Politics Masquerading as Workplace Policy
Every election year, members of my political party clamor to rebrand themselves as “Pro Business Democrats.” Only Cheri Jahn (D-Arvada), however, can legitimately lay claim to this important middle ground, where sound public policy trumps partisan politics. Bucking party lockstep, Cheri Jahn voted against 2013’s HB-1136, which takes effect on January 1, 2015 and dramatically changes the litigation landscape for Colorado’s employers.
Self-defeating Policy: Duping Stakeholders or Just Dumb?
On February 17, 2014, Colorado Senate Democrats issued a press release announcing the defeat of an obviously half-assed Republican effort to repeal HB-1136 that, with the notable exception of Cheri Jahn, passed along party lines last year. According to Senate President Morgan Carroll, one of HB-1136’s primary sponsors, “Colorado was the 43rd state to enact a law to protect all workers. Americans have been fighting for this since the 1960s . . .” Rachel Martinez of the pro-employee lobby “9 to 5” also claimed that without HB-1136, victims of atrocious, overt sexual harassment perpetrated by small employers “had no access to recourse” and that with HB-1136, women like her will now have “access to justice.”
Not exactly. Actually, federal laws (e.g., Title VII, ADA, ADEA, EPA) and their Colorado counterparts in the Colorado Anti-Discrimination Act (“CADA”) have long outlawed workplace harassment, retaliation and discrimination based on race, gender, religion, national origin, age, and disability. Whereas Title VII covers employers with 15+ employees, the CADA protects employees of employers with less than 15 employees. Though virtually identical, Title VII has historically offered distinct advantages to employee-side lawyers—namely, the compensatory and punitive damages and automatic attorneys’ fee awards available under the Civil Rights Act of 1991 (“CRA 1991”). Because of the comparatively paltry economic damages available under CADA, alleged victims like Rachel Martinez had a tough time finding employee-side lawyers (“PELA/CTLA attorneys”) to vindicate their workplace rights. Simply put, for these so-called civil rights gladiators, the low monetary recoveries available under the CADA hardly made their standard contingent fee arrangements profitable.
In her public comments last year, Ms. Carroll insisted that Colorado law must replicate the federal scheme (i.e., CRA 1991) for employers with 15+ employees, and must “close the gap” to provide greater remedies to “victims” of employers with 14 and fewer employees. Echoing the same arguments advanced by national PELA/CTLA organizations for CRA 1991 over twenty years ago, see infra, Ms. Carroll claimed that if CADA’s remedial scheme made it worth it for PELA/CTLA attorneys to champion discrimination/harassment cases involving small employers, victims like Rachel Martinez could more easily find an attorney to prosecute her claims. Notably, Ms. Carroll and Representative Joe Salazar, HB-1136’s primary proponents in the Senate and House, respectively, are both PELA/CTLA attorneys who exclusively represent employees in workplace disputes.
In signing HB-1136 into law, however, Governor Hickenlooper expressly commented that the caps on compensatory and punitive damages negotiated into this bill (e.g., $10K for 1-4 employees; $25K for 5-14 employees) will protect small businesses: most PELA/CTLA lawyers take discrimination/harassment cases on a contingent fee, he correctly observed, such that the very low damage caps will make smaller employer discrimination/harassment matters unattractive to PELA/CTLA attorneys. Thus, in ostensibly trying to encourage PELA/CTLA attorneys to prosecute EEO cases for victims of small employers, HB-1136’s scheme actually makes it less likely that PELA/CTLA attorneys will pursue them. After all, given the low damages caps, PELA/NELA attorneys like Morgan Carroll and Joe Salazar would have no more financial or moral incentive to help victims like Rachel Martinez than before HB-1136’s passage.
