Employment Law

Ninth Circuit: Prior Salary Can’t Justify Wage Differential

Why it matters

Noting that “[s]alaries speak louder than words,” the en banc U.S. Court of Appeals, Ninth Circuit ruled that employers may not justify a wage differential between male and female employees by relying on prior salary, even in combination with other factors. Aileen Rizo filed her Equal Pay Act (EPA) lawsuit after the math consultant with the public school system in Fresno County, CA, learned that her male counterparts were all paid more than she was. The employer defended the pay scale by pointing to its Standard Operation Procedure 1440, where initial salary level is set by the employee’s most recent prior salary, plus 5 percent. The county said the pay differential was based on a “factor other than sex,” namely, the plaintiff’s prior pay, and therefore was permissible under the EPA. A district court denied summary judgment in favor of the employer, and a three-judge panel of the Ninth Circuit reversed. However, the en banc Ninth Circuit granted rehearing, vacated the prior appellate decision and affirmed denial of summary judgment to the county. “[W]e now hold that prior salary alone or in combination with other factors cannot justify a wage differential,” the court wrote. “To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.” The opinion may not be the end of the subject, however. Counsel for the employer promised the county would file a writ of certiorari with the Supreme Court, and given the current circuit split on the issue of using prior pay to justify a wage differential, the case could appear on the justices’ docket in the near future.

Detailed discussion

While having lunch with her coworkers at the Fresno County School District one day, Aileen Rizo learned that a male math consultant who had recently been hired was paid more than she was. When she discovered that all her male counterparts were paid more than she was, she filed suit under the Equal Pay Act (EPA).

The employer conceded that it paid Rizo less than comparable male employees for the same work. But the county presented an affirmative defense that the pay differential was based on a “factor other than sex,” specifically, prior salary. The employer used a salary schedule known as Standard Operation Procedure 1440—with 12 levels and progressive steps within each—to determine the starting salaries of management-level employees.

For example, when Rizo started working for the county, she was placed at Level 1, Step 1 for an annual salary of $62,133, plus a $600 stipend for her master’s degree. The male who was newly hired for the same position started on Level 1, Step 9.

The county moved for summary judgment, but the district court denied the motion. On appeal, a three-judge panel of the U.S. Court of Appeals, Ninth Circuit reversed. The EPA permits wage disparity when it occurs based on “any other factor other than sex,” the panel said, including prior salary.

But after an en banc rehearing, the full Ninth Circuit sided with Rizo and affirmed the district court’s denial of summary judgment in favor of the employer.

“The Equal Pay Act stands for a principle as simple as it is just: men and women should receive equal pay for equal work regardless of sex,” the court wrote. “The question before us is also simple: can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history, and purpose of the Equal Pay Act, the answer is clear: No.”

Pursuant to the statute, there are only four ways an employer can justify an unequal pay scale: “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.”

The case turned on the fourth catchall exception, which the employer argued included prior salary. Considering the history and purpose of the statute, the Ninth Circuit strongly disagreed.

“We conclude, unhesitatingly, that ‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance,” the court wrote. “It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities—disparities that Congress declared are not only related to sex but caused by sex. To accept the County’s argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed.”

At the time of the passage of the EPA, an employee’s prior pay would have reflected a discriminatory marketplace that valued the equal work of one sex over the other, the court said. “Congress simply could not have intended to allow employers to rely on these discriminatory wages as a justification for continuing to perpetuate wage differentials.”

The Ninth Circuit cautioned that it was expressing “a general rule” and did not attempt to resolve its applications under all circumstances. Whether past salary may play a role in the course of an individualized salary negotiation, for instance, was a question reserved for another case.

Statutory interpretation also supported the court’s conclusion, it wrote. The first three exceptions in the EPA all relate to job qualifications, performance and/or experience, and it “follows that the more general exception should be limited to legitimate, job-related reasons as well,” the court said. Legislative history backed this reading, as the catchall exception was added after testimony about the need for job-related exceptions, and other federal courts have similarly held the fourth exception was limited to job-related factors.

