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Title VII safe harbor provision barred FEMA employees’ location-based, disparate impact claims*

August 4th, 2015  |  Cynthia L. Hackerott

Relying in part on the U.S. Supreme Court’s recent decision in Texas Department of Housing & Community Affairs v The Inclusive Communities Project, Inc, a First Circuit panel affirmed, 2-1,  a federal district court’s dismissal of the Title VII disparate impact and retaliation claims brought by a group of former Federal Emergency Management Agency (FEMA) call center employees. The employees claimed that FEMA discriminated against them on the basis of their Puerto Rican national origin by implementing a rotational staffing plan at a Puerto Rico call center and by eventually closing that facility; they also asserted that these actions constituted unlawful retaliation for protected conduct. The appellate court majority held that claims of different treatment based on location absent a claim of intentional discrimination do not establish liability under a safe harbor provision in Title VII at 42 U.S.C. § 2000e-2(h). Because the plaintiffs expressly disavowed any claim of intentional discrimination, their claims failed under that safe harbor provision. In addition, the majority, citing the recent High Court ruling, found that challenged actions were job-related and consistent with business necessity and that the plaintiffs failed to show there were alternatives available to FEMA that would have had less disparate impact and served FEMA’s legitimate needs. Lastly, the majority ruled both retaliation claims failed because the plaintiffs did not demonstrate that the allegedly adverse employment actions were causally related to any protected conduct (Abril-Rivera v Johnson, July 30, 2015, Lynch, S; 99 EPD ¶45,357).

Bias complaints and cost concerns. FEMA, an agency within the Department of Homeland Security (DHS), assists state and local governments in carrying out their responsibilities to alleviate the suffering and damage that result from major disasters and emergencies in part by providing federal assistance programs for public and private losses and needs sustained in disasters. To this end, FEMA has established call centers, which primarily receive calls from those affected by disasters, and National Processing Service Centers (NPSCs), which both receive calls and process claims. The plaintiffs in this action were employees of the now-closed Puerto Rico NPSC (PR-NPSC). Established in 1995 and located in San Juan, the PR-NPSC was set-up to address calls from Spanish speaking victims of Hurricane Marilyn. In 1998, it began processing claims as well as receiving calls, and became one of four full-fledged NPSCs in 2003 (the others were located Maryland, Texas, and Virginia).

In 2006, several groups of PR-NPSC employees complained to management that they were being paid less than their mainland counterparts, and eventually filed an informal complaint of discrimination in October 2006 and a formal complaint of discrimination in April 2007 with the EEO Office. In May 2007, an employee filed a class complaint with the EEO on behalf of one group of employees; that class complaint was dismissed in 2008. A June 2007 safety review revealed several fire safety issues at the facility. In May 2008, in order to make repairs necessary to address to fire safety issues, FEMA placed employees at the facility on administrative leave and continued paying them until July 18, 2008. The facility was not occupied from May 16, 2008, until mid-July 2008, when FEMA implemented the rotating staffing plan. The plan, which was implemented in light of the necessary actions needed to address the fire safety issues, as well as other cost concerns,  involved having approximately 15-20 employees (out of a total of around 300) work at a time, on a rotational basis. In October 2008, the FEMA Administrator decided to close the PR-NPSC permanently, and so recommended to DHS, who agreed in on December 10, 2008. The closure of the facility and elimination of all positions at the PR-NPSC was announced on December 30, 2008.

The plaintiffs brought their lawsuit in 2009, and the district court dismissed their claims against the DHS and FEMA on summary judgment finding, in essence, that each of defendants’ challenged actions were undertaken for non-discriminatory, valid business reasons.

On appeal, the plaintiffs’ limited their focus to their disparate impact and retaliation claims arising from two actions: (1) the implementation of a rotational staffing plan during  period of fire-safety related work at the facility which reduced the number of days of work for each employee, and (b) the closure of the PR-NPSC.

Disparate impact. Title VII, at 42 U.S.C. § 2000e-2(h), contains a safe harbor provision providing that different treatment in different locations is permissible absent an intent to discriminate. Specifically, the provision states:

“[n]otwithstanding any other provision of this subchapter, it shall not be an unlawful employment practice for an employer to apply different standards of compensation, or different terms, conditions, or privileges of employment . . . to employees who work in different locations, provided that such differences are not the result of an intention to discriminate because of race, color, religion, sex, or national origin . . . .”

