Tuesday, August 30, 2016

EEOC Loses its first-filed Transgender Discrimination Case against Religious Freedom Restoration Act defense

On August 18, 2016, the Equal Employment Opportunity Commission (EEOC) lost its first case filed on behalf of a transgender employee alleging sex stereotype discrimination in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc.


Anthony Stephens began working for R.G. & G.R. Harris Funeral Homes, Inc., (“Harris”) in October 2007 and served as its Director. During Stephens’ employment with Harris, Stephens presented himself as a male.  

 On July 31, 2013, however, Stephens submitted a letter to his supervisor, Thomas Rost, who is also Harris’ owner, informing him that “[he] had decided to become the person [his] mind already [was]” and the first step would be to “live and work full-time as a woman for a year.” Stephens informed Mr. Rost that after August 26, 2013, Stephens would be identifying himself as Amiee Australia Stephens.

In response, on August 15, 2013, Mr. Rost terminated Stephens’ employment with Harris because Stephens dressing as a female would violate Harris’ policy that required male and female employees to wear a suit and tie, or a skirt and a jacket, depending on their biological gender. Mr. Rost testified, “We have a dress code that is very specific that men will dress as men.” “He was no longer going to represent himself as a man. He wanted to dress as a woman.”

Procedural Background

After his termination from Harris, Stephens filed a charge of discrimination with the EEOC alleging sex and gender identity discrimination. On June 4, 2014, the EEOC issued a cause finding in Stephens’ favor, and on August 25, 2014, the EEOC filed suit on Stephens’ behalf in the Eastern District of Michigan, alleging sex stereotype discrimination in violation of Title VII of the Civil Rights Act of 1964, as amended (Title VII).

The EEOC brought two claims against Harris. First, the EEOC claimed that Harris violated Title VII when it terminated Stephens from his employment because he was a transgender individual, because he was transitioning from male to female, and because he did not conform with Harris’ sex or gender-based preferences, expectations, or stereotypes. Second, the EEOC claimed that Harris violated Title VII by providing clothing allowance or work clothes to male employees, but not to female employees. (The Court dismissed the EEOC’s second claim because it was not raised by Stephens in the initial EEOC charge and it did not affect Stephens directly.)

Cross-Motions for Summary Judgment

After the closing of discovery, both parties moved for summary judgment, requesting the Court to rule in their favor without the need for a trial. In regards to the EEOC’s motion, the Court found that the EEOC had in fact presented direct evidence of sex stereotype discrimination, which was rare in employment cases, to support a finding in favor of the EEOC. However, Harris’ motion presented two defenses that protected it from liability. 

First, Harris argued that it was not liable because enforcing its sex-specific dress code did not constitute impermissible sex stereotype. The Court rejected this defense because the EEOC was not challenging Harris’ sex-specific dress code policy in its lawsuit. Second, however, Harris argued that it was exempt from liability because the Religious Freedom Restoration Act of 1993 (RFRA) prohibited the EEOC from applying Title VII to force Harris to violate its sincerely-held religious beliefs. This posed a problem for the EEOC.

The RFRA Defense

The RFRA prohibits the government from substantially burdening a person’s exercise of religion even if the burden results from a rule of general applicability, unless the government demonstrates that application of the burden to the person (1) furthers a compelling government interest and (2) is the least restrictive means of furthering that interest. The purpose of the RFRA is “to provide a defense to persons whose religious exercise is substantially burdened by the government.” 42 U.S.C. § 2000bb(b)(2). The RFRA includes for-profit corporations as “persons” and the EEOC as a government agency.

Here, Harris had the initial burden of showing that compliance with Title VII imposed a substantial burden on its ability to conduct business in accordance with its religion, and it was successful in doing so. The evidence showed that Mr. Rost had been a Christian for thirty-five years; that Harris’ mission was to “honor God”; that God had called him to serve the grieving; and that he believed that sex was an immutable God-given gift and not a social construct. Mr. Rost also testified that he would be violating God’s commands if he were to allow Stephens to deny his sex and that he would feel compelled to sell his business if he allowed Stephens to dress as a female while at work.

