Shaw Valenza's Employment Law Pot Pourri / Quick Takes

Here are some quick takes to catch you up on a bunch of recent developments.

Rounding Time to the Quarter Hour

The Ninth Circuit upheld a neutral policy under which an employer rounded time to the nearest quarter-hour.

The time clock system would automatically round back for 7 minutes or less of time worked in the 15-minute period, and would round ahead for 8 or more minutes.  The rounding mechanism was not allowed to be edited by managers.

On that basis, the Court held that the rounding system was neutral on its face.  And as applied to the plaintiff, he lost just $15.00 in pay over the 13 months of punches that he made.  That's how neutral rounding is supposed to pan out.

The Court found that this practice was lawful under both the federal Fair Labor Standards Act and the  California Labor Code.  The case is Corbin v. Time Warner Entertainment etc. and the opinion is here.

California Fair Employment Agency to Revise Gender Regulations

The FEHC is beginning the process of revising its regulations regarding gender identity.   You can read the proposed revisions here.  The proposed additions include a new provision on bathroom / locker facilities:

(A) Employers shall permit employees to use facilities that correspond to the employee’s gender identity or gender expression, regardless of the employee’s assigned sex at birth.

(B) To balance the privacy interests of all employees, employers shall provide alternatives if no individual facility is available, such as, locking toilet stalls, staggered schedules for showering, shower curtains, or other method of ensuring privacy. However, an employer or other covered entity may not require an employee to use a particular facility.

(C) Transitioning employees shall not be required to undergo, or provide proof of, any particular medical treatment to use facilities designated for use by a particular gender.

(D) Employers and other covered entities with single-occupancy facilities under their control shall use gender-neutral signage for those facilities, such as “Restroom,” “Unisex,” “Gender Neutral,” “All Gender Restroom,” etc.

There also is a proposed regulation regarding pronouns and names:

(h) Recording of Gender and Name

(1) It is unlawful to require an applicant or employee to state whether the individual is transgender.

(2) If a job application form requires an individual to identify as male or female, designation by the applicant of a gender that is inconsistent with the applicant’s assigned sex at birth or presumed gender shall not be considered fraudulent or a misrepresentation for the purpose of adverse action based on the applicant’s designation.

(3) If an employee requests to be identified with a preferred gender, name, and/or pronoun, an employer or other covered entity who fails to abide by the employee’s stated preference may be liable under the Act, except as noted in subdivision (4) below.

(4) An employer may use an employee’s gender or legal name as indicated in a government-issued identification document only if it is necessary to meet a legally- mandated obligation.

Here's a proposal about dress and grooming standards:

(g) Physical Appearance, Grooming, and Dress Standards. It is lawful for an employer or other covered entity to impose upon an applicant or employee physical appearance, grooming or dress standards that serve a legitimate business purpose, so long as any such standard does not discriminate based on an individual’s sex, including gender, gender identity, or gender expression.

However, if such a standard discriminates on the basis of sex and if it also significantly burdens the individual in his or her employment, it is unlawful.  It is unlawful to require individuals to dress or groom themselves in a manner inconsistent with their gender identity or gender expression.

And, finally, something about requiring proof of gender identity:

(1) It is unlawful for employers and other covered entities to inquire or require documentation or proof of an individual’s sex, gender, gender identity, or gender expression as a condition of employment, unless the employer or other covered entity meets its burden of proving a BFOQ defense, as defined above, or the employee initiates communication with the employer regarding any requested adjustment to the employee’s working conditions. 

Attorney's Fees for Prevailing Employers Under Federal Anti-Discrimination Law?

The U.S. Supreme Court decided - 8-0 - that a prevailing defendant in a Title VII discrimination case (and that means ADA, ADEA and section 1988, too), may recover attorney's fees without winning "on the merits."  That means, for example, if a plaintiff insists on bringing a frivolous case that is obviously barred by the statute of limitations, the employer can apply for attorney's fees even though the statute of limitations defense is not proof of non-discrimination.  As Justice Thomas already points out, the defense already has to establish that the plaintiff's case was 'frivolous, unreasonable or groundless" because of an earlier Supreme Court case (that invented that standard).  So requiring a win "on the merits" would have been a whole new burden and the Court wasn't having it.  So, the EEOC owes CRST at least $4 million for its frivolous pursuit of CRST if that ruling holds up on remand.  Wet blanket moment: Where will the EEOC get the money to pay those fees?  Oh. Right.  Us.

That case is CRST Van Expedited, Inc. v. EEOC and the opinion is here.

Statute of Limitations for Constructive Discharge Under Federal Law

The U.S. Supreme Court in an 7-1 decision decided that a "constructive discharge" or forced resignation claim is considered timely or untimely based on the date that the employee gives notice of resignation.

The Post Office in Green v. Brennan, opinion here, argued that the limitations clock begins to run when the employer performs the "last discriminatory act."  But the Court disagreed and reversed the Tenth Circuit:

Ordinarily, a “ ‘limitations period commences when the plaintiff has a complete and present cause of action.’” Ibid. “[A] cause of action does not become ‘complete and present’ for limitations purposes until the plaintiff can file suit and obtain relief.” Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U. S. 192, 201 (1997).

 Applying this general rule to the case before it, the Court ruled:

the “matter alleged to be discriminatory” in a constructive-discharge claim necessarily includes the employee’s resignation for three reasons. First, in the context of a constructive-discharge claim, a resignation is part of the “complete and present cause of action” necessary before a limitations period ordinarily begins to run. Second, nothing in the regulation creating the limitations period here, §1614.105, clearly indicates an intent to displace this standard rule. Third, practical considerations confirm the merit of applying the standard rule here.

Of note, the Court made clear that the limitations period begins to run when the employee gives notice of the resignation, not on the date of the resignation.

U.S. Supreme Court: Rejected Settlement Offer Cannot "Moot" Plaintiff's Class Action Claim

Back in 2013, a 5-4 U.S. Supreme Court "assumed" in Genesis Healthcare v. Symczyk that an unaccepted "offer of judgment" could moot a plaintiff's class action, if the offer would have provided the plaintiff complete relief on her individual claim. We posted about that here.

The Court chose not to address the issue directly because of the way the case had been litigated.  As a result of the assumption, though, the court held that the plaintiff's decision to ignore the settlement offer took her out of the case, leaving the case without a proper named plaintiff.  Because the Court "assumed without deciding" the issue, it had no binding effect on lower courts.

Fast-forward to now, and the Court directly addressed the "assumed" issue above, and came out the other way.  This time, in Campbell-Ewald Company v. Gomez, the Court adopted the Genesis Healthcare dissent's position:  the unaccepted offer of compromise does not affect the plaintiff's right to continue litigation on behalf of the class. Let me explain.