Because the plaintiffs here did not pursue an intentional discrimination theory on appeal, and, indeed, expressly disavowed it, the safe harbor statutory provision in § 2000e-2(h) defeated both of their disparate impact claims as to the Puerto Rico employees being rotated while the facility was repaired and as to the closing of the facility after the lease expired.

Defense not presented below. Although the First Circuit acknowledged that the defendants did not raise the safe harbor provision in the trial court or explicitly argue it on appeal, it explained that the settled law of the circuit is that “’an appellate court has discretion, in an exceptional case, to reach virgin issues’” (citing Chestnut v. City of Lowell, (1stCir, 2002)). The appeals court concluded that that this case was appropriate for the exercise of that discretion for four reasons. First, the issue was purely legal and could be resolved on the existing record. Second, the argument that it applies was highly persuasive. Third, the court’s consideration of the issue did not prejudice plaintiffs. Even if the safe harbor did not apply, plaintiffs’ claims would still fail because, as explained below, the defendants set forth legitimate business justifications for the challenged actions. Finally, the issue involves important questions about the reach of Title VII that may arise in future cases.

Legitimate business justifications. As an independent holding, even if the safe harbor provision were not applicable, the majority stated that it would still affirm the district court’s dismissal of plaintiffs’ disparate impact claims because the defendants established that there were legitimate business justification for the decisions at issue, and the plaintiffs failed to present any contrary evidence.

This holding was based on the U.S. Supreme Court’s June 25, 2015 decision in Texas Department of Housing & Community Affairs. There, the High Court upheld, 5-4, the application of disparate impact theory of discrimination under the Fair Housing Act, but imposed significant limitations on its application. Here, the First Circuit majority noted that the Court emphasized that disparate impact liability must be limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system. It must also be limited as applied to government entities so as to avoid injecting racial considerations into every agency decision. Further, the Supreme Court stated that “[g]overnmental or private policies are not contrary to the disparate-impact requirement unless they are artificial, arbitrary, and unnecessary barriers.” Accordingly, before rejecting a business justification, a court must determine that a plaintiff has shown that there is an available alternative practice that has less disparate impact and serves the agency’s legitimate needs, the First Circuit explained. If employers’ business judgments are subject to challenge without adequate safeguards, then there is a danger that potential defendants may adopt racial quotas, thereby, raising serious constitutional concerns, the appellate court observed, citing the High Court’s decision.

With regard to the rotational staffing plan, the First Circuit majority agreed with the district court’s finding that the plan served FEMA’s legitimate needs of maintaining as many employees as possible to assist in the event of a disaster while still maintaining a safe working environment.

Although the plaintiffs disagreed, the record was clear that the 2008 review revealed serious safety concerns, and FEMA’s decision to reduce staffing levels while addressing those concerns and evaluating the future of the PR-NPSC was reasonable. Indeed, once FEMA became aware of the concerns it had no choice but to address them or an entirely different sort of legal liability, otherwise, it would risk exposure to an entirely different sort of legal liability.

Regarding the closing of the center, the undisputed facts show numerous business justifications for the conclusion that the PR-NPSC should not have remained open. These justifications included:

(1) remedying the deficiencies identified in the 2008 inspection would have been very expensive;
(2) establishing and operating a new facility in Puerto Rico would have been even more expensive;
(3) even though the PR-NPSC employees took Spanish- and English language calls, the Puerto Rico facility was established specifically for bilingual services, and by 2008, the volume of Spanish-language calls had decreased; and
(4) the existing NPSC system could absorb the workload if the PR-NPSC closed.

In addition, FEMA had ample basis to close a facility that still had ongoing safety issues, was in poor condition, and lacking critical modern infrastructure, and which was no longer needed, given declining claims processing needs, rather than to pay approximately $9 million to move to a new facility or to renew the lease and renovate the facility, which was never designed for long-term FEMA use.