“Prior salary does not fit within the catchall exception because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality,” the court wrote. “It may bear a rough relationship to legitimate factors other than sex, such as training, education, ability or experience, but the relationship is attenuated. More important, it may well operate to perpetuate the wage disparities prohibited under the Act. Rather than use a second-rate surrogate that likely masks continuing inequities, the employer must instead point directly to the underlying factors for which prior salary is a rough proxy, at best, if it is to prove its wage differential is justified under the catchall exception.”

The court also took the opportunity to clarify prior law, overruling a 1982 case relied upon by the three-judge panel. In Kouba v. Allstate Insurance Co., the Ninth Circuit held that the EPA allows an employer to consider prior salary in setting starting pay where it could establish an “acceptable business reason” for doing so. Finding that Kouba was inconsistent with the rule it announced in the Rizo opinion, the panel overruled the decision.

“If money talks, the message to women costs more than ‘just’ billions: women are told they are not worth as much as men,” the court concluded. “Allowing prior salary to justify a wage differential perpetuates this message, entrenching in salary systems an obvious means of discrimination—the very discrimination that the Act was designed to prohibit and rectify.”

Several members of the panel filed concurring opinions. Two members of the court wrote that the majority went too far in holding that any consideration of prior pay was impermissible, even when assessed with other job-related factors. Two others expressed concern that the majority “ignore[d] the realities of business” by missing the fact that prior salary may reflect factors other than gender (such as geographic location or cost of living). A fifth concurrence agreed with the court’s result but arrived at it through a different reading of the statute.

To read the opinion in Rizo v. Yovino, click here.

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Supreme Court Puts Brakes on Service Advisors’ OT Claims

Why it matters

With a broad reading of the overtime exemptions of the Fair Labor Standards Act (FLSA), the Supreme Court ruled 5 to 4 in favor of the employer in a long-running dispute involving service advisors at car dealerships. A group of current and former service advisors sought back pay under the statute for overtime work. The employer refused, arguing they were exempt from overtime payment under a provision covering “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” A district court judge dismissed the suit, the U.S. Court of Appeals, Ninth Circuit reversed and the Supreme Court vacated the decision. On the second go-around, the Ninth Circuit held the exemption did not apply to the service advisors and the justices reversed again in an opinion authored by Justice Clarence Thomas. The Court noted that the plaintiffs meet customers, listen to their concerns, suggest repair and maintenance services, sell new accessories or replacement parts, and explain the work when customers return for their vehicles, among other tasks, “obviously” leaving them within the category of a salesman. “The ordinary meaning of ‘salesman’ is someone who sells goods or services,” the majority wrote. “Service advisors do precisely that.” In a dissenting opinion, Justice Ruth Bader Ginsburg expressed concern about the majority’s “expansive” reading of the FLSA exemption.

Detailed discussion

When the Fair Labor Standards Act (FLSA) was enacted in 1938, Congress created many categories of employees that were exempt from the requirement that employers pay them overtime for working more than 40 hours in a week. All employees at car dealerships were initially exempt from the overtime pay requirement.

That changed with amendments to the statute in 1966 that limited the exemption at car dealerships to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” pursuant to Section 213(b)(10)(A). In 2011, the Department of Labor (DOL) issued a rule that interpreted the term “salesman” to exclude service advisors.

In response, a group of current and former service advisors at Encino Motorcars in California filed suit seeking back pay. A federal district court dismissed the suit, but the U.S. Court of Appeals, Ninth Circuit reversed. Finding the text ambiguous, the federal appellate panel deferred to the DOL’s rule.

When the case went before the Supreme Court for the first time, the justices vacated the Ninth Circuit’s judgment and explained that the 2011 rule was procedurally defective, meaning courts could not defer to it. The justices remanded the case for the court to address whether the exemption covers service advisors.