Gomez was a recipient of a "spam" text message, for which he claimed he had not opted in. Campbell-Ewald Company, via a sub-contractor, sent the text message on behalf of the Navy. The Navy had hired Campbell to help with a recruiting campaign.

Gomez sued on behalf of a class of other recipients under a federal law not related to employment law. During the litigation, Campbell made an "offer of judgment" under Federal Rule of  Civil Procedure 68, under which Gomez would receive full payment for the text messages he received, including "treble damages." The offer included a proposed injunction, but no attorney's fees, and no relief for the other potential class members. (The statute does not provide for attorney's fees. The court had not yet granted class certification.)

Gomez let the offer lapse, resulting in a rejection. Campbell then asked the district court to dismiss the case. Campbell argued that its expired offer rendered Gomez's claim "moot" because he could not hope to recover more than Campbell had offered.  Campbell also argued that, as a federal contractor, it was immune from suit.  I'm focusing on the mootness argument here. The district court and 9th circuit rejected both arguments.

So, the Supreme Court had to decide if the unaccepted offer resulted in the case being "moot." Mootness is a doctrine that federal courts use to ensure that they are deciding "live" controversies, required by the Constitution.   A case may be moot if the plaintiff no longer has any personal stake in the litigation.

The 5-4 majority, led by Justice Ginsburg, decided that Campbell's offer did not mean Gomez had no personal stake in the litigation:

Having rejected Campbell’s settlement bid, and given Campbell’s continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered. See Eli- ason v. Henshaw, 4 Wheat. 225, 228 (1819) (“It is an undeniable principle of the law of contracts, that an offer of a bargain by one person to another, imposes no obligation upon the former, until it is accepted by the latter . . . .”). In short, with no settlement offer still operative, the par- ties remained adverse; both retained the same stake in the litigation they had at the outset.

 * * *

Because Gomez’s individual claim was not made moot by the expired settlement offer, that claim would retain vitality during the time involved in determining whether the case could proceed on behalf of a class. While a class lacks independent status until certified, see Sosna v. Iowa, 419 U. S. 393, 399 (1975), a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.

The majority of course is correct that once expired, the offer could not be accepted. But the majority's decision weakened the point of Rule 68.  Rule 68 is supposed to end litigation early, and penalize parties who continue with litigation when they are offered a viable settlement.  

Justice Thomas concurred in the judgment, adding a sixth vote in favor of Gomez.  Justice Thomas, however, did not agree with the majority opinion. Rather, he focused on the fact that Campbell did not actually "tender" the settlement funds, and denied liability.  Historically, Justice Thomas noted, Campbell's actions were not enough to end the case. Therefore, there was no basis to hold the case was moot.

Chief Justice Roberts, writing for himself, and Justices Scalia and Alito dissented. They opined that Campbell offered Gomez what he wanted the district court to award him under federal law:

When a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III. After all, if the defendant is willing to remedy the plaintiff’s injury without forcing him to litigate, the plaintiff cannot demonstrate an injury in need of redress by the court, and the defendant’s interests are not adverse to the plaintiff.

Seizing on language in the majority opinion, the Chief Justice suggested that there is a way for defendants to moot future plaintiffs claims by actually paying the offered sums:

The good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. For aught that appears, the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court. See ante, at 11–12. This Court leaves that question for another day—assuming there are other plaintiffs out there who, like Gomez, won’t take “yes” for an answer.

 The majority did not actually decide this question. Therefore, it remains to be seen whether five justices will hold that paying an offer into Court will moot a plaintiff's case in a class action.  Stay tuned. 

This case is Campbell-Ewald Company v. Gomez and the opinion is here. 

U.S. Supreme Court: Employer's Motivation Rather than Knowledge Is Key to Liability Under Title VII

Samantha Elauf applied to work for Abercrombie & Fitch.  She wore a headscarf during the application process.  A&F has in place a no-headgear "look" policy.   The hiring managers determined that her head scarf would violate that policy.

At least one hiring manager suspected that Elauf wore the headscarf as a religious practice.  She so informed the district manager, who decided that the scarf would violate the "look" policy and that she would not be hired.

No one asked Elauf if the scarf was a religious practice, or investigated whether she would work without it.  No one sought to determine if allowing the scare would be an accommodation for a religious practice, or whether flexing the policy would be an undue hardship.  Apparently seeking to avoid these issues, they just turned her down for the job.

The EEOC sued on Elauf's behalf.   The dispute before the court boiled down to whether the Company could be liable for intentional discrimination when it did not know Ms. Elauf wore the scarf for religious reasons, but at least one manager surmised that there was a religious connection to her garb.  The district court had granted summary judgment in favor of the EEOC.  But the court of appeals reversed and granted summary judgment in favor of A&F.

Justice Scalia, writing for a majority of 7, decided that A&F could violate Title VII without actual knowledge that a religious practice was at issue.  Rather, for the Court, the issue was the motivation of the hiring managers.

First, the Court noted that under Title VII (as opposed to the ADA), the only claims available are disparate treatment or disparate impact. Therefore, "denial of religious accommodation" alone is not a claim under Title VII.   That being the case, the plaintiff can win only by proving that the company's failure to hire (or other adverse action) is motivated by an illegal criterion:

The disparate-treatment provision forbids employers to: (1) “fail . . . to hire” an applicant (2) “because of ” (3) “such individual’s . . . religion” (which includes his religious practice). Here, of course, Abercrombie (1) failed to hire Elauf. The parties concede that (if Elauf sincerely believes that her religion so requires) Elauf’s wearing of a head- scarf is (3) a “religious practice.” All that remains is whether she was not hired (2) “because of” her religious practice.

 *  *  *

the intentional discrimination provision prohibits certain motives, regardless of the state of the actor’s knowledge. Motive and knowledge are separate concepts. An employer who has actual knowledge of the need for an accommodation does not violate Title VII by refusing to hire an applicant if avoiding that accommodation is not his motive. Conversely, an employer who acts with the motive of avoiding accommodation may violate Title VII even if he has no more than an unsubstantiated suspicion that accommodation would be needed.

Thus, the rule for disparate-treatment claims based on a failure to accommodate a religious practice is straightforward: An employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions. For example, suppose that an employer thinks (though he does not know for certain) that a job applicant may be an orthodox Jew who will observe the Sabbath, and thus be unable to work on Saturdays. If the applicant actually requires an accommodation of that religious practice, and the employer’s desire to avoid the prospective accommodation is a motivating factor in his decision, the employer violates Title VII.

