Unpaid Bias Settlements? Employers May Get Some Funds Back

By Jay-Anne B. Casuga

Imagine an employer that settles federal class discrimination allegations filed years, if not decades, ago. The company appears to be nearing the litigation finish line, but a new starting point appears: finding all those class members.

This could be an issue for Bank of America and Texas Roadhouse Inc., both of which recently settled class hiring discrimination claims brought, respectively, by the Labor Department’s Office of Federal Contract Compliance Programs and the Equal Employment Opportunity Commission.

Bank of America agreed to pay $1 million to a class of 1,027 black applicants rejected for positions at a predecessor bank in 1993, while the casual dining restaurant chain will pay $12 million to a class of at least 750 applicants over the age of 40 who were allegedly denied front-of-house positions between 2007 and 2014.

The process for locating former job applicants or employees can be a lengthy task. But there’s some potential good news for employers: When class members can’t be found, sometimes companies get back those unpaid settlement funds.

“It depends on how old the case is,” said Leigh M. Nason, an attorney with Ogletree Deakins in Columbia, S.C., and chair of the firm’s Affirmative Action/OFCCP Compliance Practice Group. “The older it is, the less likely you’re going to find class members.”

There are caveats. Depending on which agency is involved, the money may have to be used for an equal employment opportunity purpose, such as training, or donated to an EEO program or charity.

How often does this happen? Perhaps more often than one might think, management attorneys told Bloomberg BNA.

Apart from the age of the claims, the type of claimant plays a role too.

It’s much more difficult to locate former applicants asserting failure-to-hire claims, as opposed to class members who are current employees or recently separated employees, said Nathaniel M. Glasser, an attorney in the employment, labor and workforce management practice at Epstein Becker Green in Washington.

Uncashed Settlement Checks ‘Rare,’ Agencies Say

Representatives of the DOL and the EEOC, however, told Bloomberg BNA that residual settlement funds are rare.

“Since the class members we do find typically share the total settlement amount equally, there are rarely uncashed checks or residual funds that are returned to the contractor for EEO training or other activities,” a DOL spokesman said. “Even in the rare instances where there are uncashed checks, OFCCP conciliation agreements often have a provision to redistribute those funds to class members that have responded to the settlement notice if the per class member amount is above a certain threshold.”

The DOL spokesman also pointed to the OFCCP’s Class Member Locator as one tool the agency uses to locate and provide information to class members. He declined to comment on whether the agency keeps tabs on the amount of unpaid settlement funds that revert back to contractors for EEO training.

The EEOC doesn’t track how much money is donated to charities from unpaid settlements, an EEOC spokeswoman told Bloomberg BNA.

“It’s likely a rare occurrence that we can’t find many victims who may be entitled to a settlement,” she said.

It’s All Negotiable

Employers and government agencies like the OFCCP and the EEOC are cognizant of the possibility that some class members might not be found and typically address the issue in their settlement agreements, Glasser said. The same is true for parties in private discrimination lawsuits.

The question boils down to whether the agreement will include a “true reversionary provision,” where unclaimed funds go back to the company, or whether the already-located class members receive some additional proportional amount, he said. Government agencies may take a compromise position, allowing unclaimed funds be returned to the company, but only if those funds are used for an agreed-upon EEO purpose.

In other words, it’s all negotiable.

Everything is a point of negotiation, Nason said, from the amount of interest calculated on back pay awards to the dollar threshold that will trigger a second distribution to identified class members.

How Are Class Members Located?

Sometimes, it can take up to a year to determine a final list of settlement recipients.

In the Bank of America settlement with the OFCCP, for example, the agency within five days of signing the agreement will forward a class member list to the bank with the members’ most current addresses. The agency can use Social Security numbers or other government databases and software to locate the class members.

The bank then has 35 days to mail to class members a notice of the settlement along with a claim form and release. Class members or their representatives then have 90 days to return the claim form and release. Within 60 days of sending out the notices, the bank will notify the OFCCP of class members who don’t respond. The agency then has another 45 days to provide the bank with a new list of updated addresses.

The bank then must try to contact the class members on the updated list, giving them 90 days to respond. Any class members who submit incomplete or unsigned claim forms and releases will get an additional 15 days to fix those issues.

When all is said and done, the OFCCP and Bank of America must agree on a final list of eligible recipients who will receive the monetary award negotiated under the settlement, as well as the time within which members must cash their settlement checks.

Who Gets How Much?

Hypothetically, let’s say the OFCCP and the bank locate 50 class members who timely submit their claim forms and releases.

If for whatever reason some of those checks don’t get cashed or are returned as undeliverable, the bank will notify the OFCCP and will again attempt to deliver the checks to the class members if the agency finds alternate addresses.

Any remaining uncashed settlement funds will either undergo a second distribution to the identified class members or will revert to the employer for EEO training.

The parties generally negotiate a dollar threshold that will trigger a second distribution, Nason said.

The Bank of America settlement with the OFCCP states that a second distribution will occur only if residual funds will provide more than $30 to each class member. In other words, if the remaining funds are insufficient to provide at least $30 to each class member, then the funds would return to the bank.

The funds will also return to the bank if a negotiated check cashing period has expired.

The Bank of America settlement expressly provides: “After all notices have been sent and all checks have been issued ... and the cashing period of all such checks has expired, any residual amounts ... shall remain with Bank of America and shall be used to to provide training in equal employment opportunity to its personnel.”

The OFCCP doesn’t dictate how Bank of America, or any contractor, conducts its EEO training, so long as the company can prove that it spent the money on such training, Nason said. Contractors generally provide periodic progress reports to the OFCCP as part of settlements.

How much of the settlement goes unclaimed depends on the circumstances of each case.

No Funds Go Back to Employer Under EEOC Settlements

Things play out differently in settlements with the EEOC, which settles class discrimination claims with a broader range of employers, not just government contractors like the OFCCP.

The EEOC doesn’t allow any portion of its settlements to revert back to the company, an agency spokeswoman told Bloomberg BNA.

Any residual funds “should be contributed to programs which have the purpose of enhancing the employment opportunities of the group(s) affected by defendant’s unlawful practices,” according to the EEOC’s Regional Attorney’s Manual.

“Settlements should contain provisions identifying the program(s) receiving the funds (or describing how the program will be selected) and explaining the purposes for which the funds will be used,” the manual states.

The Texas Roadhouse settlement provides that the restaurant will donate any unallocated funds to one or more mutually agreed upon nonprofit organizations that address “age discrimination or age-related employment opportunities, including but not limited to those with a particular focus on the employment concerns of veterans over age 40.”

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

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