On remand, the Ninth Circuit again held that the exemption does not include service advisors, invoking the distributive canon and applying the principle that exemptions to the FLSA should be construed narrowly. The employer filed a second petition for certiorari, and the Supreme Court again reversed.

Are service advisors “salesm[e]n … primarily engaged in … servicing automobiles”?

“We conclude that they are,” Justice Clarence Thomas wrote for the majority. “Under the best reading of the text, service advisors are ‘salesm[e]n,’ and they are ‘primarily engaged in … servicing automobiles.’ The distributive canon, the practice of construing FLSA exemptions narrowly, and the legislative history do not persuade us otherwise.”

A service advisor is “obviously” a salesman, the Court said, applying the ordinary meaning of “someone who sells goods or services.” Service advisors do precisely that by selling customers services for their vehicles.

In addition, service advisors are also “primarily engaged in … servicing automobiles,” the justices wrote. While they do not spend most of their time physically repairing automobiles, they are “integrally involved in the servicing process,” a description that also applies to partsmen, who are similarly exempt.

As for the distributive canon, the Court found that statutory context favored the ordinary disjunctive meaning of “or” in the exemption, as the narrow, distributive phrasing used by the Ninth Circuit was “an unnatural fit” and required the reader to mix and match the precise combinations, a result the justices found unlikely. “The more natural reading is that the exemption covers any combination of its nouns, gerunds, and objects,” the Court said.

The justices also rejected the federal appellate panel’s conclusion that exemptions to the FLSA should be construed narrowly. “Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation,’” Justice Thomas wrote. With over two dozen exemptions in Section 213(b) alone, the exemptions “are as much a part of the FLSA’s purpose as the overtime-pay requirement.”

Nor did a 1966 DOL Handbook or legislative history sway the majority.

“[T]he best reading of the statute is that service advisors are exempt,” the Court concluded. “Even for those Members of this Court who consider legislative history, silence in the legislative history, ‘no matter how “clanging,”’ cannot defeat the better reading of the text and statutory context.”

A dissenting opinion authored by Justice Ruth Bader Ginsburg emphasized that only three occupations—salesmen, partsmen and mechanics—were exempted from the FLSA overtime requirements by Congress, with no mention of service advisors.

“I would not enlarge the exemption to include service advisors or other occupations outside Congress’ enumeration,” she wrote. “The reach of today’s ruling is uncertain, troublingly so: By expansively reading the exemption to encompass all salesmen, partsmen, and mechanics who are ‘integral to the servicing process,’ the Court risks restoring much of what Congress intended the 1966 amendment to terminate, i.e., the blanket exemption of all dealership employees from overtime-pay requirements.”

To read the opinion in Encino Motorcars, LLC v. Navarro, click here.

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Pushback on DOL’s PAID Program, Browning-Ferris in D.C. Circuit

Why it matters

In updates to recent news, the Department of Labor (DOL) released additional information about the new Payroll Audit Independent Determination (PAID) program—although the New York attorney general vowed to continue bringing lawsuits for wage and hour violations under state law—while the fight over the joint employment standard continues, with the U.S. Court of Appeals, D.C. Circuit keeping Browning-Ferris Industries of California, Inc. v. NLRB on its docket given the “extraordinary circumstances” at play. In March, the DOL announced a pilot program that enables employers to conduct self-audits of Fair Labor Standards Act (FLSA) compliance and voluntarily report violations to the agency. The DOL recently provided additional information about PAID, including criteria for participation, a description of compliance assistance materials and the required elements of a self-audit, among other details. However, the agency’s efforts to achieve compliance without litigation or additional penalties hit a speed bump when New York Attorney General Eric T. Schneiderman announced that his office will not ease up on prosecuting wage theft, calling the PAID program “nothing more than a Get Out of Jail Free card for predatory employers.” Meanwhile, the joint employer standard used by the National Labor Relations Board (NLRB or Board) remains a hot topic, with a split panel of the D.C. Circuit holding that “extraordinary circumstances” meant the appeal of Browning-Ferris should remain before the court. Although the panel had previously ordered that the case be sent back to the NLRB, the ensuing drama—with the Board’s subsequent decision in Hy-Brand Industrial Contractors, Ltd., reversing the Browning-Ferris standard, thrown out after a decision that one of the members should have recused himself from the proceeding—requires the case to remain in the court system, the majority said.