Let us remember that this case involves a question of fact: did the company deny employment "because" she was Muslim and might seek a relaxing of the look rule?  There was evidence of that motivation in the record.  Therefore, the Court's only ruling was that the court of appeals should not have granted summary judgment. It remains to be seen if a jury would find that A&F denied employment motivated by the possibility of religious accommodation, or because they don't hire anyone with a headscarf.  Given the hiring manager's articulated suspicion, this one is not likely to go the employer's way.

This case opens up employers to claims that are based on "perceived" religious practice.  That is the employer can be wrong and still be held liable. Motivation is almost never provable before trial.  

This case also establishes that under Title VII, the employee would have to prove the motivation.  That is the employee has to prove the employer denied employment because it did not wish to accommodate the applicant. 

This case could have been avoided had management simply asked the applicant if she could abide by the look policy if hired.  That's a perfectly legal question. Then the applicant could have said "I need to wear a scarf as a religious practice."  At that point, the company would be faced with two options: accommodate, or claim undue burden. In most cases, a relaxation of a dress code can be a form of accommodation.  

Justice Thomas and Alito wrote separate concurrences in the judgment. Both believed the circuit court should not have granted summary judgment in favor of A&F, and correctly so.  But neither agreed with the majority opinion's rationale.  Justice Thomas felt that the case was one of disparate impact discrimination, seeming to ignore the evidence of unlawful bias by the hiring manager.  Justice Alito appears to claim that the case was one of reasonable accommodation law rather than intentional discrimination, i.e., failure to hire.  (Amateur Justice Valenza says they're both incorrect).

This case is EEOC v. Abercrombie & Fitch and the opinion is here. 

Supreme Court: Plan Fiduciaries Have a Continuing Obligation to Monitor Investment Prudence

WARNING: Do not read this while operating machinery or driving, if you are pregnant, or might become pregnant.   Yes, it's an ERISA case.  But it will keep your plan administrator up at night.

The Supreme Court considered whether claims against a retirement plan's fiduciaries were time barred. The plaintiffs claimed that the value of their retirement plan accounts decreased because the plan purchased "retail" mutual funds, rather than "institutional" class funds, which have lower expense ratios.

The Ninth Circuit held that the claims were untimely under ERISA's six-year statute of limitations.  The court of appeals believed the statute of limitations ran because the administrator selected the more expensive funds more than six years before the plaintiffs filed the lawsuit.

The Supreme Court, unanimously, reversed.  The high Court found that the claims were timely because they implicated whether the trustees prudently managed the funds during the limitations period, by monitoring whether the investments were adequate, or by failing to do so.  As such, the Court decided that regardless of the timing of the selection of the funds, the failure to adequately monitor the investments could form the basis of a timely claim.  Here's the money quote:

The Ninth Circuit did not recognize that under trust law a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances. Of course, after the Ninth Circuit considers trust-law principles, it is possible that it will conclude that respondents did indeed conduct the sort of review that a prudent fiduciary would have conducted absent a significant change in circumstances. 

An ERISA fiduciary must discharge his responsibility “with the care, skill, prudence, and diligence” that a pru- dent person “acting in a like capacity and familiar with such matters” would use. §1104(a)(1); see also Fifth Third Bancorp v. Dudenhoeffer, 573 U. S. ___ (2014). We have often noted that an ERISA fiduciary’s duty is “derived from the common law of trusts.” Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U. S. 559, 570 (1985). In determining the con- tours of an ERISA fiduciary’s duty, courts often must look to the law of trusts. We are aware of no reason why the Ninth Circuit should not do so here.

Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset.

So, employers must ensure that the plan administrators are adequately monitoring investment options to satisfy their fiduciary duties.  Poor management and supervision claims likely will not grow stale over time given this ruling.

The case is Tibble v. Edison International and the opinion is here.

U.S. Supreme Court: Courts Have the Power to Review EEOC's Conciliation Efforts

The Supreme Court unanimously held that the Equal Employment Opportunity Commission's duty to "conciliate" after finding reasonable cause is reviewable in court.

The EEOC typically investigates "charges," administrative complaints filed by individuals alleging discrimination or harassment or retaliation.  If EEOC decides there is no "reasonable cause" to find a violation of Title VII, the ADA, etc., it issues a "no cause" finding and a "right to sue" letter.

But when the agency decides there IS reasonable cause to believe a violation has occurred, then it proceeds with an effort to remedy the situation. That can be via "conciliation" - e.g., a settlement proposal, mediation, etc. If that fails the EEOC can sue or issue a eight-to-sue letter.

The conciliation process is required by law.  But what happens if the employer believes the EEOC has not attempted to do so?  That's what the supreme Court considered in  Mach Mining, LLC v. EEOC.  Justice Kagan, writing for the unanimous court, explained:

This case began when a woman filed a charge with the EEOC claiming that petitioner Mach Mining, LLC, had refused to hire her as a coal miner because of her sex. The Commission investigated the allegation and found reasonable cause to believe that Mach Mining had discriminated against the complainant, along with a class of women who had similarly applied for mining jobs. See App. 15. In a letter announcing that determination, the EEOC invited both the company and the complainant to participate in “informal methods” of dispute resolution, promising that a Commission representative would soon “contact [them] to begin the conciliation process.” Id., at 16. The record does not disclose what happened next. But about a year later, the Commission sent Mach Mining a second letter, stating that “such conciliation efforts as are required by law have occurred and have been unsuccessful” and that any further efforts would be “futile.” Id., at 18–19.

The EEOC then sued Mach Mining in federal district court alleging sex discrimination in hiring. The Commission’s complaint maintained that “[a]ll conditions precedent to the institution of this lawsuit”—including an attempt to end the challenged practice through conciliation—“ha[d] been fulfilled.” Id., at 22. In its answer, Mach Mining contested that statement, asserting that the EEOC had failed to “conciliat[e] in good faith” prior to filing suit. Id., at 30.

So, the EEOC moved for summary judgment against Mach Mining on the conciliation issue, arguing that the quality of its efforts are not reviewable by a court.  The district court disagreed; the Seventh Circuit ruled in favor of the EEOC.

The Supreme Court held as follows:

1.  Courts indeed have the power to review the EEOC's efforts to conciliate. Therefore, the court rejected the EEOC's argument that it had unreviewable discretion to determine what is adequate.

2.  EEOC's letter showing that it found reasonable cause and planned to conciliate, and a later letter stating conciliation has failed is insufficient evidence of conciliation.  EEOC must provide notice to the employer of what the violation is claimed to be, and must provide a court with an affidavit that it attempted conciliation. If the employer offers credible evidence contradicting EEOC's claim, the court may do fact-finding into that limited issue.

