Supreme Court Watch

Tuesday, January 03, 2012

By Nina Joan Kimball, Kimball Brousseau LLP

In the Supreme Court Watch, we summarize decisions from the U.S. Supreme Court in labor and employment cases, and we provide alerts on employment cases that are currently before the Court for argument. 

CASES CURRENTLY BEFORE THE COURT, 2011-2012 TERM

Hosanna-Tabor Evangelical Lutheran Church & School, No. 10-553 (Oral Argument Oct. 5, 2011)
Issue:
Whether “ministerial exception” to the ADA applies to a teacher at a religious elementary school who teaches both religious and secular classes.  The teacher, Cheryl Perich, is a commissioned minister, and taught both religious and secular classes.  She took a leave of absence when she was diagnosed with narcolepsy, and the school hired a substitute.  When she tried to return to teaching, the school asked her to resign, fearing her health would place students at risk.  The school finally terminated her employment and she brought claims under the Americans with Disabilities Act alleging discrimination and retaliation.  The school claimed it was exempt from the ADA under the ministerial exemption, which is intended to protect First Amendment rights of religious schools to separation of church and state, to ensure that courts do not get involved in religious decisions.  Summary judgment was granted to the school by the federal district court, but was overturned by the Sixth Circuit, ruling that the ministerial exception did not apply in this circumstance. 

Knox v. Service Employees Int’l Union, No. 10-1121 (Oral Argument Jan. 10, 2012)
Issue
:  Whether a union can use nonunion members’ state-mandated fees to finance political and ideological actions despite providing limited information about such use and without allowing nonunion members the opportunity to object.  California state employees are required to pay agency fees to the Service Employees International Union (SEIU), their collective bargaining agent.  In this case, the nonunion members argue that additional mid-term fees were assessed without the notice required by the Supreme Court’s decision in Chicago Teachers Union v. Hudson, thus violating their First, Fifth and Fourteenth Amendment rights because the notice provided to them did not give them sufficient information to make an informed choice whether or not to object to the additional fees.  The federal district court granted the nonunion members’ motion for summary judgment, which was reversed by the Ninth Circuit, which held that the union had complied with the Supreme Court’s Hudson notice requirement. 

Coleman v. Maryland Court of Appeals, No. 10-1016 (Oral Argument Jan. 11, 2012)
Issue: Whether FMLA’s self-care leave provision abrogated states 11th Amendment immunity.   In Nevada Department of Human Resources v. Hibbs (2003), the Supreme Court ruled that states are not immune from suit under the Family and Medical Leave Act for claims brought under the FMLA’s provision that allows employees to take leave to care for sick family members, holding that Congress had properly abrogated the states’ 11th Amendment immunity through its power to eliminate gender discrimination under the Fourteenth Amendment.  In this case, Daniel Coleman was denied FMLA leave for his own serious health condition, and terminated by his employer, the Maryland Court of Appeals.  He filed suit under the FMLA.  The federal district court dismissed the claim, ruling that Congress had not abrogated the state’s 11th Amendment immunity for the self-care provision of the FMLA.  The 4th Circuit affirmed.  This case raises the question whether the FMLA’s medical leave provisions (the self-care provision and the family-care provision) should be considered as a unified effort to combat gender discrimination thus abrogating states’ immunity to suit under both types of leave provisions. 

Filarsky v. Delia, No. 10-1018 (Oral Argument Jan. 17, 2012)
Issue:
 Whether a private lawyer retained by the government to work with government employees in conducting an internal investigation is entitled to the same qualified immunity that the government employees enjoy.  Here Steve Filarsky was a private attorney retained by the city to assist in an investigation of a city firefighter, Delia.  During the course of the investigation, Delia claimed his civil rights were violated by a search of  materials from his home.  He sued the individuals who were conducting the investigation.  The Ninth Circuit ruled that all were immune from suit except Filarsky, solely on the ground that he was a private attorney, not a government employee. 