Detailed discussion

In an effort to expedite resolution of inadvertent overtime and minimum wage violations under the Fair Labor Standards Act (FLSA), the Department of Labor (DOL) launched a new nationwide pilot program.

The Payroll Audit Independent Determination (PAID) program aims to resolve statutory violations “expeditiously and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.”

All FLSA-covered employers are eligible to participate in the pilot, with the exception of those already under investigation by the Wage and Hour Division (WHD) or employers already facing litigation, arbitration or similar legal action.

To participate in the program, employers must audit their compensation practices for potential noncompliance. If the employer discovers any noncompliant practices, or if the employer believes its compensation practices may be lawful but wishes to proactively resolve any potential claims anyway, four steps are required: Specifically identify the potential violations, identify which employees were affected, identify the time frames during which each employee was affected and calculate the back wage amounts the employer believes are owed to each employee.

Now the WHD has provided additional information for employers interested in participating in the PAID program. Employers can visit the PAID portal to determine whether they meet the criteria for participation, find more details on the compliance assistance materials and learn about the required elements of the self-audit.

However, the agency’s efforts experienced a hiccup when New York Attorney General Eric T. Schneiderman spoke out against the initiative. “The Trump Labor Department’s ‘PAID Program’ is nothing more than a Get Out of Jail Free card for predatory employers,” he said in a statement. “Employers have a responsibility under state and federal laws to pay back stolen wages, as well as damages intended to deter them from breaking the law again. The PAID Program allows employers to avoid any consequences for committing wage theft, while blocking lawsuits intended to vindicate employees’ rights.”

Schneiderman, who said he has “won back over $30 million in stolen wages and additional damages for over 21,000 workers” in the state since taking office in 2001, vowed to continue his efforts.

“I want to send a clear message to employers doing business in New York: my office will continue to prosecute labor violations to the fullest extent of the law, regardless of whether employers choose to participate in the PAID Program,” Schneiderman warned.

In other news, the battle over the joint employer standard used by the National Labor Relations Board (NLRB or Board) continues, with a divided panel of the U.S. Court of Appeals, D.C. Circuit reversing course to keep the high-profile Browning-Ferris Industries of California, Inc. v. NLRB case before the court.

The NLRB adopted a controversial new standard to determine the scope of joint employer liability in its 2015 Browning-Ferris decision. There, the Board held that even when two entities have never exercised joint control over the essential terms and conditions of employment, and even when any joint control is not “direct and immediate,” the two entities will still be joint employers based on the existence of “reserved” joint control, or based on indirect control or control that is “limited and routine.”

The employer appealed the decision to the D.C. Circuit. While the case was pending, however, things got even more complicated with the subsequent case of Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co. In that case, an administrative law judge applied the Browning-Ferris standard to find that the two entities were joint employers for purposes of the National Labor Relations Act (NLRA) when they terminated a total of seven workers.

But when the employers appealed to the NLRB, the Board—complete with new members courtesy of President Donald J. Trump—took the opportunity to throw out the Browning-Ferris standard and establish a new test.

Although the decision was hailed by employers, the victory was short-lived. In a motion for reconsideration, for recusal and to strike, the charging parties requested that the NLRB vacate its decision and that Board member William J. Emanuel recuse himself. The NLRB’s Inspector General launched an investigation into whether Emanuel was required to recuse himself because his former law firm represented Leadpoint, another entity involved in the Browning-Ferris case.

After the Inspector General agreed Emanuel should have recused himself, the NLRB vacated its decision.