3.  If the district court finds in favor of the employer - that the EEOC did not conciliate adequately - then it is to stay the action and order the EEOC to conciliate.

So, thanks for reading this far.  As you probably figured out, this case will have little impact on employers and employment litigation.  First, the EEOC finds reasonable cause in few cases.  Second, the failure to conciliate at best is remedied with an order to conciliate, not dismissal of the lawsuit. And third, EEOC rarely sues employers, filing lawsuits in just a small percentage of cases in which it finds cause.  Fourth, this case has no bearing on state agencies and their charges, such as the Department of Fair Employment and Housing in California.

So, that's Mach Mining, LLC v. EEOC. The opinion is here. 

U.S. Supreme Court Upholds U.S. DOL's "Administrator Interpretations"

In 2010, the U.S. Department of Labor began issuing "Administrator Interpretations."  These are analyses of regulations that are broader and more comprehensive than the traditional opinion letters that DOL used to issue. The opinion letters generally were targeted to respond to requests made by individual stakeholders, often employers.  The Administrator Interpretations contain the DOL's view on how its regulations apply generally, not in response to a particular set of facts.

The DOL issued three of these in 2010, of which two remain published on its website. (Here)  These two address the definition of "clothes" under part of the Portal-to-Portal Act and whether mortgage loan officers qualify as "exempt" under the Fair Labor Standards Act.  In 2014, the DOL issued two more interpretations concerning home health care workers.

On the issue of mortgage loans officers, the DOL has changed its views several times in opinion letters over the years.  The 2010 Administrator Interpretation opines that mortgage loan officers are non-exempt.  Here.  That is because they primarily sell, and salespersons are not exempt under the "administrative test."

It has been argued that the Administrator Interpretations are actually in the nature of regulations, rather than opinion letters.  As such, the argument goes, they cannot be issued without going through the formalities of the federal Administrative Procedure Act.  That Act requires the agency to issue proposed regulations, followed by notice and comment by the public.  

There has also been a dispute as to whether an agency's "flip-flopping" or reversal of a prior interpretation is akin to a regulation, requiring APA procedures.  The Court of Appeals for the District of Columbia Circuit had held that when the DOL issues an interpretation that contradicts prior interpretations it is making what is in effect a new or amended regulation.

The U.S. Supreme Court in Perez v. Mortgage Bankers Association upheld the right of the DOL to issue these Administrator Interpretations without going through the APA requirements.   The Court disapproved the DC Circuit's approach and held that the Administrative Procedure Act does not require "notice and comment" procedures when the agency interprets its own regulations.

First, the APA does not require procedural safeguards with respect to agency interpretations generally.  But what is the difference between an interpretation and new rule?  Here is what the Court said:

the critical feature of interpretive rules is that they are “issued by an agency to advise the public of the agency’s construction of the statutes and rules which it administers.” Shalala v. Guernsey Memorial Hospital, 514 U. S. 87, 99 (1995) (internal quotation marks omitted). The absence of a notice-and-comment obligation makes the process of issuing interpretive rules comparatively easier for agencies than issuing legislative rules. But that convenience comes at a price: Interpretive rules “do not have the force and effect of law and are not accorded that weight in the adjudicatory process.” Ibid.

The Supreme Court rejected the Mortgage Bankers Association's argument that the DOL's decision to reverse course is analogous to amending the regulation.   The Court also refused to address the argument that the Administrator Interpretation was in fact a "legislative rule" or regulation rather than an interpretation of an existing rule.  That is because, the Court wrote, the parties had not litigated the case under that theory.

All nine justices rejected the D.C. Circuit's approach. But three justices pointed out in concurrences and partial dissents that the majority's decision allowed too much discretion in the administrative agencies' power to interpret their own regulations.  These justices based their objections not on the Administrative Procedure Act, but on the constitution's separation of powers.  Those arguments did not carry the day in this case.  However, the three justices signaled a willingness to walk back some older precedents on the power of administrative agencies.

What does this all mean?
- the DOL will continue to be allowed to issue Administrator Interpretations
- Administrator Interpretations may be attacked as inconsistent with the underlying regulation, but under a very deferential standard of review by the courts.
- The courts do not have to give deference to an Administrator Interpretation the same way that it must give deference to a regulation, particularly when the interpretation is inconsistent over time.
- Mortgage loan officers are probably non-exempt under the FLSA for now and the reasonably foreseeable future.

This case is Perez v. Mortgage Bankers Association and the opinion is here. 

P.S. I wrote about the first three Administrative Interpretations here.  The Supreme Court issued its ruling on the definition of clothes in Sandifer v. U.S. Steel, which I wrote about here.

U.S. Supreme Court Explains Burdens in Pregnancy Discrimination Cases

The Supreme Court analyzed the federal Pregnancy Discrimination Act, which amended Title VII of the Civil Rights Act of 1964.  The Court in an opinion written by Justice Breyer on behalf of himself and five more justices, analyzed how pregnant employees can prove discrimination in cases where they cannot do their jobs, but claim other employees were provided accommodations not afforded to the pregnant workers.

The facts are as follows, per the Court:

Peggy Young, worked as a part-time driver for the respondent, United Parcel Service (UPS). Her responsibilities included pickup and delivery of packages that had arrived by air carrier the previous night. In 2006, after suffering several miscarriages, she became pregnant. Her doctor told her that she should not lift more than 20 pounds during the first 20 weeks of her pregnancy or more than 10 pounds thereafter. App. 580. UPS required drivers like Young to be able to lift parcels weighing up to 70 pounds (and up to 150 pounds with assistance). Id., at 578. UPS told Young she could not work while under a lifting restriction. Young consequently stayed home with- out pay during most of the time she was pregnant and eventually lost her employee medical coverage.

Young's theory of discrimination was

that her co-workers were willing to help her with heavy packages. She also said that UPS accommodated other drivers who were “similar in their . . . inability to work.” She accordingly concluded that UPS must accommodate her as well.

UPS, on the other hand, 

responded that the “other persons” whom it had accommodated were (1) drivers who had become disabled on the job, (2) those who had lost their Department of Transportation (DOT) certifications, and (3) those who suffered from a disability covered by the Americans with Disabilities Act of 1990 (ADA), 104 Stat. 327, 42 U. S. C. §12101 et seq. UPS said that, since Young did not fall within any of those categories, it had not discriminated against Young on the basis of pregnancy but had treated her just as it treated all “other” relevant “persons.”

So, Young sued. Her federal claim under the Pregnancy Disability Act required the Court to interpret this language:

“women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes . . . as other persons not so affected but similar in their ability or inability to work....”