Pointing out that the PR-NPSC employees were required to be fully bilingual, unlike their counterparts at other centers, the plaintiff’s asserted that the defendants could have responded to the excess capacity in the NPSC system with nationwide, performance-based layoffs. However, this course of action would not have addressed FEMA’s concerns about the costs associated with maintaining the PR-NPSC facility, the court said.

Retaliation. The plaintiffs failed to make the requisite showing that the purported adverse employment actions (the decision to rotate employees while the center was under repair and the decision to close the center) were causally connected to any protected activity, much less that protected activity was a “but for” cause of the rotational staffing plan or the closing of the PR-NPSC. They identified two instances of protected activity: (1) the EEO complaints filed from October 2006 to May 2007 claiming that PR-NPSC employees were underpaid relative to their mainland counterparts, and (2) the EEO complaints filed in response to the July 2008 implementation of the rotational staffing system.

The first set of complaints was far too temporally remote from the challenged actions to support an inference of causality, the majority found. Over 14 months elapsed between the last EEO complaint regarding pay and the implementation of the rotational staffing system during repairs.

The plaintiffs argued that there is more evidence of causation than mere temporal proximity because the challenged actions were a deviation from the procedures followed within the PR NPSC and NPSC system for over ten years. Yet, the court was not convinced. There was no evidence to support the suggestion that the 2007 review was itself a mere pretext to eventually close the center. FEMA management was not aware of the safety issues until they were identified in the 2007 review, when the management began taking steps to rectify the problems.

While the first set of complaints occurred too early to ground a retaliation claim, the second set occurred too late to be causally related. The decision to close the PR-NPSC was set in motion by recommendations in May 2008, at least two months before the implementation of the rotational staffing system, the subject of the second set of complaints, the First Circuit majority pointed out, citing both U.S. Supreme Court and First Circuit precedent for the proposition that employers’ proceeding along lines previously contemplated, though not yet definitively determined, is no evidence whatever of causality. Here, without more evidence of causality there could be no rational inference that the closure of the PR-NPSC, first contemplated in May 2008, took place in retaliation for complaints filed in the wake of the July 2008 implementation of the rotational staffing plan.

Given the safety concerns at the PR-NPSC facility, the impending expiration of the facility’s lease, and the $9 million cost of establishing a new Puerto Rico facility, it decision to close the center was justified. Moreover, it was undisputed that the Puerto Rico facility was originally established specifically for bilingual services, and the need for those services had sharply diminished by 2008.

“The premise of this entire lawsuit was erroneous. Plaintiffs cannot force a government agency to keep open an unsafe facility which would have cost excessive sums to repair when there are alternate means by which the agency can accomplish its goals,” the majority wrote.

Again, the majority cited Texas Department of Housing & Community Affairs, to emphasize that “’[d]isparate-impact liability mandates the removal of artificial, arbitrary, and unnecessary barriers, not the displacement of valid governmental policies.’”

Dissent. Judge Torruella dissented, asserting that the plaintiffs raised factual issues sufficient to take the case to a jury and specifically objecting to the majority applying, on its own initiative, the safe harbor defense for the first time on appeal even though the defendants failed to present it either before the district court or the First Circuit. Concluding it was an affirmative defense (which the majority declined to rule on), Torruella maintained that not only was the majority wrong to apply this defense on its own initiative, it was also wrong to conclude as a matter of law that the safe harbor defense protects an employer’s decision to terminate employees.

According to Torruella, the plaintiffs “deserved a chance to prove that their alternatives to FEMA’s adverse actions reasonably accommodated FEMA’s business necessities to the extent that these were valid — without having a disparate impact against them, and they should have a chance to prove that reasons to place them in a rotational staffing plan and then terminate them were pretextual.”

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* Update: On November 17, 2015, the First Circuit issued a revised opinion (99 EPD ¶45,438) withdrawing its prior opinion and apparently eliminating its reliance on the safe-harbor defense. The revised opinion still affirmed dismissal of the employees’ Title VII disparate impact claims, but relied only on an independent holding cited in the prior opinion—that the employees’ disparate impact claims failed because the challenged actions were job-related and consistent with business necessity, and the plaintiffs had not shown that there were alternatives available to FEMA that would have had less of a disparate impact and served FEMA’s legitimate needs. The retaliation claims failed as well for the same reasons stated in the prior opinion.

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