Elgin v. Department of the Treasury, No. 11-45 (Oral Argument Feb. 27, 2012)
Issue:
 Michael Elgin and the other petitioners are former federal employees who were barred from federal Executive agency employment because they did not register for the draft.  They filed suit claiming that the statutory lifetime bar to employment is a bill of attainder and discriminatory on the basis of sex.  The federal district court ruled against them on the merits.  The First Circuit affirmed on other grounds, finding that the district court lacked jurisdiction, and that their exclusive remedy for discharge from federal employment is a claim under the Civil Service Reform Act by appeal to the Merit Systems Protection Board.  The question before the Court is whether the CSRA is the exclusive remedy and precludes the petitioners from seeking relief in federal district court based on allegations that they were unconstitutionally terminated from federal employment.  [N.B. The attorney for petitioners is Harvey Schwartz of Rodgers, Powers & Schwartz.]

Christopher v. SmithKline Beacham Corp., No. 11-204 (Oral Argument TBS)
Issue:
Whether the FLSA’s outside sales exemption applies to pharmaceutical sales representatives.  The Department of Labor has interpreted the outside sales exemption from the FLSA overtime requirements not to apply to pharmaceutical sales representatives.  There is a split in the circuits as to whether the DOL’s regulations are owed deference on this issue.  Earlier in 2011 the Supreme Court declined to review the Second Circuit’s decion in In re Novartis Wage & Hour Litigation that agreed with the DOL’s rule that pharmaceutical sales representatives do not qualify for the outside sales exemption because they do not make sales.  The Ninth Circuit in SmithKline came to the opposite conclusion, thus setting up the circuit split.   

EMPLOYMENT CASES DECIDED BY THE SUPREME COURT IN 2011

By Christopher Powell and Jillian Harrison, Ropes & Gray LLP

and Nina Joan Kimball, Kimball Brousseau LLP

Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) – 1.5 Million Person Class Cannot Proceed in Sex Discrimination Case
In Wal-Mart Stores, Inc. v. Dukes, et al., the United States Supreme Court ruled that approximately 1.5 million current and former female employees of Wal-Mart could not proceed as a class in their Title VII sex discrimination suit.  This case had been the largest employee class-action lawsuit in the nation’s history.  The Supreme Court’s ruling provides greater clarity as to the degree of commonality required to use the class action mechanism.  It also demonstrates that class action lawsuits are rarely the appropriate vehicle for employment-related disputes involving large, decentralized employers.

The named plaintiff in this case, Betty Dukes, originally filed suit against Wal-Mart in 2000, claiming that she had been passed over for training and promotion in favor of male employees and that she was paid at a lower rate than similarly situated male employees.  Dukes and the other named plaintiffs alleged that Wal-Mart had systematically permitted discrimination against female employees by allowing local and regional managers wide-ranging discretion in pay and promotion practices; these managers, the plaintiffs claimed, in turn relied on arbitrary and subjective criteria that had a disparately negative impact on women.  The plaintiffs supported this contention with statistical evidence showing that women filled a disproportionately small share of managerial positions and that women were, on average, paid less than men at Wal-Mart nationwide and across all regions.  

In federal district court, the plaintiffs sought—and obtained—class certification to represent all women employed at a domestic Wal-Mart retail store at any time since December 26, 1998.  A divided en banc panel of the Ninth Circuit eventually upheld this class certification, reasoning that the plaintiffs had raised “the common question” whether Wal-Mart’s “corporate policies” (as opposed to numerous individually discriminatory acts) had resulted in discrimination against female employees. 