The Court rejected the plaintiff's argument that the employer must provide pregnant employees the same accommodations it provides to any other worker, even if some nonpregnant workers would not receive that accommodation. For example, the plaintiff sought to invalidate policies that provide accommodations only to employees with industrial injuries. Here's what the court wrote:

We doubt that Congress intended to grant pregnant workers an unconditional most-favored-nation status. The language of the statute does not require that unqualified reading. The second clause, when referring to nonpregnant persons with similar disabilities, uses the open-ended term “other persons.” It does not say that the employer must treat pregnant employees the “same” as “any other persons” (who are similar in their ability or inability to work), nor does it otherwise specify which other persons Congress had in mind.

So, how can a plaintiff prevail in a pregnancy discrimination lawsuit involving denial of accommodation?  The Court answered.  First -

plaintiff alleging that the denial of an accommodation constituted disparate treatment under the Pregnancy Discrimination Act’s second clause may make out a prima facie case by showing, as in McDonnell Douglas, that she belongs to the protected class, that she sought accommodation, that the employer did not accommodate her, and that the employer did accommodate others “Similar in their ability or inability to work.”

Then it's the employer's turn - 

The employer may then seek to justify its refusal to accommodate the plaintiff by relying on “legitimate, nondiscriminatory” reasons for denying her accommodation. 411 U. S., at 802. But, consistent with the Act’s basic objective, that reason normally cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those (“similar in their ability or inability to work”) whom the employer accommodates. 

And finally - the employee will have to prove pretext to prevail. The Court offered some advice for plaintiffs -

If the employer offers an apparently “legitimate, non- discriminatory” reason for its actions, the plaintiff may in turn show that the employer’s proffered reasons are in fact pretextual. We believe that the plaintiff may reach a jury on this issue by providing sufficient evidence that the employer’s policies impose a significant burden on pregnant workers, and that the employer’s “legitimate, nondiscriminatory” reasons are not sufficiently strong to justify the burden, but rather—when considered along with the burden imposed—give rise to an inference of intentional discrimination.

The plaintiff can create a genuine issue of material fact as to whether a significant burden exists by providing evidence that the employer accommodates a large percentage of nonpregnant workers while failing to accommodate a large percentage of pregnant workers. Here, for example, if the facts are as Young says they are, she can show that UPS accommodates most nonpregnant employees with lifting limitations while categorically failing to accommodate pregnant employees with lifting limitations. Young might also add that the fact that UPS has multiple policies that accommodate nonpregnant employees with lifting restrictions suggests that its reasons for failing to accommodate pregnant employees with lifting restrictions are not sufficiently strong—to the point that a jury could find that its reasons for failing to accommodate pregnant employees give rise to an inference of intentional discrimination.

So, this case calls into question light duty and other accommodation policies that would categorically exclude pregnant employees.  But it does not outright invalidate them.  The Court's explanation of pretext is strange.  The Court wants a jury to decide whether the employer's explanation for a policy is not "sufficiently strong" to justify the burden on pregnant employees.  So, the Court IS sitting as a "super-personnel department" now?

Finally, in 2014, the EEOC issued Enforcement Guidance broadly interpreting the Pregnancy Disability Act's provisions.  The EEOC apparently issued these regulations after the Court granted review of this case.   The Court was not amused:

we have long held that “the rulings, interpretations and opinions” of an agency charged with the mission of enforcing a particular statute, “while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.” Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944). See Brief for United States as Amicus Curiae 26.

But we have also held that the “weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors that give it power to persuade, if lacking power to control.” Skidmore, supra, at 140. These qualifications are relevant here and severely limit the EEOC’s July 2014 guidance’s special power to persuade. 

We come to this conclusion not because of any agency lack of “experience” or “informed judgment.” Rather, the difficulties are those of timing, “consistency,” and “thoroughness” of “consideration.” The EEOC promulgated its 2014 guidelines only recently, after this Court had granted certiorari in this case. In these circumstances, it is fair to say that the EEOC’s current guidelines take a position about which the EEOC’s previous guidelines were silent. And that position is inconsistent with positions for which the Government has long advocated. . . . Nor does the EEOC explain the basis of its latest guidance.  Does it read the statute, for example, as embodying a most-favored-nation status? Why has it now taken a position contrary to the litigation position the Government previously took? Without further explanation, we cannot rely significantly on the EEOC’s determination. 

Ouch.

So, the Court sent the case down to the circuit court for examination of its decision upholding summary judgment in favor of UPS.

In dissent, Justice Scalia, along with Thomas and Kennedy, argued that the pregnancy discrimination provision is the same as the prohibition of sex discrimination.  The dissent accused the majority of making up a mushy test that had no basis in the text of the law. And the dissent writes that the majority conflated the concept of disparate treatment and disparate impact. 

This case is Young v. United Parcel Service, Inc. and the opinion is here.

A Pot Pourri of Recent Employment Law Decisions

Here are some recent significant California employment law developments I missed. Long post, but chock full of employment law goodness. Or something:

Employer's Summary Judgment on Disability Discrimination and Related Claims
The court of appeal in Swanson v. Morongo Unified School District (opinion here) reversed summary judgment in favor of the school district.

Swanson was a teacher who was treated with breast cancer.  The school district voted not to renew her contract based on her performance.  Swanson believed the district's vote was based on her cancer and treatment.  She also claimed that the district failed to accommodate her by refusing to allow her to teach a second grade class rather than the assignment they gave her, and failed to adequately engage in the "interactive process."

On the discrimination claim, the court of appeal acknowledged the district demonstrated Swanson's poor performance as a legitimate reason.  That shifted the burden to Swanson to raise a triable issue of fact regarding whether discrimination motivated the district, rather than performance. Here is the pretext analysis:

Swanson had to present evidence showing (1) the District’s stated reason for not renewing her contract was untrue or pretextual; (2) the District acted with a discriminatory animus in not renewing her contract; or (3) a combination of the two. *** We conclude Swanson met this burden by presenting evidence establishing a triable issue of fact on whether the District intentionally discriminated against her when making its teaching assignments and its treatment of her after her cancer diagnosis and medical leaves. ***We conclude Swanson met this burden by presenting evidence establishing a triable issue of fact on whether the District intentionally discriminated against her when making its teaching assignments and its treatment of her after her cancer diagnosis and medical leaves. 

