Beslissing inzake openbaarmaking van EEO-1-rapporten kan gevolgen hebben voor andere bedrijfsinformatie in het bezit van overheidsinstanties

This blog was republished by Law360 on February 2, 2024.

In the long-running battle over public disclosure of federal contractors’ EEO-1 reports, the Northern District of California has ruled that these reports of workforce demographics are not exempt under the federal Freedom of Information Act (FOIA) and must be disclosed by the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP). Ctr. For Investigative Reporting (“CIR”) v. United States Dep’t of Labor, 3:22-cv-07182-WHA (N.D. Cal. Dec. 22, 2023). This decision is noteworthy because it calls for the release of tens of thousands of reports. But it has a broader significance because the ruling tightly construes a rarely litigated term in FOIA Exemption 4 that businesses most frequently assert, finding that, even though the reports contained demographic statistics of the contractors’ workforces, the information is not “commercial” and so does not fit within that exemption. If adopted by other courts, this ruling could expand the range of private business information in the hands of government agencies that is susceptible to public disclosure.   

Key Background

The reports and information at issue:  CIR involved EEO-1 reports that government contractors with at least 50 employees (and all employers with 100 or more employees) must submit annually to the Equal Employment Opportunity Commission (EEOC). The reports breakdown a company’s total workforce by race, ethnicity, and gender within 10 broad job categories defined by the EEOC. 

The dispute arose when a news organization submitted FOIA requests to the Department of Labor (DOL) for the EEO-1 reports of all federal contractors from 2016 through 2020. Collectively, these requests covered over 75,000 reports of more than 24,000 contractors. OFCCP gave the contractors an opportunity to object to the release of their reports. Almost 5,000 contractors did object, meaning that nearly 19,000 did not object, a fact that may have been in the back of the CIR court’s mind.

The OFCCP released the reports of the non-objecting contractors, but while it was still assessing the objections, the news organization and its reporter filed suit. Bellwether objectors were identified, and cross motions for summary judgment were filed.

Exemption 4 of FOIA:  The objectors relied on FOIA Exemption 4, which exempts from mandatory disclosure “trade secrets and commercial or financial information obtained from a person and privileged and confidential.” FOIA does not define any of the key terms in Exemption 4, including “commercial”. This exemption is a favorite of businesses, and it was the focus not too long ago of the United States Supreme Court’s decision in Food Marketing Institute v. Argus Leader, 139 S.Ct. 2356 (2019) (“Argus Leader”). Argus Leader dealt with the term “confidential”, but it is worth briefly pausing on this opinion to understand the Supreme Court’s approach to defining undefined terms in this exemption. The Supreme Court acknowledged long-established precedent that FOIA’s nine express exemptions must be narrowly construed to align with FOIA’s disclosure goals. But it also held that, because Congress made those exemptions express, they are entitled to the same weight as the rest of FOIA. So, while exemptions should be construed narrowly, courts cannot “arbitrarily constrict [them] either by adding limitations found nowhere in [their] terms.” (Emphasis in original) The goal is to find the ordinary, common, and contemporary meaning of undefined terms used in exemptions — and to do that, the Supreme Court turned to dictionaries from the day. In the process, the Supreme Court consciously swept aside the requirement that “substantial competitive injury” must result from disclosure that the D.C. Circuit had engrafted on the term “confidential” decades ago and that most courts had followed since then; the Supreme Court found that a “relic” from a “bygone” era of statutory construction. Some commentators and advocates have decried Argus Leader as unduly limiting disclosure of business information held by government agencies.

The CIR Ruling

After finding that the DOL was not bound by a 2019 decision from a magistrate judge in the same district holding that EEO-1 reports did not fall within Exemption 4 because they were not “commercial”, the CIR court undertook its own inquiry into the meaning of that term. Consistent with Argus Leader (and lots of other case law), the court held that Exemption 4 had to be narrowly construed and that “commercial” had to be given its ordinary or common meaning. Unlike Argus Leader, however, the court did not rely on any dictionary or non-legal sources as to the contemporary meaning of that term when FOIA was enacted (even though cases the court cited did point to dictionary definitions, which tend to be quite broad and define “commercial” to mean simply relating to commerce or trade). Instead, the court looked to the case law from the few occasions when a requester has challenged whether a business’s documents are “commercial”. Those cases recognize that “commercial” generally should be read broadly but also find that it must have limits. They also hold that it is not enough that a commercial consequence might follow from disclosure of information. Instead, the information has to be commercial in and of itself. In this regard, the CIR court specifically gave weight to a ruling by the influential D.C. Circuit involving employee names that Exemption 4 covers only “inherently valuable” business information.

The court then considered various arguments by the bellwether objectors as to why the EEO-1 data was “commercial”. The court rejected them all, finding that the data in the reports was generalized to the point of being “too attenuated” from any commercial process to yield commercially valuable insights. The court thus ordered the reports disclosed, although it subsequently entered an agreed stay of production while the DOL decides whether to appeal. 

