-6.”

The “purpose and design” of Dodd-Frank corroborates this understanding of Section 78u-6, the Court said, as the “core objective” of the statute’s “robust whistleblower program, as Somers acknowledges, is ‘to motivate people who know of securities law violations to tell the SEC.’” By enlisting whistleblowers to assist the government in identifying and prosecuting those who violate securities laws, Congress attempted to improve SEC enforcement and facilitate the Commission’s recovery of money for the victims of financial fraud, the Court added.

Dodd-Frank’s incentives—the whistleblower award program, longer statute of limitations, lack of administrative exhaustion and opportunity for double back pay—encourage SEC reporting, particularly in contrast with Sarbanes-Oxley, which has less robust rewards and no SEC reporting requirement.

“In sum, Dodd-Frank’s text and purpose leave no doubt that the term ‘whistleblower’ in Section 78u-6(h) carries the meaning set forth in the section’s definitional provision,” the Court wrote. “The disposition of this case is therefore evident: Somers did not provide information ‘to the Commission’ before his termination … so he did not qualify as a ‘whistleblower’ at the time of the alleged retaliation. He is therefore ineligible to seek relief under Section 78u-6(h).”

Justice Ginsburg rejected Somers’ and the Solicitor General’s arguments to adopt an “ordinary sense” definition of “whistleblower” without any SEC reporting requirement. While the plain-text reading adopted by the Court “undoubtedly” shields fewer individuals from retaliation, this did [ is there a “not” missing?] produce anomalous results or create obvious incongruities, she wrote.

Overlooked in these arguments “is Dodd-Frank’s core objective: to prompt reporting to the SEC,” the justices said. “In view of that precise aim, it is understandable that the statute’s retaliation protections, like its financial rewards, would be reserved for employees who have done what Dodd-Frank seeks to achieve, i.e., they have placed information about unlawful activity before the Commission to aid its enforcement officers.”

Justice Sonia Sotomayor (joined by Justice Stephen Breyer) and Justice Clarence Thomas (joined by Justices Samuel Alito and Neil Gorsuch) filed concurring opinions, disagreeing with how the Court should rely on legislative history, as the majority did with regard to the purpose of Dodd-Frank.

To read the opinion in Digital Realty Trust, Inc. v. Somers, click here.

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Ten-Week Telecommute Reasonable for In-House Counsel, Sixth Circuit Holds

Why it matters

Affirming a jury verdict, the U.S. Court of Appeals for the Sixth Circuit found that ten weeks of telecommuting was a reasonable accommodation for a pregnant lawyer put on bed rest. Due to complications from pregnancy, in-house counsel Andrea Mosby-Meachem was put on bed rest. Pursuant to the Americans with Disabilities Act (ADA), she requested to work from home during that period. Memphis Light, Gas & Water denied the request, taking the position that in-person attendance was an essential function of her job. Mosby-Meachem sued, and a jury awarded her $92,000 in compensatory damages on her claim of disability discrimination. The employer appealed, but the federal appellate panel upheld the verdict. The plaintiff presented sufficient evidence for a reasonable jury to conclude that in-person attendance was not an essential function of her job for the ten-week period she requested to work from home, the court said.

Detailed discussion

An attorney for Memphis Light, Gas & Water Division (MLG&W), Andrea Mosby-Meachem focused primarily on the areas of labor, employment and workers’ compensation.

When a new general counsel was hired at the company, she sent an email to all the lawyers in the legal department outlining her policy that the attorneys should be present in the office for the entire workday. If a midday meeting occurred at another location, lawyers were still expected to return to the office, she explained. However, in practice, employees often telecommuted, with Mosby-Meachem doing so for two weeks while recovering from neck surgery.

In 2013, Mosby-Meachem’s doctors expressed concerns during the 23rd week of her pregnancy and put her on bed rest for approximately ten weeks. She informed her supervisor and the human resources department of the diagnosis and then made an official accommodation request pursuant to the Americans with Disabilities Act (ADA). Mosby-Meachem asked that she be permitted to work from a bed either within the hospital or her home for the ten-week period, submitting documentation in support of her request.

MLG&W assembled an ADA Committee, conducted a phone conference with Mosby-Meachem and denied the request despite her assurances that she could perform her job remotely. In a letter, the employer stated the denial was based on the determination that physical presence was an essential function of Mosby-Meachem’s job and that teleworking created concerns about confidentiality.

Mosby-Meachem later filed suit alleging failure to accommodate and retaliation in violation of the ADA as well as state law claims. At trial, the jury returned a verdict for Mosby-Meachem on her discrimination claims, awarding her $92,000 in compensatory damages. Jurors sided with the employer on the ADA retaliation and state law claims.

The employer appealed, moving for judgment as a matter of law or, in the alternative, a new trial. The jury lacked a legally sufficient basis to find that the plaintiff could have effectively performed all the essential functions of her job with her requested accommodation, MLG&W argued.

But the U.S. Court of Appeals for the Sixth Circuit affirmed the jury verdict. While the employer was correct that some evidence showed in-person attendance was an essential function of the plaintiff’s job, Mosby-Meachem proffered other evidence at trial from which a jury could reasonably conclude that she was otherwise qualified to perform her job from home for ten weeks without being physically present in the office, the court said.

In addition to Mosby-Meachem herself, several MLG&W attorneys as well as outside counsel who worked with the plaintiff testified that they felt she could perform all essential functions during the ten-week period working from home, the court said.