Here's the evidence the court found significant:

The evidence the parties presented establishes the following disputed facts creating a triable issue on Swanson’s liability theory: (1) Swanson performed well in the teaching assignments she held during her first two years with the District, but the District gave her a new teaching assignment for the first full school year after she completed her cancer treatments; (2) the District gave Swanson the new assignment knowing it would require her to spend additional time planning and preparing to teach her new class and Swanson’s weakened health condition impaired her ability to do so; (3) the District denied Swanson’s request to teach a second grade class similar to one she recently had taught at her previous school, and instead assigned the available second grade class to another teacher; (4) the District assigned Swanson to teach a kindergarten class even though she had not taught kindergarten in nearly 30 years and expressed concern her weakened immune system could not protect her from the many illnesses prevalent in kindergarten classes; (5) although promising to do so, Lowe did not provide Swanson the preevaluation format she needed to prepare for her first series of teacher observations; (6) the District did not provide Swanson the mentor teacher she requested after receiving the remediation plan or any of the other training or assistance she requested; (7) Lowe told Swanson the District wanted him to make a determination on her employment status before he had time to complete the second series of teacher observations; (8) Lowe asked Swanson to resign her teaching position even though he gave her a positive review on the first teaching observation following the remediation plan and implied her review on the second observation also would be positive; and (9) the District’s Board of Education voted not to renew Swanson’s contract before she completed the remediation plan and all of the observations were conducted.

This is to say that the court of appeal felt that a jury should decide whether the district's personnel actions against Swanson that led to her poor performance were motivated by her disability. Therefore, to win these cases, the employer should show on summary judgment that it treated the plaintiff the same as the other, similarly situated, employees.

On the failure to accommodate claim, the plaintiff claimed she would have been able to perform her essential job functions if she was assigned to teach a second grade class, rather than the kindergarten class she was assigned. Although the district showed the court several accommodations it provided, the court was unpersuaded that the district was entitled to summary judgment:

Swanson does not claim the District failed to grant her leave or any other scheduling accommodation. Instead, she alleges the District failed to reasonably accommodate her cancer-related conditions because it refused to provide her the accommodation she sought after the District decided to move her out of the reading specialist position she held during the 2007/2008 school year. Specifically, she alleges the District refused her request to teach an available second grade class. According to Swanson, the second grade class assignment was a reasonable accommodation that would allow her to perform her essential job functions because she recently had taught a second grade class when working in another district, and therefore was familiar with the curriculum and children of that age. Swanson alleged any other new teaching assignment would require additional time to prepare and plan lessons, but the effect of her cancer treatments jeopardized her ability to prepare for her new assignment. 

         *  *  *

To meet its initial burden on Swanson’s failure to accommodate claims, the District therefore had to present evidence showing the second grade position Swanson sought was not available or otherwise was not a reasonable accommodation, or the fifth grade or kindergarten assignments the District offered were reasonable accommodations that would have allowed Swanson to adequately perform her essential job functions. The District produced no such evidence. 

The court also held that the district did not adequately engage in the interactive process to determine an accommodation:

The District contends Swanson’s interactive process claims fail because it engaged in the interactive process by switching her from fifth grade to kindergarten when she objected to the fifth grade assignment. That contention is not adequate to satisfy the District’s initial burden on summary judgment. The FEHA required the District to engage in an ongoing dialogue regarding the accommodations Swanson believed she needed to mitigate her cancer-related conditions, but the District failed to present any evidence to show it engaged Swanson in such a dialogue. For example, the District offers no evidence to show it discussed with Swanson the second grade assignment she sought or provided any explanation why it could not grant her request as a reasonable accommodation. To the contrary, the evidence shows the District simply assigned Swanson to teach kindergarten and failed to engage in any further discussion with her. Accordingly, the trial court erred in granting summary judgment on the interactive process claims. 

Arbitration Compelled Even Though Insufficient Proof Unsigned Arbitration Policy Was in Effect

Stephanie Cruise signed an employment application with Kroger Corporation, in which she agreed to mandatory, final, binding arbitration. The application referenced a separate mediation and arbitration policy, which was "incorporated by reference."  After her termination, Cruise sued Kroger. Kroger moved to compel arbitration. The trial court denied the motion, holding that Kroger had not proved that Cruise had received the arbitration policy, or that the one attached to the motion was the one she had allegedly received.

The court of appeal reversed the trial court and ordered arbitration. The court held that the following language in the application "eliminate[d]" Cruise's argument there was no agreement to arbitrate:

“MANDATORY FINAL & BINDING ARBITRATION: I acknowledge and understand that the Company has a Dispute Resolution Program that includes a Mediation & Binding Arbitration Policy (the ‘Policy’) applicable to all employees and applicants for employment . . . . I acknowledge, understand and agree that the Policy is incorporated into this Employment Application by this reference as though it is set forth in full, . . . the Policy applies to any employment-related disputes that exist or arise between Employees and the Company . . . and that the Policy requires that any Employee who wishes to initiate or participate in formal proceedings to resolve any Covered Disputes must submit the claims or disputes to final and binding arbitration in accordance with the Policy.” (Italics added.)

The court rejected Cruise's argument that the employer did not sign the application, reasoning that the employer submitted the application to Cruise of signature, and that it was Kroger's own application, after all.

BUT, what of the policy?  The court of appeal accepted the trial court's conclusion that the employer had not established the existence of the policy, which governed the terms and procedures re arbitration. The court of appeal, however, ruled that Cruise was still obligated to arbitrate, only under the California Arbitration Act.

The only impact of Kroger‟s inability to establish the contents of the 2007 Arbitration Policy is that Kroger failed to establish that the parties agreed to govern their arbitration by procedures different from those prescribed in the CAA (§ 1280 et seq.). Unless the parties otherwise agree, the conduct of an arbitration proceeding is controlled by the CAA. (See, e.g., §§ 1281.6, 1282, 1282.2.) Here, because Kroger failed to establish an agreement to the contrary, the instant arbitration proceeding is to be governed by the procedures set forth in the CAA. Because this arbitration is controlled by California statutory and case law, Cruise‟s arguments that Kroger‟s Arbitration Policy is unconscionable, both procedurally and substantively, are meritless.

If this case remains good law, then (1) employers can include clear agreements to arbitrate in applications and (2) they can rely on the California Arbitration Act rather than prescribe specific procedures.

This case is Cruise v. Kroger Co .and the opinion is here.

                                                                 * * *
Here are some narrow decisions, but which may contain helpful holdings for other cases.