Analysis of Ruling

In some respects, CIR seems an unremarkable application of existing law to a specific set of facts, especially because finding the outer reaches of any undefined statutory term will involve some case-specific judicial judgment. For example, even after acknowledging the generally accepted broad meaning of “commercial” in Exemption 4, the court was on firm ground in saying that the term must present some hurdle to non-disclosure — why else did Congress include it? It also makes sense to require, as the court did, that information must be commercial in nature or use and that establishing that has to involve more than a business (or government agency) showing some commercial consequence to disclosure, as that would block disclosure of information that is merely embarrassing to a business — such as workplace injury data.

But closer scrutiny suggests something more is afoot. The tell is in how the CIR court marginalized Argus Leader, the most recent case from the nation’s highest court dealing with Exemption 4. Although the CIR court acknowledged Argus Leader, it limited that opinion’s teachings to “confidential”, effectively rendering Argus Leader irrelevant because the CIR court conveniently never had to decide whether the EEO-1 information satisfied the “confidential” requirement of Exemption 4, given that it first ruled the information was not “commercial”. Indeed, far from applying at least the spirit of Argus Leader, the court in CIR may have heeded the call of Argus Leader’s critics to somehow counteract Argus Leader’s perceived expansion of Exemption 4.      

Although CIR acknowledges Argus Leader’s proscription against “arbitrarily constrict[ing]” an exemption by adding limitations found nowhere in its terms, CIR does something similar by imposing the requirement that information must be “intrinsically valuable” to a business for it to qualify as “commercial”. This is problematic for several reasons. First, that phrase is nowhere to be found in Exemption 4; nor is it any part of the dictionary definitions of “commercial” relied on by cases CIR cites.[1]

Second, if “intrinsically valuable” is part of the ordinary and common meaning of any term in Exemption 4 (other than “trade secrets”), it would be “confidential”. After all, why would a company spend resources to keep information confidential that was not valuable to its business in some fashion? But the CIR court knew that Argus Leader had closed that door as to the term “confidential”, so it had to look elsewhere within Exemption 4, landing on “commercial”. 

Third, not only is imposing an “intrinsically valuable” requirement at odds with Argus Leader’s rejection of the “substantial competitive harm” test, but it injects precisely the same kind of uncertainty over information’s protected status that many disliked about that now obsolete test. Whether a given judge will find particular information “intrinsically valuable” is hard to predict, and that, in turn, will give businesses yet another reason to resist providing information to the government if there is any way to avoid it. This unpredictability is illustrated by the CIR decision because the court’s holding that a competitor could not divine any commercially valuable insights from the information summarized in EEO-1 reports is far from inevitable. For example, companies scrutinize the composition and compensation of their workforce all the time because of the obvious connection to profitability. Some companies even claim it is worthy of trade secret protection.[2] The fact that the DOL requires that the same information be submitted in categories not specific to particular industries should not affect the information’s fundamental nature.[3] Moreover, while the CIR court allowed that workforce data in EEO-1 reports might be “relevant” to a company’s business, the court held that the reports did not reveal enough about the business to be considered “commercial”, leaving open the question of what quantum of inherent value is required to earn that label. 

Finally, the CIR court’s analogizing of the composition of a business’s workforce to the names, birthdays, and even demographics of individual employees is questionable. While an individual no doubt has the right to their personal information, it is the business that deliberately chose to put together a workforce that has particular demographic characteristics, believing that such overall makeup gives it a competitive advantage. 

Conclusie

CIR is noteworthy because it requires the release of tens of thousands of EEO-1 reports from government contractors. If other courts decide to follow it by applying an “intrinsically valuable” requirement for information to be “commercial” within Exemption 4 — as opposed to the Supreme Court’s approach in Argus Leader of not imposing any additional requirements not part of the common and ordinary meaning of the words in Exemption 4, far more information than just EEO-1 reports will be at risk for public disclosure. We will report back with developments in this evolving area.

[1] For example, CIR cites Citizens for Resp. and Ethics in Washington v. United States Dep’t of Justice, 58 F.4^th 1255, 1263 (D.C. Cir. 2023), which in turn points to various dictionaries defining “commercial” as meaning of or connected with commerce or having profit as a primary aim.

[2] A prior post discusses attempts by some companies to argue that diversity strategies and data are trade secrets. See https://www.foley.com/insights/publications/2019/03/employers-diversity-data-and-initiatives-trade-sec/

[3] See American v. Nat’l Mediation Board, 588 F.2d 863, 870 (2d Cir. 1978) (both the number of union authorization cards of employees seeking to unionize submitted to the National Mediation Board and the number of different types of cards was “commercial” information within the meaning of Exemption 4).