This year the U.S. Supreme Court's seminal decisions on health care and state immigration law dominated the news cycle (National Federation of Independent Business v. Sebelius, 567 U.S. ___ (2012) (affirming the constitutionality of most provisions of the Patient Protection and Affordable Care Act, including the requirement that most Americans have health insurance by 2014); Arizona v. United States, 567 U.S. ___ (2012) (holding Arizona's law providing authority for local law enforcement to enforce immigration law was preempted by federal immigration law)). But in the two terms that cover 2012 the U.S. Supreme Court also issued multiple decisions and heard oral arguments for less publicized cases in the labor and employment arena.
DECISIONS RENDERED IN 2012
Since January 2012, the Supreme Court decided various labor and employment cases that covered a range of topics. Some of the Court's notable decisions are discussed below.
"Ministerial Exception" Bars Wrongful Termination Claims Against Churches
In a landmark case for religious institutions, the Supreme Court unanimously ruled that the First Amendment bars discrimination lawsuits brought on behalf of ministers against their church employers. Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, 132 S.Ct. 694 (January 11, 2012). Cheryl Perich was terminated by her church employer and thereafter filed a claim alleging she had been fired in violation of the Americans with Disabilities Act. The Supreme Court held that Perich was a minister and, as such, her disability discrimination claim against the church was barred. The Hosanna-Tabor decision is the first Supreme Court case to recognize the existence of a "ministerial exception," grounded in the First Amendment, that precludes application of employment discrimination laws to claims concerning the employment relationship between religious institutions and their ministers. According to Chief Justice Roberts, who delivered the Court's opinion, "[t]he interest of society in the enforcement of employment discrimination statutes is undoubtedly important ... so too is the interest of religious groups in choosing who will preach their beliefs, teach their faith and carry out their mission ... the First Amendment has struck the balance for us. The church must be free to choose those who will guide it on its way."
The Hosanna-Tabor case is a seminal case for religious institutions seeking to defend against employment discrimination lawsuits. Religious employers that can show a plaintiff is a "minister" have a clear basis for dismissing employment discrimination claims brought in administrative agencies and in courts. These employers should note, however, that by applying the ministerial exception, Hosanna- Tabor only bars suits brought by ministers and it only bars employment discrimination lawsuits.
Suits Alleging Violation of FMLA Self-Care Leave Provision Not Available to State Employees
In Coleman v. Maryland Court of Appeals, 132 S.Ct. 1327 (March 20, 2012), the Supreme Court ruled a state employer was immune from suit alleging a violation of the Family and Medical Leave Act's (FMLA) self-care provisions. In addition to providing leave to care for others, the FMLA entitles an employee to take up to 12 weeks of unpaid leave per year due to the employee's own serious health condition when the condition interferes with the employee's ability to perform at work. Coleman filed suit, alleging his employer, the Maryland Court of Appeals, a state entity, violated the FMLA by denying him self-care leave. The district court dismissed the suit on sovereign immunity grounds, and the 4th Circuit Court of Appeals affirmed. In upholding the 4th Circuit ruling, the Supreme Court reasoned that unlike the FMLA's family-care provisions, which the Court previously held could be pursued against state employers, the FMLA's self-care provision was not directed at an identified pattern of gender
based discrimination and therefore related suits against state employers are barred by the state's sovereign immunity. Justice Ginsburg, in her dissent, argued that the underlying purpose of the FMLA's family-care and self-care provisions were the same and the state should be subjected to suit.
In light of the Coleman decision, state employees no longer have judicial recourse when they believe a violation of the FMLA's self-care provision has occurred. Further, the case highlights the Court's willingness to provide greater protections for state employees who care for others than it does for those who care for themselves.
No Jurisdiction for Federal Employees Challenging Adverse Employment Action
In a 6-3 decision, the Supreme Court held in Elgin v. Dept. of the Treasury, 567 U.S. ___ (June 11, 2012), that the Civil Service Reform Act (CSRA) gives exclusive jurisdiction to the U.S. Court of Appeals for the Federal Circuit, that the Merit Systems Protection Board (MSPB) may hear claims of adverse employment action, and district courts do not have jurisdiction over claims related to the CSRA. A federal statute bars employment in the executive branch of male citizens who failed to register for the draft. Elgin, who had been discharged from his job, first challenged the decision before the MSPB but his case was dismissed on the ground that the MSPB lacked authority to review the constitutionality of a federal statute. Rather than appealing that decision, Elgin sued in federal district court.