LA Hotel Service Charge Ordinance - Class Action - UCL Claim 

The court of appeal in Audio Visual Services Group, Inc. v. Superior Court opinion here, handled a narrow issue: whether Los Angeles's Hotel Service Charge Reform Ordinance applied to third party employees who do not traditionally depend on tips.  The Ordinance requires certain hotels to pay certain employees all service charges added to customers bills.  The Audio Visual employees provided AV services to hotels, for which they charged a fee plus a service charge. The plaintiffs sued, claiming they were owed that service charge. The Court of Appeal issued a writ, sustaining the employer's demurrer to the class complaint (extraordinary in and of itself). The court of appeal decided that the ordinance does not apply to Audio Visual's employees.  Of note, the court clearly held that the employees "unfair competition claim" under Business and Professions Code section 17200 was not actionable because the statutory claim also was without merit. So, this case can help in other UCL actions. Money quote:

In light of our construction of the Ordinance that Solares, an audio-visual technician, is not among the class of hotel workers entitled to be paid service charges pursuant to the Ordinance, Solares cannot assert a UCL claim against PSAV. Business and Professions Code section 17200 defines “unfair competition” as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with [Business and Professions Code ] Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” The UCL claim is dependent upon a violation of the Ordinance. Thus, the class action complaint failed to state a cause of action.

U.S. Supreme Court: Whistle Blower Under Homeland Security Act Protected

Department of Homeland Security v. MacLean (opinion here)  involves an Air Marshall who reported  to MSNBC that the TSA had canceled Air Marshall missions during a time when there was a heightened security alert regarding possible Al Qaeda highjackings.  He had been told that TSA canceled missions to save money.  After MacLean made the disclosure, TSA reversed its position under pressure from Congress.

The TSA discovered MacLean was the leaker and fired him in 2006.  He sued for whistleblower retaliation. TSA argued that MacLean's disclosure was "specifically prohibited" by its regulation, which was as good as "law." TSA had issued regulations prohibiting disclosure of what they called "sensitive security information." That information could include "information concerning specific numbers of Federal Air Marshals, deployments or missions, and the methods involved in such operations.”

Federal law generally provides whistleblower protections to an employee who discloses information revealing “any violation of any law, rule, or regulation,” or “a substantial and specific danger to public health or safety.” 5 U. S. C. §2302(b)(8)(A). An exception exists, however, for disclosures that are “specifically prohibited by law.”

So, the question for the Court was whether MacLean's disclosure was prohibited by law.  The Court held (7-2) that the statute's use of "specifically prohibited by law" meant statutory law, rather than regulations.  The Court reasoned that Congress had used "law, rule or regulation" throughout the whistleblower law, but limited the disclosure exception only to "law."

 

U.S. Supreme Court Ends Term With 3 L/E Law Decisions

The U.S. Supreme Court's Term ended last week.  The Court issued three labor/employment-related opinions.  You probably heard about "Hobby Lobby," which the lay media butchered and sensationalized.  You may have heard about Harris v. Quinn, which the lay media half-ignored, and half butchered and sensationalized. And, unless you are a labor / employment law or benefits wonk, you may have missed Fifth Third Bancorp. v. Dudenhoeffer.   Here are summaries of these three opinions.  Each applies to specific employers in specific ways.

Fifth Third Bancorp v. Dudenhoeffer (opinion here) is an ERISA case.  (Those of you operating machinery or driving please skip to the next decision).  Fifth Third's retirement plan permitted employees to invest in a variety of vehicles, including Fifth Third's stock via an Employee Stock Ownership Plan (ESOP).  When the company's stock declined (74%) after the great recession killed Fifth Third's mortgage portfolio, employees sued Fifth Third and some of its officers, claiming that as administrators of the retirement plan, they owed the investors a fiduciary duty to be prudent, and should have taken actions to mitigate losses.  They did not, and bought and held the stock as normal.

The lower courts decided that the administrator was entitled to a "presumption" that their decisions were prudent. The Supreme Court unanimously disagreed, holding that the administrators of an ESOP had the same duty as fiduciaries as anyone else.

You might say, "duh," but an ESOP exists to buy and hold the stock of the company.  ERISA does not require administrators to diversify ESOP holdings as it requires administrators to diversify traditional retirement plan holdings.

Thus, an ESOP fiduciary is not obliged under §1104(a)(1)(C) to “diversif[y] the investments of the plan so as to minimize the risk of large losses” or under§1104(a)(1)(B) to act “with the care, skill, prudence, and diligence” of a “prudent man” insofar as that duty “requires diversification."

The Court then rejected the lower courts' "presumption of prudence" that it conferred on ESOP administrators.

In our view, the law does not create a special presumption favoring ESOP fiduciaries. Rather, the same standard of prudence applies to all ERISA fiduciaries, including ESOP fiduciaries, except that an ESOP fiduciary is under no duty to diversify the ESOP’s holdings. This conclusion follows from the pertinent provisions of ERISA,

The fiduciaries argued that if they are not provided protection from lawsuits, then decreases in stock price will lead to meritless lawsuits against ESOP administrators. The Court recognized the concern, and provided guidance to lower courts on how to weed out "sour grapes" lawsuits that do not allege actual breaches of fiduciary duties.  As with many Supreme Court decisions, the Court left it to the lower courts to sort out how future claims will be addressed.

So, this case removes some protection from administrators of ESOPs.  Employers should have their ESOPs reviewed to ensure the administrators act consistently with ERISA's "prudent" person standard. 

*  *  *  *

Harris v. Quinn (opinion here)  is a case about the First Amendment and those public sector employees who perform in-home, personal attendant work.  These are workers paid by the state, funded by federal Medicaid, who provide in-home care to the elderly and others who would require nursing home care.  However, unlike most public sector employees, the laws creating these positions provide that the true "employer" is not the state, but rather the "customer" who receives the care.   So, these personal care attendants are a special type of public sector worker.   The Harris case concerns the Illinois program and workers.

Unions have organized many of these employees.  State law authorized the unions to bargain with the state over personal attendants' terms and conditions of employment.  Those who choose not to join the union still are covered by the collective bargaining agreements the union negotiates. They are required to pay a reduced fee (called "fair share") to pay for the unions' collective bargaining activities. The employees do not pay additional "dues," which go towards other union activities, such as lobbying and political contributions.

Several Illinois personal attendants sued the state, claiming the state law authorizing union representation and the "fair share" fee violate the First Amendment, because they require employees to pay a union they do not support.   If the union workers were true "public sector" employees, the Supreme Court already upheld "fair share" agreements against a First Amendment claim in Abood v. Detroit Bd. of Ed. 431 U. S. 209 (1977).

The Supreme Court held, 5-4, that Abood did not apply to personal attendants, who were in fact "employed" by the private sector "customer," but paid by the state.  The Court's majority analyzed and criticized Abood as based on flawed reasoning and a misinterpretation of precedent. But the majority did not overrule it as it applies to "full-fledged," public sector employees. The personal attendants, employed by private sector "customers" were not "full fledged."