Accordingly, the Court held that “to enforce Title VII, by requiring [Harris] to provide a skirt or allow an employee born a male to wear a skirt at work would impose a substantial burden on Rost’s ability to conduct business in accordance with his sincerely-held beliefs.” Therefore, Harris was exempt from Title VII liability, unless the EEOC could show that compliance with Title VII by allowing Stephens to wear a skirt at work furthered a compelling government interests and that it was the least restrictive means of furthering that interest.

Here, the Court held that the EEOC could not meet its burden. First, the EEOC did not show a compelling government interest as to the “particular person burdened,” in this case, Harris. Yet, because the Court was at “a loss” of how it was “supposed to scrutinize” this first prong, it assumed that the EEOC had met its burden. Second, the EEOC did not provide a “focused to the person” analysis of how the burden on Harris’ religious exercise was the least restrictive means of eliminating clothing gender stereotypes at Harris. In fact, the EEOC offered no discussion of how it had explored the possibility of any solutions, other than just taking the position that Harris was required to allow Stephens to wear a skirt while at work to express his gender identity.  The Court noted that if the EEOC’s intent was to eliminate sex stereotype at work, the EEOC did not propose a gender-neutral dress policy, which could have been less restrictive for Harris.

Therefore, because the EEOC did not meet its burden in showing that allowing Stephens, as a biological male, to wear a skirt while working at Harris to match his gender identity was the least restrictive means in furthering the government’s compelling interest of eliminating sex stereotypes at work, the RFRA provided Harris with a defense to Title VII liability.


This is a big loss for the EEOC, but perhaps the battle does not end there, since the EEOC still has the right to appeal to the U.S. Court of Appeals for the Sixth Circuit.

While this decision has negative implications for the development of employment rights for the LGBTQ community, it is important to note that Harris’ RFRA defense does not apply to suits between private parties. In other words, if a private employee (and not the EEOC) sues a private employer alleging sex stereotype discrimination under Title VII, that employer cannot successfully raise the RFRA defense, which may only be used against the government. 

This case has takeaways for both employees and employers. LGBTQ employees need to keep in mind that discrimination “because of sexual orientation” or “because of gender identity” is not an independent and cognizable claim under Title VII. Rather, it must be brought under the theory of sex stereotype, as Stephens did here. As for employers, it is clear that sex-specific dress code policies pose a problem, if not exposure to a lawsuit. While the EEOC did not challenge the sex-specific dress code policy in Harris, employers’ dress code policies must remain gender-neutral. 

This blog was written by José Galvan

Wednesday, August 10, 2016

Debt Collectors Have a Whistleblower Protection

Last month, the Consumer Financial Protection Bureau (CFPB) announced its plans to issue new regulations for the debt collection industry.  CFPB’s notice states, “Debt collection generates more complaints to the CFPB than any other financial product or service.”

The CFPB’s proposed rules would help consumers by increasing the requirements that debt collectors must meet to document the correct amount of a debt, increasing the consumer’s opportunities to dispute a debt, making more specific the rules against repetitive and harassing contacts, and requiring that consumers requests to limit communications apply to subsequent collectors working on the same debt.

However, the CFPB’s notice makes no mention of a relatively new legal protection for the employees of debt collection firms.  Since the 2010 enactment of the Dodd-Frank Act (which created the CFPB), employees of debt collection firms have had a legal protection against retaliation whenever they raise concerns about violations of consumer rights.

The way that Congress enacted this protection has made it so obscure that hardly anyone has ever noticed it and I am not aware that anyone has ever used it.

Congress passed the Dodd-Frank Act in the wake of the 2007-08 fiscal crisis.  Our financial markets, here and around the world, ground to a halt as widespread fraud in the consumer mortgage market came to light. Within a decade of passing the Sarbanes-Oxley Act in 2002 (SOX), Congress was rightfully concerned that our systems were inadequate to detect the frauds that could be so harmful. 

As part of the Dodd-Frank Act, Congress created the Consumer Financial Protection Bureau (CFPB) believing that a dedicated watchdog could protect our markets from future crises in a way that SOX had not. CFPB would have independent power to protect consumers from frauds and other mistreatment and thereby have eyes and ears in the consumer financial markets.