We were duped . . . or these Democrats stink at crafting legislation to effectuate their ostensible public policy purposes. In fact, the results of HB-1136 speak volumes about the underlying intent. HB-1136 was never about helping small employer victims like Rachel Martinez. On the contrary, HB-1136 was always about switching EEO enforcement forums from federal court, where knowledgeable federal judges routinely dismiss non-meritorious discrimination/harassment matters before trial, to Colorado state court, where overwhelmed judges unfamiliar with 50 years of federal employment law allow even the dumbest discrimination matters to reach, or careen darn close to, juries. Perhaps for that reason, HB-1136’s proponents actually proposed the low caps applicable to small employers, but refused to negotiate (or lower) the damages caps applicable to Colorado employers with 15+ employees, which mirrors existing federal law (i.e., CRA 1991). In fact, HB-1136’s final draft contains a provision instructing Colorado state judges to rely on over 50 years of federal EEO law very well known to Colorado’s federal bench.
As passed, HB-1136 gives PELA/CTLA attorneys the best of both worlds: the ability to file discrimination/harassment lawsuits in historically employee-friendly jurisdictions like Denver, Boulder, and Adams counties, while fully benefiting from the same damages and LAW available in the federal EEO enforcement system.
The Great Divide between Rhetoric and Reality
Difficult to Prove . . . EASY to Allege
At the House Judiciary Hearing for HB-1136 on February 14, 2013, attorneys representing PELA and CTLA testified about how difficult discrimination cases are to prove. Morgan Carroll even postulated that Colorado employers will not likely encounter frivolous discrimination litigation arising out of everyday personnel decisions because actual discrimination is the “rare exception;” Governor Hickenlooper actually characterized the difficulty proving intentional discrimination or harassment as a “safeguard” for employers! Indeed, the federal U.S. Equal Employment Opportunity Commission (EEOC) issues “reasonable cause” determinations to believe discrimination/harassment has occurred in less than 4% of all charges, a percentage that has steadily decreased over the past five years. Likewise, the EEOC issues “no reasonable cause” determinations in nearly 2/3 (66%) of all charges filed, as does CCRD in all but approximately 5% of charges.
Although discrimination is difficult to prove, it is extremely EASY to allege. And under HB-1136, employers start losing money as soon as the allegation is made. HB-1136 mimics CRA 1991’s attorneys’ fees provisions, which require employers to pay the attorneys’ fees of a prevailing employee as a matter of course. Accordingly, under this scheme, PELA/CTLA attorneys can recover BOTH (a) 33%-40% of the judgment as a contingent fee; AND (b) hourly attorneys’ fees based on an exaggerated rate and an inflated hourly time estimate, a real windfall. Employers, by contrast, can recover their substantial defense investment only upon a showing that the lawsuit was patently frivolous or prosecuted in bad faith, a finding Colorado judges virtually never make (even when they should). In the federal EEO enforcement system upon which HB-1136 is modeled, $700K in attorneys’ fees to the plaintiff’s lawyer, based on a $27K judgment, have become commonplace. Meanwhile, the employer must not bear this incredible expense, but also the weight of its own non-recoverable defense fees, which typically exceed $100K for litigation. Check out these Biglaw cost-of-defense estimates here.
Employers’ Cost of Defense Conundrum: A Cost-Prohibitive Fight to Prove Themselves Right
Cost-of-defense now drives employers’ settlement deliberations more than any other factor. In the federal enforcement system that HB-1136 replicates, employers instantly walk into a cost-of-defense conversation as soon as the charge of discrimination is made, regardless of wrong-doing. EEO Legal Solutions’ recent survey of employers’ experience in the EEOC mediation process demonstrates that these federal mediators regularly use cost-of-defense in “encouraging” employers to settle. More troubling, our survey also shows that EEOC mediators regularly threaten EEOC enforcement activity, including prosecution, to ratchet up employers’ cost-of-defense monetary offers. Thus, not only is it common knowledge within Colorado’s employment bar that employers, more often than not, settle out of cost-of-defense concerns, our study shows that this kind of “shakedown” has become an institutionalized tool to exact employer payouts. Adding insult to injury, for the past several years, the EEOC has characterized its historic collections from employers, $372.1m in FY2013, as “enforcing the law more effectively.”