The Supreme Court held that the district court lacked jurisdiction because it is "fairly discernable" from the CSRA's text, structure and purpose that Congress precluded district court jurisdiction over covered adverse employment actions, including those involving constitutional challenges to federal statutes. Justice Thomas, writing for the Court, noted that if the MSPB lacks power to hear such claims, the claims may be meaningfully addressed by the Federal Circuit. By its decision, the Court further limited the recourse of federal employees to the courts in adverse employment actions, allowing recourse only to a few specific courts.
Pharmaceutical Sales Representatives are "Outside Salesmen" and FLSA Exempt
In a 5-4 ruling, the Supreme Court held that pharmaceutical sales representatives working primarily to get physicians to prescribe their employer's prescription drugs were "outside salesmen" and exempt from the Fair Labor Standards Act (FLSA) overtime pay requirements. Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156 (June 18, 2012). The Court's majority refused to defer to the Department of Labor's (DOL) regulatory interpretations of the FLSA's overtime laws. Rather, interpreting the phrase "other disposition" from the DOL regulations, the Court found the employees made sales for purposes of the FLSA and were exempt because obtaining a nonbinding commitment from a physician to prescribe one of the employer's drugs was the most they were able to do to ensure the eventual disposition of the products that the employer sold. Since these sales representatives were determined to be outside salesmen, the employer was not required to pay overtime for hours worked over 40 during a workweek.
Wage and hour issues remain in the forefront for many employers, and it is an area that is highly litigated. The decision in Christopher signals that courts might be more flexible than the regulatory agencies in determining whether a given job position is considered exempt or nonexempt from the FLSA's wage and hour requirements.
Union Dues Increase Requires New Notice and Consent of Nonmembers
In Knox v. Service Employees International Union (SEIU), 132 S. Ct. 2277 (June 21, 2012), the Supreme Court addressed the notice and consent that must be given to dues-paying nonunion employees before a union could impose a special assessment. Nonunion employees brought a class action against the SEIU alleging the union violated their First Amendment rights and the procedural requirements announced in Teachers v. Hudson, 475 U.S. 292 (1986) (Hudson notice) when the union imposed a temporary increase in employee fees in order to use the funds in an electoral campaign. In a 7-2 decision (Justices Breyer and Kagan dissenting), the Court found the union's procedure was improper because it did not provide a new opportunity for nonmembers to decide whether they wished to contribute to this effort. Specifically, the Court held that when a union imposes a special assessment or dues increase to meet expenses that were not disclosed when the regular assessment was set, it must provide a new notice to all impacted employees, and it may not exact any funds from union nonmembers without their affirmative consent.
Twenty-four states, most recently Michigan, are "Right-to- Work" states where nonmember employees can no longer be required to pay union dues. Both Knox and continuing state efforts should signal to employers that the interplay between unions, members and/or nonmembers will continue to be a source of controversy throughout 2013.
Jurisdiction over MSPB "Mixed Case" Appeals
In a unanimous decision, the Supreme Court ruled that federal employees may appeal discrimination-related complaints in federal district court. Kloeckner v. Solis, No. ___, slip op. (U.S. December 10, 2012). The ruling follows earlier lower court decisions that forced federal employees to appeal some Merit Systems Protection Board (MSPB) decisions through the U.S. Court of Appeals for the Federal Circuit. In this case, Carolyn Kloeckner was fired from the Labor Department in 2005 after complaining of sex and age discrimination and a hostile work environment. The MSPB dismissed her case on procedural grounds after a protracted legal dispute. Kloeckner tried to appeal her case in district court. But the 8th Circuit Court of Appeals ruled that her appeal could only be heard by the D.C.-based Federal Circuit because MSPB decided her case on a procedural matter.