The Supreme Court reversed the Court of Appeals and held (unanimously) that the class had improperly been certified under Federal Rule 23(b)(2), which allows certification for groups of plaintiffs seeking class-wide injunctive or declaratory relief.  A bare majority of Justices also held that the class could not be certified under any provision of Rule 23, because it could not satisfy the necessary prerequisite that there be a “question of law or fact common to the class.”  The very decentralization and discretion of which the plaintiffs had complained, the Court held, precluded the existence of “a common answer to the crucial question why was I disfavored.”  Wal-Mart’s existing corporate-wide policies expressly prohibited sex discrimination, the Court noted, meaning that disposition of the plaintiffs’ claims would rely on case-by-case analysis of the employment decisions at issue.  Merely having a policy against having uniform employment policies, the Court concluded, does not raise any inference of discriminatory conduct and cannot suffice to establish class commonality.

This decision shows that it is not enough, for the purposes of class certification, merely to show that a group of plaintiffs has suffered the same injury—the plaintiffs must also demonstrate that they have been injured by the same act, decision, policy, or process in order to qualify for class status.  In the Wal-Mart case, by contrast, the plaintiffs had “little in common but their sex and this lawsuit,” as Chief Judge Alex Kozinski of the Ninth Circuit put it.

Thompson v. North American Stainless, LP, 131 S.Ct. 863 (2011) – Third Party Retaliation Claim Allowed
Eric Thompson and his fiancée, Miriam Regalado, both worked for North American Stainless (“NAS”) until early 2003.  In February of that year, the Equal Employment Opportunity Commission (“EEOC”) informed NAS that Regalado had filed a sex discrimination charge against the company.  Three weeks later, Thompson was fired.  He filed a charge and subsequent lawsuit of his own, alleging that his employment was terminated in retaliation for Regalado’s filing.  The District Court granted NAS’ motion for summary judgment, reasoning that Title VII does not permit third party retaliation claims.  On appeal, the Sixth Circuit initially reversed, but then affirmed in an en banc rehearing, because Thompson did not, himself, engage[e] in any activity protected by Title VII.

In reversing the Sixth Circuit, the U.S. Supreme Court considered two questions:  (1) whether Thompson’s firing could constitute unlawful retaliation and, (2) if so, whether Title VII granted him a cause of action.  The Court answered both questions affirmatively, holding that Title VII prohibits an employer from retaliating against a worker who complains of discrimination by firing a third party – that worker’s fiancée and that the fired fiancée can sue the employer for violating Title VII.  On the first question, the Court applied the broad standard from Burlington Northern to conclude that a reasonable employee would likely be dissuaded from engaging in protected activity if her fiancé would be fired as a result. 

The second question required the Court to consider how broadly to define the term “aggrieved” as used to confer standing to sue in Title VII.  The Court held that to interpret it in the manner advocated by NAS—that it is a term of art conferring standing only on the employee who engaged in the protected activity—would be “artificially narrow” and has “no basis in text or prior practice.”  Rather the Court held that the term applies to persons in the “zone of interests” intended to be protected by Title VII.  As an employee of NAS, the Court held that Thompson was “well within” the zone of interests Title VII was intended to protect—employees who suffer unlawful actions at the hands of their employers.

Staub v. Proctor Hosp., 131 S.Ct. 1186 (2011) – Cat’s Paw Liability: Employer Liable for Conduct of Person who Influences Decisionmaker
While employed as an angiography technician at Proctor Hospital, Vincent Staub also served as a member of the United States Army Reserve.  His military obligations required his presence at training one weekend per month and two to three consecutive weeks per year.  Staub’s supervisor and her supervisor both disapproved of his military obligations.  In January 2004, Staub was disciplined for a purported rule violation that included a directive requiring him to check in with one of the two supervisors whenever he had no patients.  In April, one of the supervisors reported Staub for violating the directive and, in reliance on that report, the Vice President for Human Resources (VPHR) fired Staub.  