In light of such “extraordinary circumstances,” the D.C. Circuit granted a motion to reconsider Browning-Ferris after previously remanding it to the NLRB. The divided panel—one member took the position that the court should “stay its hand” until the Board finally decides Hy-Brand—also ordered the case be held in abeyance pending “prompt” disposition of the pending motion for reconsideration in Hy-Brand, requesting the parties file status reports every 21 days.

To read AG Schneiderman’s statement, click here.

To read the order in Browning-Ferris Industries of California Inc. v. NLRB, click here.

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SEC Awards Whistleblower Record Amount, Uses ‘Safe Harbor’

Why it matters

Continuing its recent streak of notable whistleblower awards, the Securities and Exchange Commission (SEC) announced more than $2.2 million in the first award under the “safe harbor” of Exchange Act Rule 21F-4(b)(7). The Rule provides that if a whistleblower submits information to another agency and then provides the same information to the SEC within 120 days, the SEC will treat the information as though it had been submitted to the SEC at the same time it was shared with the other agency. “Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, said in a statement about the award. Last month, the agency announced a record-setting $50 million award for two individuals and a third garnering more than $33 million, eclipsing the prior high of $30 million in 2014.

Detailed discussion

In its first award applying the “safe harbor” of Exchange Act Rule 21F-4(b)(7), the Securities and Exchange Commission’s (SEC) Office of the Whistleblower gave $2.2 million to an individual who reported information to the SEC after first reporting it to another agency.

Rule 21F-4(b)(7) states: “If you provide information to … any other authority of the federal government … and you, within 120 days, submit the same information to the Commission pursuant to Section 240.21F-9 of this chapter, as you must do in order for you to be eligible to be considered for an award, then, for purposes of evaluating your claim to an award … the Commission will consider that you provided [the] information as of the date of your original disclosure, report or submission to one of these other authorities or persons.”

In the case at hand, the whistleblower voluntarily reported information to a federal agency covered by the Rule, which in turn made a referral to the SEC based on the information. SEC enforcement staff responded by opening an investigation that led to an action. Within 120 days of the original report, however, the whistleblower provided the same information to the SEC (albeit after the investigation had already begun).

Based on these facts, the SEC found that the whistleblower satisfied Rule 21F-4(b)(7) and was eligible for a $2.2 million award.

“Whistleblowers, especially non-lawyers, may not always know where to report, or may report to multiple agencies,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, said in a statement. “This award shows that whistleblowers can still receive an award if they first report to another agency, as long as they also report their information to the SEC within the 120-day safe harbor period and their information otherwise meets the eligibility criteria for an award.”

The Office of the Whistleblower has been busy lately. Last month, the prior record of $30 million for a whistleblower award was shattered by a $50 million award for a pair of claimants and another $33 million for a third whistleblower.

“These awards demonstrate that whistleblowers can provide the SEC with incredibly significant information that enables us to pursue and remedy serious violations that might otherwise go unnoticed,” Norberg said. “We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.”

Since the program’s inception in 2012, the SEC has awarded more than $264 million to 54 whistleblowers.

To read the SEC’s order determining the $2.2 million award, click here.

To read the order for the $50 million and $33 million awards, click here.

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California Employers Not Required to ‘Police’ Meal Breaks

Why it matters

As employers are not required to “police” whether or not workers take meal breaks, a California appellate panel dismissed a putative class action suit seeking payment for missed breaks under state law. Norma Serrano filed a putative class action against Aerotek Inc., a company that provided temporary employees to Bay Bread. Aerotek’s on-site account manager visited the Bay Bread facility twice each day but did not check for issues with meal breaks. Serrano never discussed the issue with the manager but later filed suit for violations of state labor law over missed breaks. Affirming judgment in favor of Aerotek, the appellate panel said that proof that an employer had knowledge of employees working through meal breaks will not subject the employer to liability. The contract between Aerotek and Bay Bread required the bread company to comply with applicable laws, and Aerotek provided its break policy to employees and trained them on it, including the need to inform the company if they believed they were being prevented from taking breaks, the court said. Refusing to require employers to police whether or not employees take meal breaks, the court affirmed dismissal.