Justice Kagan, who delivered the opinion for the Supreme Court, wrote federal employees bringing "mixed cases" involving both claims of discrimination and adverse personnel decisions (i.e., termination) should proceed to district court, rather than seek judicial review in the Federal Circuit "regardless of whether the MSPB decided her case on procedural grounds or on the merits." The Kloecker decision is notable because it demonstrates that federal employees alleging job discrimination have broader appeal rights than they would normally receive because, instead of seeking judicial review in the Federal Circuit, they may bring suit in district court under the applicable antidiscrimination law.
CASES ARGUED IN 2012 AND PENDING
Since the Court's 2012-2013 term began on October 1, 2012, the U.S. Supreme Court heard oral arguments for several employment-related cases. Although the decisions on these cases are not expected until early 2013, these issues are in the forefront of the Court's docket, and the implications of these decisions can be far reaching.
Affirmative Action in Higher Education
The Supreme Court heard oral arguments on October 10, 2012 in a case that could trigger one of the broadest social policy decisions of 2013. Fisher v. Univ. of Texas at Austin (No. 11-345) (Justice Kagan not participating). In Fisher, the Court will revisit its 2003 decisions on affirmative action in higher education that held race-conscious admissions policies are lawful for an undergraduate program but unlawful for a graduate program. Here, the plaintiff claims the university expressly and unlawfully considered race in rejecting her from admission to the University of Texas at Austin's law school.
Although Fisher explicitly raises facts involving affirmative action in higher education, the case is likely to have a much broader application if the Court further limits the parameters of race-conscious policies designed to promote diversity. As such, the Court's ruling in Fisher could have far reaching implications that impact workplace hiring and diversity initiatives.
Scope of Title VII "Supervisor" Liability Imputed to Employers
On November 26, 2012, the Supreme Court heard oral arguments for Vance v. Ball State University (No. 11-556). In Vance, the Court will address the issue of who is a "supervisor" for purposes of imposing strict liability on an employer for harassment committed in the workplace. The specific question is whether an employer is strictly liable under Title VII of the Civil Rights Act of 1964 for harassment by (1) employees who have authority to oversee and direct the work of the alleged victim, or (2) only those who have the authority to "hire, fire, demote, promote, transfer, or discipline" the alleged victim. Currently there is a federal circuit split on this issue.
Vance is particularly significant because of the landmark cases of Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth, where the Supreme Court ruled an employer is vicariously liable for severe or pervasive workplace harassment committed by a supervisor of the victim. Depending on how the Supreme Court rules, employers' potential liability (and associated risks) for the actions of its employees may be significantly expanded.
Mootness of FLSA Section 216(b) Collective Action
Oral arguments in Genesis HealthCare Corp. v. Symczyk (No. 11-1059) were heard on December 3, 2012. In Genesis, the Supreme Court will address the issue of whether a collective action (class action) under the FLSA becomes moot when the lone plaintiff receives an offer of judgment that fully satisfies the claim. The employer offered the plaintiff $7,500 in alleged unpaid wages, plus attorneys' fees, costs and expenses, which would have fully satisfied her individual claim, and she refused to accept it. In response, the employer moved to dismiss the FLSA claim. The trial court sided with the employer and dismissed the FLSA claim with prejudice, but on appeal the 3rd Circuit Court of Appeals ruled the offer of judgment did not moot the plaintiff's claim under the FLSA. In doing so, the appellate court expressed concern that a contrary ruling would enable employers to "pick off" individually named plaintiffs in order to avoid FLSA collective action claims.
The Supreme Court's decision in Genesis may have a significant impact not only on FLSA collective actions, but also on other class action lawsuits where representative plaintiffs bring suit on behalf of a larger group of employees.
CONCLUSION
In 2012, the U.S. Supreme Court issued multiple employment-related decisions and the Court heard arguments for other cases that could dramatically impact companies' benefits, payroll policies, litigation process and liability, hiring and leave policies, and complaint investigation processes, and could dictate how such companies account for associated risks. Employers should remain well-informed about these and other recent Supreme Court decisions and/or consult outside legal counsel as we continue to monitor, advise and adjust to ever-evolving case law.
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