Déjà Vu All Over Again
The arguments advanced by PELA/CTLA, bar associations, and employee advocacy groups in favor of HB-1136 in 2013 bore a striking, and disturbing, resemblance to those articulated over 25 years ago in passing CRA 1991. Nearing the 25-year mark since passage of Title VII, these groups urged Congress to modify Title VII’s remedial scheme to allow for jury trials, compensatory and punitive damages, and recovery of attorneys’ fees. They claimed that if Congress sweetened the pot to make it more profitable to prosecute employers for EEO violations, they, as “gladiators” and “mini Attorneys’ General”, would advance the cause for equal employment opportunity and help an underfunded EEOC deliver on Title VII’s promises. By ratcheting up the damages against employers, victims of discrimination, they maintained, would have meaningful remedies to punish employers for bad behavior and to serve as an example to others of the importance of EEO compliance. For more reading about the CRA 1991’s legislative history, click here.
Since CRA 1991: Measuring What Matters
As noted above, the EEOC boldly characterizes its historic collections from employers as evidence of “enforcing the [EEO] laws more effectively.” Nevertheless, despite 20+ years of measurable data since CRA 1991 (HB-1136’s federal counterpart), neither HB-1136’s proponents nor opponents questioned whether this privatized civil litigation enforcement scheme even WORKED to promote greater workplace equal employment opportunity. If we look at more meaningful evaluative metrics of our progress, the march toward equal employment opportunity has stalled.
As mere examples, the EEOC’s own EEO-1 data from 1998 to 2012 shows that women and Latinos have not made significant strides toward greater representation in Official/Manager jobs across industries; despite earlier gains, their progress has flat-lined in recent years. Unfortunately, African-Americans have lost ground toward achieving these tops jobs since 2008, a downward trajectory that should cause obvious concern among policymakers; women of color have fared particularly poorly in achieving management jobs. Further, the EEOC has openly acknowledged that despite its greater control over federal sector discrimination issues, its processes and procedures have yielded little progress for the federal African-American workforce. A recent Gallup poll revealed that African-Americans feel as disadvantaged in obtaining desired employment as they did in 1963. According to research by Catalyst.org, pay inequality based on gender, race, and ethnicity continues to plague our workplaces. The U.S. lags behind numerous other modern economies (e.g., Norway, the UK, and even South Africa) in including women on Boards of Directors.
CRA 1991’s privatized civil litigation enforcement model has not proven effective at delivering greater equal employment opportunity for Title VII’s stakeholders, although a substantial amount of money has changed hands between employers, insurance carriers, and lawyers. Money changing hands, however, is no substitute for real EEO change.
The Market’s Foreseeable Response to CRA 1991: EPLI and the California Problem
After CRA 1991, the market responded in foreseeable ways—namely, the proliferation of Employment Practices Liability Insurance coverage (EPLI) for employers and of HR consulting practices like that of Senator Linda Newell, another leading HB-1136 proponent. By design, EPLI takes the sting out of the stick of CRA 1991’s enhanced remedies, thereby allowing employers to treat discrimination matters like any other insured business risk (e.g., slip-n-fall, workers’ comp claim, car crash). Employers now regard discrimination/harassment claims as an unavoidable cost of doing business, a sentiment that makes real workplace rehabilitation impossible.
In response to HB-1136, Colorado employers will also seek necessary protection by purchasing EPLI. In the California EEO enforcement model that Colorado now copies, however, EPLI insurance has become increasingly un-affordable for small to mid-sized employers. Colorado employers should expect the same, particularly steep increases in their EPLI premiums once HB-1136 takes effect on January 1, 2015.
It’s About the Money, Money, Money . . .
If HB-1136’s proponents cared as much about civil rights and equal employment opportunity as they do the money that this enforcement model makes for them, they would surely share our concerns about its efficacy as we near Title VII’s 50th anniversary in July, 2014. Given the intensely ad hominem and overly simplistic tenor of last year’s passage of HB-1136, however, optimism seems ill-advised. In the “victim/villain” dichotomy perpetuated by PELA/CTLA lawyers for the benefit of PELA/CTLA lawyers, rhetoric about victims, fighting for civil rights, a passion for justice, and doing “God’s work” often just masks ego and greed in the most Machiavellian manner.