Detailed discussion

Aerotek Inc., a staffing agency that places temporary employees with its clients, entered into a contract with Bay Bread, a food production facility in San Francisco. Pursuant to the agreement, temporary employees would work under Bay Bread’s management and supervision, with Bay Bread promising to comply with applicable federal, state and local laws.

Aerotek’s policies that applied to temporary employees were set forth in an employee handbook. The meal policy stated that after a work period of more than five hours, hourly employees must be provided with an uninterrupted 30-minute off-duty meal break. If the workday was no more than six hours, however, the employee may elect to waive the off-duty meal period in advance by written agreement.

The policy also stated that if an employee believed he or she was being prevented from taking an authorized meal period, the employee should immediately report the matter to Aerotek. Aerotek had an on-site account manager who visited the production facility twice a day for walk-throughs but was not tasked with checking for meal break violations.

Hired by Aerotek, Norma Serrano worked in Bay Bread’s production facility in 2012 and 2013. Both times, she signed forms acknowledging she received the employee handbook as well as forms waiving a meal period on any day she worked no more than six hours.

She later filed suit against Aerotek, alleging violations of state labor law for failure to provide meal periods. Time records showed that on several days on which she worked more than six hours, she took her meal breaks more than five hours after beginning work, and in a few instances did not take a meal break at all.

Aerotek moved for summary judgment, and a trial court granted the motion. Serrano appealed. Relying heavily on the California Supreme Court’s 2012 opinion in Brinker Restaurant Corp. v. Superior Court, the appellate panel affirmed.

In Brinker, the court held that employers are not required “to police meal breaks and ensure no work thereafter is performed,” and that “[p]roof an employer had knowledge of employees working through meal periods will not alone subject the employer to liability for premium pay.”

The panel was careful to note it was not suggesting “that a temporary staffing agency meets its duty and immunizes itself from liability by merely promulgating a compliant meal period policy without regard to a client’s implementation of it.” Aerotek did more than that, the court said.

“The contract between the parties required Bay Bread to comply with applicable laws, Aerotek provided its meal period policy to temporary employees and trained them on it during orientation, and the policy required them to notify Aerotek if they believed they were being prevented from taking meal breaks,” the court said. “Serrano fails to convince us that anything more is required of staffing agencies when they provide temporary employees to other companies.”

Nor did Aerotek’s failure to review time records and investigate whether meal period violations were occurring constitute a breach of its own duty to provide meal periods, the court held. The plaintiff “provides no authority to suggest that Aerotek could not fulfill its duty to provide meal breaks without investigating whether those breaks were being taken, and we specifically reject her contention that ‘time records show[ing] late and missed meal periods creat[ed] a presumption of violations.’”

“Even if Aerotek had actual or constructive knowledge that she was not taking her meal breaks within five hours of starting work, Brinker makes clear that such knowledge does not establish liability because an employer has no obligation to ensure that employees actually take provided breaks,” the panel wrote. “In short, Serrano’s attempt to impose a heightened duty on Aerotek finds no support in Brinker or any other relevant authority. The trial court correctly determined that there was no triable issue of material fact as to whether Aerotek fulfilled its own duty to provide meal periods.”

To read the decision in Serrano v. Aerotek, Inc., click here.

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Court Moves DACA Plaintiff’s Alienage Discrimination Suit Forward

Why it matters

An employer must face an alienage discrimination class action filed by a Deferred Action for Childhood Arrivals (DACA) plaintiff, according to a new Florida federal court decision. Authorized to work in late 2012 under the DACA initiative, David Rodriguez was rejected for hire pursuant to a Procter & Gamble (P&G) policy that U.S. applicants must be “legally authorized to work with no restraints on the type, duration, or location of employment.” The Venezuelan national then filed a putative class action asserting alienage discrimination under Section 1981. P&G moved to dismiss, arguing that its decision was based not on alienage but instead on temporary immigration status. The court disagreed. The complaint sufficiently stated a claim by pointing to a policy that expressly classified people on the basis of a protected characteristic, the court said, as the plaintiff alleged P&G had a facially discriminatory employment policy against a class of lawfully present work-authorized DACA recipients.