Staub sued Proctor under the Uniformed Service Employment and Reemployment Rights Act of 1994 (“USERRA”), alleging that his termination was motivated by antimilitary animus.  He did not allege that the VPHR was herself so-motivated, but that his supervisors were and that their actions influenced the VPHR’s decision to terminate his employment.  A jury agreed and awarded Staub almost $60,000 in damages.  The Seventh Circuit reversed, holding that only where the ultimate decisionmaker “blindly relies” on the discriminatory non-decisionmaker, can a “cat’s paw” case like Staub’s succeed.  Since the VPHR had spoken to another employee and reviewed Staub’s file, the Seventh Circuit was satisfied that her investigation, though not as “robust” as it might have been, was sufficient.

The Supreme Court reversed the Seventh Circuit, holding that if a supervisor performs an act motivated by bias against the military that the supervisor intends to cause an adverse employment action, and if that act is the proximate cause of the ultimate employment action, then the employer can be held liable under USERRA.  

AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) -- State Law Banning Class Action Waivers Preempted by Federal Law.
In its decision in AT&T Mobility LLC v. Concepcion, the United States Supreme Court upheld the enforceability of an arbitration clause that disallowed classwide arbitration, striking down a California rule barring such provisions. This ruling at once reaffirms the enforceability of contractual arbitration provisions in general and opens the door for employers to shield themselves (at least for the time being) from class actions asserting, for example, wage and hour claims. 

The plaintiffs in this case, the Concepcions, had entered into a service contract with AT&T which included an arbitration clause requiring customers to bring breach of contract claims only in their “individual capacity” and not as members of a class. When the Concepcions attempted to join a class action against AT&T, complaining of alleged false advertising, the company moved to compel arbitration per the terms of the contract. The federal trial and appellate courts, however, refused to require the Concepcions to arbitrate their claims as individual complainants, applying a California rule deeming “unconscionable” certain kinds of arbitration provisions that waive an individual’s right to join a class action. The Supreme Court reversed, holding that the state rule stood “as an obstacle” to the Federal Arbitration Act and impeded the “liberal federal policy favoring arbitration.” Although the issue addressed by the Court arose in connection with a consumer contract, the Court’s decision is more broadly applicable, including to employment agreements containing provisions requiring the arbitration of work-related disputes. 

In response to the Supreme Court’s decision, some members of Congress have pledged to reintroduce the Arbitration Fairness Act, which would render unenforceable any pre-dispute arbitration agreement relating to employment, consumer, or civil rights claims.

Mayo Found. for Medical Educ. & Research v. United States, 131 S.Ct. 704 (2011) – Medical Residents are Employees for FICA Purposes
The petitioners in this case operate medical residency programs for medical school graduates pursuing a specialty.  The programs provide training primarily through hands-on experience, but also require certain formal educational activities including lectures, reading, and examinations.  The majority of the residents’ time, however, is spent treating patients.  They are paid annual stipends, and also receive insurance and paid time off.

In 2004, the Treasury Department issued regulations that indicated that the services of a “full-time employee are not incident to and for the purpose of pursuing a course of study,” and therefore are not exempt from the Federal Insurance Contributions Act (“FICA”), even if the work has an educational or training component to it.  In contrast, from 1951 to 2004, the Treasury Department had construed FICA’s student exemption to include students who work for their schools “as an incident to and for the purpose of pursuing a course of study.”  The 2004 rule provides the specific example of a medical resident working over 40 hours a week and indicates that he is not exempt as a student under FICA.

Mayo sued, claiming that the 2004 rule was invalid.  The District Court agreed, holding that the rule was inconsistent with the “unambiguous text” of the statute, which indicates that as long as the educational aspect of the service predominates, the employee is a student.  The Eighth Circuit reversed, giving the Treasury Department Chevron deference and concluding that the interpretation was reasonable.  The Supreme Court agreed with the Eighth Circuit.  Chevron deference was appropriate because Congress delegated authority to the Treasury Department to make rules and the rule was promulgated within the scope of that authority.  Mayo advocated for an interpretation that would require a case by case consideration of the nature of each employee’s employment and to determine whether educational aspects dominated.  The Court disagreed, finding that the Treasury Department “reasonably sought a way to distinguish between workers who study and students who work” and that the lines drawn regarding hours of work and hours of study were “perfectly sensible” ways to do so.  The regulation also addressed the Social Security Administration’s concern that the exemption would keep residents and their families from obtaining “vital disability and survivorship benefits” provided by Social Security.