As a young legal aid lawyer, I counseled many consumers who were distressed by harassment from debt collectors. They suffered symptoms of stress similar to those of domestic violence victims. They felt shame and embarrassment. They felt powerless to stop the abuse. They lose sleep, suffer medical problems and are constantly anxious about how to make it stop.  I could explain how the harassment was illegal, and sometimes that would lessen their immediate anxiety. A few clients were willing to let their harassment become the basis of a lawsuit to hold the collectors accountable for their actions. While my clients’ recoveries would be immensely satisfying for them, it became just a cost of doing business for the collections firms that continued their practices against other consumers who didn’t know or would not use their legal rights.

In creating the CFPB, Congress wisely understood that one of the best sources of information about frauds and violations would be the employees that companies use to carry out their misdeeds. Therefore, in Section 1057, Congress created a whistleblower protection for the employees in all the industries that CFPB would regulate. As I walk with you through this section of law, I suspect that you will quickly see that it is convoluted and difficult to discern the actual meaning.

Now codified at 12 U.S. Code § 5567(a), this protection bars any “covered person or service provider” from terminating or “in any other way discriminat[ing] against,” “any covered employee” “by reason of the fact that such employee or representative … has” —
(1) provided, caused to be provided, or is about to provide or cause to be provided, information to the employer, the Bureau, or any other State, local, or Federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;

(2) testified or will testify in any proceeding resulting from the administration or enforcement of any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;

(3) filed, instituted, or caused to be filed or instituted any proceeding under any Federal consumer financial law; or

(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the Bureau.
The key to understanding the significance of this section, particularly subsections (1) and (4), is understanding the scope of “this title” and what is “subject to the jurisdiction of, or enforceable by, the Bureau.”  The answer is contained in 12U.S.C. § 5481(14). There, the Dodd-Frank Act lists all the laws that are now within CFPB’s jurisdiction. They are:

the Alternative Mortgage Parity Act of 1982, 12 U.S.C. § 2801; Consumer Leasing Act of 1976, 15 U.S.C. § 1667; most of the Electronic Funds Transfer Act, 15 U.S.C. § 1693; Equal Credit Opportunity Act, 15 U.S.C. § 1691; Fair Credit Billing Act, 15 U.S.C. § 1666; most of the Fair Credit Reporting Act, 15 U.S.C § 1681; Home Owners Protection Act of 1998, 12 U.S.C. § 4901; Fair Debt Collection Practices Act, 15 U.S.C. § 1692; parts of the Federal Deposit Insurance Act, 12 U.S.C. § 1831t(c)-(f); parts of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6802-09; Home Mortgage Disclosure Act of 1975, 12 U.S.C § 2801; Home Ownership and Equity Protection Act of 1994, 15 U.S.C. § 1601 note; S.A.F.E. Mortgage Licensing Act of 2008, 12 U.S.C. § 5101; the Truth in Lending Act, 15 U.S.C. § 1601; the Truth in Savings Act, 12 U.S.C. § 4301; section 626 of the Omnibus Appropriations Act, Pub. L. No. 111-8; and the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701

For my purpose in this blog, this list explicitly includes the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692. Each of these laws, however, now has the same explicit whistleblower protections for any employees who want to raise concerns about the violations of the consumer’s rights.

By placing the whistleblower protection in this provision of the Dodd-Frank Act, and making its application dependent on finding and understanding each reference, Congress did make it harder for practitioners to find and use the law.  In other whistleblower laws, the provision protecting whistleblowers is a part of the law that is being enforced.  For the FDCPA, one has to know to look in the CFPB statute to find the employee protection.

As a legal aid lawyer, I fantasized about how great it would be if the employees of the debt collectors I sued could have a legal protection for refusing to abuse and harass the debtors. Most of them are paid on commission, so it was in their interest to continue whatever tactics would get consumers to pay the most. Would the CFPB protection today allow a debt collector to refuse to engage in harassment, but still pursue a claim for the commissions that would have been earned but for that refusal?  This question remains unanswered as there are no reported cases enforcing this protection for debt collectors.

Perhaps the CFPB will consider an addition to their final rules for debt collectors.  They could require debt collection firms to post the Department of Labor’s fact sheet for CFPB whistleblower claims.  Then debt collectors could learn about their protections and the 180 day time limit to file retaliation complaints.

If there are debt collectors, or other employees in the consumer financial industry, looking for advice about their rights, or concerned that they have suffered retaliation, they are welcome to apply to our offices for legal advice and representation.