Detailed discussion

In December 2012, Venezuelan national David Rodriguez obtained an Employment Authorization Document pursuant to the Deferred Action for Childhood Arrivals (DACA) initiative. In September 2013, Rodriguez submitted his resume to a recruiter for Procter & Gamble (P&G), who was looking for college students to obtain internships with the company.

Rodriguez also filled out an application through the company’s website that included a prescreening questionnaire. He was asked four questions related to his immigration status: “1) Are you currently a U.S. citizen or national, or an alien lawfully admitted for permanent residency, or a refugee, or an individual granted asylum, or admitted for residence as an applicant under the 1986 immigration amnesty law? 2) Are you an individual admitted exclusively on a nonimmigrant visa, such as B, H, O, E, TN or L or an individual on the F-1 visa completed CPR or OPT? 3) Are you an individual who is now completing the permanent residency process but has not yet been granted permanent residency? 4) Will you now, or in the future, require sponsorship for U.S. employment visa status (e.g., H-1B or permanent residency status)?”

He answered “no” to each question. A few days later, Rodriguez received a rejection letter from P&G. The recruiter told him he was not eligible for hire because “per P&G policy, applicants in the U.S. should be legally authorized to work with no restraints on the type, duration, or location of employment.”

Rodriguez then filed a putative class action asserting alienage discrimination in violation of Section 1981 in Florida federal court. P&G moved to dismiss, arguing that the plaintiff failed to sufficiently plead that the employer’s decision was based on his noncitizen status.

To state a claim under Section 1981, a plaintiff must allege that he or she is a member of a protected class, the defendant intentionally discriminated against him or her on the basis of membership in that protected class, and the discrimination concerned one of Section 1981’s enumerated activities (such as the making and enforcement of an employment contract).

As P&G read the complaint, the plaintiff alleged only that the employer discriminated against individuals with temporary immigration statuses, a claim that is not cognizable under the statute.

“The Court disagrees,” U.S. District Judge Kathleen M. Williams wrote. “Plaintiff alleges in the complaint that P&G discriminated against him based on his status as a non-citizen.”

Relying on Juarez v. Northwestern Mutual Life Insurance Co., a 2014 decision from the Southern District of New York, the court said that one way to plead intentional discrimination is to point to a law or policy that expressly classifies people on the basis of a protected characteristic.

In that case, the DACA recipient plaintiff claimed Northwestern Mutual had a policy of hiring only U.S. citizens and green card holders. The court determined that the employer impermissibly discriminated against a subclass of lawfully present aliens because Section 1981’s protection against discrimination extends to all lawfully present aliens; a plaintiff need not allege discrimination against all members of a protected class to state a claim under Section 1981; and a plaintiff can plead intentional discrimination by alleging that the defendant acted pursuant to a facially discriminatory policy requiring adverse treatment based on a protected trait.

“Here, P&G’s policy, as alleged in the complaint, could be construed to discriminate against a subset of legal aliens, which are a protected class under section 1981,” the court said. “And it is well established that plaintiff need not allege discrimination against the whole class to establish a section 1981 claim. Despite P&G’s argument that at most, [it] discriminated based on immigration status, at the pleadings stage, the Court may only rely on the allegations stated in the Complaint, which in this case assert a ‘facially discriminatory employment policy,’ against a subclass of lawfully present aliens.”

Even if the employer had lawful business reasons to reject applications from DACA recipients, those reasons could not be properly determined on a motion to dismiss, the court added, denying P&G’s motion to dismiss.

To read the order in Rodriguez v. The Procter & Gamble Company, click here.

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