Kasten v. Saint-Gobain Performance Plastics Corp., 131 S.Ct. 1325 (2011) – Oral Complaint is Protected Conduct Under FLSA
Kevin Kasten made oral complaints to officials of his employer, Saint-Gobain Performance Plastics, for placing time clocks beyond the area where employees donned and doffed their work-related protective gear.  Kasten believed this was a violation of the Fair Labor Standards Act (“FLSA”) because it prevented workers from receiving credit for this time.  Following the termination of his employment, Kasten alleged that such termination was retaliation for his complaints.  The District Court granted and the Seventh Circuit affirmed summary judgment for Saint-Gobain reasoning that the FLSA did not protect oral complaints from retaliation.

The Supreme Court disagreed, holding that the term “filed any complaint” in the FLSA’s anti-retaliation provisions includes both oral and written complaints.  Finding that a study of the statute’s text alone could not resolve the issue, the Court looked to the FLSA’s “basic objectives,” which include prohibiting poor labor conditions.  The Court noted that the FLSA relies for its enforcement on reports by workers, and that the exclusion of oral complaints might put enforcement out of reach for the very workers it is intended to protect.  On the issue of fair notice to employers, the Court agreed that it was an important consideration but held that an oral complaint may be “filed” when a “reasonable, objective person would have understood the employee [to have] put the employer on notice that [the] employee is asserting statutory rights under the [Act].”  

NASA  v. Nelson, 131 S.Ct.746 (2011) – Background Checks not Privacy Violation
This suit was filed by a number of contract employees at a NASA lab operated by the California Institute of Technology.  The employees were not subject to background checks when they were hired, but post-9/11 changes in security requirements required them to submit to background checks in order to remain employed at the NASA facility.  The employees claimed that certain questions on the background check forms violated their constitutional right to informational privacy.  Their principal objection was to a series of questions about illegal drug use and drug treatment and counseling.  The District Court denied the plaintiff’s motion for a preliminary injunction, but the Ninth Circuit granted one and eventually reversed the District Court.  The Ninth Circuit held that most of the forms’ questions raise no privacy concerns, but that questions about drug treatment served no legitimate interest and that a series of open-ended questions were not narrowly tailored to serve a government interest.

The Supreme Court reversed, holding that the questions do not violate any constitutional right to informational privacy that the employees may have.  The Court found the questions to be reasonable given the government interests at stake.  Because the government was dealing with citizens as employees and not as citizens at large, the government was entitled to a “freer hand” than would otherwise be constitutional.  Since the questions are of a type commonly used by employers in background checks, the Government was also entitled to ask them in order to “aid [it] in employing a competent, reliable workforce,” which the Court identified as a “strong” government interest. 

Borough of Duryea v. Guarnieri, 131 S. Ct. 2488 (2011) – First Amendment’s Petition Clause Does Not Protect Public Employees Who Petition on a Matter that is Not of Public Concern
The police chief of the Borough of Duryea was dismissed from his job, filed a union grievance and was reinstated.  Upon his return to work he was issued directives about his job, and was denied overtime pay.  He filed suit under 42 U.S.C. § 1983, claiming that the directives and denial of overtime were in retaliation for his filing of a grievance, which he claimed was protected petitioning activity under the First Amendment.  The jury found in his favor, and the Third Circuit affirmed in a decision that was counter to all other circuit courts that had ruled on this issue.  The Supreme Court reversed, ruling that a government employee does not have a claim under the First Amendment’s Petition Clause unless his activity relates to a matter of public concern—and here an issue related to his own personal employment situation was not a matter of public concern. The Court clarified that suits under the First Amendment’s Petition Clause are subject to the same standards as suits under the First Amendment’s Speech Clause.