HB-1136’s primary cheerleader, Senate President Morgan Carroll, is an attorney with Denver personal injury giant, Bachus & Schanker. Following HB-1136’s passage in May, 2013, Bachus & Schanker announced the expansion of its employee-rights practice by merging with longtime PELA/CTLA attorney Elwyn Schaefer. According to Darin Schanker, Bachus & Schanker founding partner, expanding their personal injury practice into employment law is simply “logical,” and with the addition of Mr. Schaefer, his firm looks forward “to benefiting from the high energy and outstanding results his firm is known for” (i.e., money, again).
The House’s primary sponsor in the House, PELA/CTLA attorney Joe Salazar, also stands to make more money prosecuting employers. Likewise, Senator Linda Newell, who owns an HR consulting firm, should also profit from HB-1136 by cautioning/counseling Colorado’s employers about the increased EEO litigation risks that, ironically, she herself created! Come to think of it, HB-1136 could allow me, a longtime and visible EEO litigator, to churn cost-of-defense payouts like a personal injury settlement mill too! Whether legislation benefits me, however, does not measure its value as public policy, an ethic I’d always assumed my fellow Democrats shared.
Elevating Lawyers over Employers
With an overbroad brush, HB-1136’s proponents claimed that “Colorado was the 43rd state to enact a law to protect all workers. Americans have been fighting for this since the 1960s . . .”, as though Coloradans were backwards, racist hater hillbillies. This misleading statement, however, smacks of the false “victim/villain” paradigm created by PELA/CTLA attorneys for the benefit of PELA/CTLA attorneys—i.e., if you oppose this legislation for sound business and public policy reasons, you must be a backwards, racist hater hillbilly.
This false dichotomy, however, prevented really SMART people among Democratic legislators (maybe even Governor Hickenlooper himself) from addressing the real downstream problems that HB-1136 poses. In fact, HB-1136 renders Colorado one of the most employer-punitive states in the Rocky Mountain region. According to legal research prepared by Biglaw employment boutique Littler Mendelson, the majority of states (29) do not permit recovery of punitive damages, as does HB-1136. Even our neighboring states (e.g., New Mexico, Kansas, Wyoming, Utah), with which Colorado competes to attract business, do not allow punitive damages against employers. Likewise, HB-1136 places Colorado in the minority of states that allow employees to recover compensatory and punitive damages, AND unlimited attorneys’ fees.
In enacting HB-1136, Colorado’s Democrats have steered us towards the California EEO enforcement model, which has hardly proven successful for anyone except lawyers. Because damages available under California law are more generous than Title VII and CRA 1991, PELA/CTLA attorneys now bypass the federal EEO enforcement system entirely, opting to pursue their claims in state agencies and state courts—namely, the intended effect of HB-1136. No doubt, this shift from federal to state EEO enforcement has foisted additional administrative and judicial burdens on a state teetering on the verge of bankruptcy for years. The litigation climate in Southern California, for example, has become so bad that EPLI carriers are now pulling out of the market or are forced to charge exorbitant premiums that many small to mid-sized employers cannot afford. Learn more here. These conditions may help explain why large California businesses with lots of personnel needs migrate to the Rocky Mountain region in the first place.
Fostering Equal Employment Opportunity through Colorado Innovation and Collaboration
Coloradans are innovators. Instead of enacting an EEO enforcement model that has proven ineffective, that burdens employers, that reduces our regional competitiveness, that treats employers as villains, and that legislates the exception, let Colorado become a beacon of innovation toward achieving meaningful EEO progress in our workplaces. This July, 2014 marks the 50th anniversary of Title VII of the Civil Rights Act of 1964, an ideal moment to measure how far we have come toward inclusive, fair workplaces. HB-1136’s model simply has not worked to transform our workplaces, which compels our generation to experiment with new ways to deliver on Title VII’s promises. By partnering with business and investing in inclusiveness initiatives throughout our state, Colorado has an opportunity to become a positive, national example in the continuing march toward equal employment opportunity over the next 50 years. The path forward requires more collaboration, less litigation.
Merrily Archer, Esq., M.S.W. (once politically Blue, but now a pleasant shade of Purple)