Mosby-Meachem also challenged the strength of the employer’s evidence that physical attendance was necessary by establishing that she had never tried a case in court nor taken depositions of witnesses, two of the functions listed in her job description. The job description itself was based on a 20-year-old questionnaire that did not reflect changes in the job that have resulted from technological advancements, the plaintiff also told jurors.

“Given all the evidence presented by Mosby-Meachem that both undermined MLG&W’s evidence and independently supported a finding that she could perform the essential functions of her job remotely for ten weeks, a rational jury could find that she was a qualified employee and that working remotely for ten weeks was a reasonable accommodation,” the court wrote.

Sixth Circuit precedent has left open the possibility of teleworking as a reasonable accommodation, particularly for a finite period, the panel noted, adding that determining what constitutes an essential function “is highly fact specific.”

The plaintiff also presented evidence that MLG&W failed to engage in an interactive process. Testimony at trial revealed the employer had already determined that it was not willing to permit Mosby-Meachem to work remotely and that the members of the ADA Committee understood they were to refuse any telecommuting requests.

Affirming the verdict, the panel denied the employer’s motion for judgment as a matter of law or a new trial.

To read the opinion in Mosby-Meachem v. Memphis Light, Gas & Water Division, click here.

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Court Limits ADA’s ‘Regarded As’ Protections to Current Disabilities

Why it matters

The Americans with Disabilities Act’s (ADA) “regarded as” protections do not extend to cases where an employee is presently healthy but has the potential to become disabled in the future, a Florida federal court ruled in rejecting a lawsuit filed by the Equal Employment Opportunity Commission (EEOC). The agency filed suit on behalf of Kimberly Lowe, a massage therapist who asked for time off from her job at Massage Envy to visit her sister in Ghana. Although her request was initially approved, Lowe was fired three days before her trip after one of the company owners expressed concern that she would be infected with Ebola during her trip and infect co-workers and clients upon her return. The EEOC asserted that Lowe’s termination constituted disability discrimination in violation of the ADA. But the court disagreed. The employer simply regarded Lowe as having the potential to become infected with Ebola in the future, the court said, which does not fall under the protections of the statute as would be the case for an employee who is currently contagious.

Detailed discussion

Kimberly Lowe began working as a massage therapist at Massage Envy on Jan. 13, 2012. In September 2014, she asked for time off to visit her sister in Ghana. The company’s business manager approved her request. But three days prior to her trip, one of the owners fired Lowe. He expressed concern that she would be infected with Ebola if she traveled to Ghana and infect her co-workers and clients upon her return.

When she returned from Ghana, Lowe filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC). After conciliation efforts failed, the agency filed suit in Florida federal court alleging the employer violated the Americans with Disabilities Act (ADA) by firing Lowe with claims under both “regarded as” disability and association discrimination.

The employer moved to dismiss both counts. U.S. District Judge Mary S. Scriven granted the motion, ruling that the statute does not protect an employee who may become disabled.

Under the “regarded as” prong of the ADA’s definition of disability, an individual is regarded as having a disability when he or she is subjected to a prohibited action because of “an actual or perceived physical or mental impairment whether or not the impairment limits or is perceived to limit a major life activity.” The EEOC argued that this language means employers can violate the ADA even when they discriminate against an otherwise healthy individual based on misconceptions about that person’s potential to become disabled in the future.

But the court rejected this position, distinguishing cases that involved employees who were presently impaired. Those cases involved a teacher currently contagious with tuberculosis, a job applicant erroneously believed to have a back injury, and an employee who was terminated after traveling to Mexico because her employer feared she had contracted swine flu.

“The Court declines to expand the ‘regarded as’ disabled definition in the ADA to cover cases, such as this one, in which an employer perceives an employee to be presently healthy with only the potential to become disabled in the future due to voluntary conduct,” the court wrote. “Accordingly, the EEOC has failed to state a claim for discrimination under the regarded as disabled definition of the ADA.”

Turning to the association discrimination claim, Judge Scriven reached the same result. At the time of Lowe’s termination, she had not yet associated with people in Ghana, and there was no evidence that Massage Envy knew that any individual in Ghana with whom Lowe would be meeting had Ebola.

“The plain language of the ADA makes clear that the relevant individual complainant must be ‘known to have [present tense] a relationship’ or association with a person known to have a disability in order for that relationship to serve as a basis for association discrimination,” the court said. “Here, there is no question that [the employer] was without knowledge of a current association between Lowe and individuals in Ghana at the time of Lowe’s termination, because any such association had not yet occurred. This fact is fatal to the EEOC’s prima facie case.”

Further, even if the plaintiff could bring an association discrimination claim for a potential future association with a disabled individual, the ADA clearly requires that such an individual have a “known disability,” the court added.

“The ADA does not establish a cause of action for discrimination against an individual who associates with people who are merely regarded as disabled,” Judge Scriven wrote. “Lowe expressly pleads in her charge that she was not planning to associate with any people who were known by [the owner] to have Ebola. Indeed, it is central to the EEOC’s theme of the case, as articulated in its complaint and opposition to the Motion to Dismiss, that [Massage Envy’s owner] was woefully ignorant in his beliefs and resulting bias that people in Ghana have Ebola. His behavior in terminating Lowe based on this nescience and Massage Envy’s support of him in this behavior, although deplorable, are not actionable under the statute.”

The court dismissed the suit and denied the EEOC’s motion to file an amended complaint, finding the effort would be futile.

To read the order in EEOC v. STME, LLC, click here

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