Without Abood's protection, the Illinois law therefore violated the First Amendment.  Here is the money quote:

we refuse to extend Abood in the manner that Illinois seeks. If we accepted Illinois’ argument, we would approve an unprecedented violation of the bedrock principle that, except perhaps in the rarest of circumstances, no person in this country may be compelled to subsidize speech by a third party that he or she does not wish to support. The First Amendment prohibits the collection of an agency fee from personal assistants in the Rehabilitation Program who do not want to join or support the union.

The dissent, penned by Justice Kagan, essentially argued that Abood controlled the case.  The dissent rejected the majority's distinction between personal attendants and other state-paid employees.  The dissent also noted that the majority criticized, but did not overrule Abood.

Thus, unless or until Abood is overruled in a future case, it remains good law.  This decision applies only to personal care attendants working under state laws that treat them as employees of private customers.  Those employees need not join unions or pay agency fees if they do not wish to do so.  It remains to be seen if the state laws will be modified to fit the employees within Abood, or if this decision applies equally to personal attendants in states other than Illinois.  Breathe.

*  *  *  *

Finally, Burwell v. Hobby Lobby Stores, Inc.  (opinion here) involves the interplay between the Affordable Care Act (ACA aka Obamacare)  and the Religious Freedom Restoration Act (RFRA).  As explained by the Court:

RFRA prohibits the “Government [from] substantially burden[ing] 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) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”

Congress passed RFRA in response to an earlier Supreme Court decision that upheld a law against a claim that it violated religious beliefs. The Court noted "[b]y enacting RFRA, Congress went far beyond what this Court has held is constitutionally required." RFRA provides broad protection to religious practices, but allows the government to demonstrate the necessity of a law that burdens religious beliefs under the standard above.

The ACA requires employer health plans to provide “preventive care and screenings” for women without “any cost sharing requirements.”  The Department of Health and Human Services issued regulations, implementing that statutory provision. The regulations require the health plans to include 20 contraceptive methods approved by the FDA.  The 20 include 4 methods that "may have the effect of preventing an already fertilized egg from developing any further by inhibiting its attachment to the uterus."

The regulations expressly exempt religious organizations, such as churches,  from that contraception mandate.  HHS also excluded non-profits with religious objections.  But this case involves whether a for-profit, "closely held" corporation (Hobby Lobby and others) can claim that providing the 4 contraception methods described above impinge on its religious convictions, violating the RFRA.

The majority, 5-4, over vigorous dissents, held that the "contraception mandate" violated the RFRA.  The Court decided that, as a closely held corporation, Hobby Lobby and the other employers involved were "persons" covered by RFRA.

The Court then decided that the mandate burdens the religious beliefs of the persons who own these close corporations.  The Court noted that the employer's options were (1) ignore their religious beliefs to provide the mandated coverage (2) pay humongous penalties for non-compliance with the ACA.

The Court assumed that the mandate served a "compelling interest."  But the Court decided that the regulations were not the "least restrictive means of furthering" the government's interest in providing preventive care.   The Court noted that the ACA itself contained alternatives that would provide the contraception desired, but without requiring the employers to pay for them in a way that burdened their religious beliefs.

This is a politically charged decision engendering much controversy and loud arguments about important social and political issues.  My job is to explain what the opinion says, and how it affects employers.  So here goes:

1.  The decision applies only to "closely held" corporations: "a federal regulation’s restriction on the activities of a for-profit closely held corporation must comply with RFRA."  The term "closely held" corporation will be contained in state and federal corporate law.  In this case, the companies were owned and operated by one family.  Publicly traded corporations, private corporations owned by unrelated shareholders who have no day-to-day responsibilities to operate the business, etc. are not covered by this decision.

2.   The ruling applies only to those closely held corporations that operate under sincerely held religious beliefs that conflict with a law that burdens those beliefs.  Closely held corporations that do not operate under religious tenets will not be covered. Still, this is a broad standard. But the Court majority pointed out that federal courts must ferret out insincere religious beliefs in a variety of contexts.  Larger corporations, with diverse shareholders, likely will not be able to establish a common religious  belief, or that its belief governs the operation of the business.

3.   As the majority points out, the law and regulations already provide full access to contraceptives for religious entities and non-profits, even though the contraceptive mandate does not apply.  So, the administration and/or Congress can still ensure women who want the 4 contraceptives at issue, and who work for closely held corporations with religious objections to them, can obtain them free of charge.

The employees of these religious nonprofit corporations still have access to insurance coverage without cost sharing for all FDA-approved contraceptives; and according to HHS, this system imposes no net economic burden on the insurance companies that are required to provide or secure the coverage. **** 

Although HHS has made this system available to religious nonprofits that have religious objections to the contraceptive mandate, HHS has provided no reason why the same system cannot be made available when the owners of for-profit corporations have similar religious objections. 

4.   The Hobby Lobby opinion therefore does not apply to most employers or most workers.  Smaller businesses are grandfathered in old plans, do not offer health insurance, and are exempt from ACA's penalties.  Even if the ACA fully applies to a business, some businesses offer no coverage and pay the penalties, allowing employees to buy individual coverage via the health exchanges.  It remains to be seen whether the HHS will modify its regulations, or if the insurance companies will change coverage options to provide contraception coverage to affected workers as it does to employees of religious organizations and non-profits.

There are several dissents, with the lead dissent penned by Justice Ginsburg.   Two dissenters (Justice Ginsburg and Sotomayor) would not confer RFRA protections to for-profit corporations. Justices Kagan and Breyer would not reach that issue. Justice Ginsburg also argued that the contraception mandate did not burden the employers' owners' religious beliefs because it was up to employees whether or not to use the contraceptives involved.  Finally, Justice Ginsburg warned of a flood of claims for religious exemption.

U.S. Supreme Court: President's "Recess Appointments" to NLRB Were Invalid

The U.S. Supreme Court unanimously held that the President made invalid "recess appointments" to the National Labor Relations Board in January 2012. The Senate declared itself in recess for three-day periods during that month. The President then appointed three out of five members to the NLRB.

The Court's judgment - that the recess appointments were invalid - is unanimous. But only 5 out of 9 justices joined the majority opinion, written by Justice Breyer (joined by Justices Kennedy, Kagan, Sotomayor, and Ginsburg), Four justices, led by Justice Scalia (with Justices Thomas, CJ Roberts, and Alito), issued a separate opinion, disagreeing with the majority's conclusions regarding when recess appointments are valid.

This opinion is over 50 pages long, and it is mostly devoted to the history of the Constitution's recess appointments clause, and the way it has been used historically.  The upshot, however, is that the President has a lot of power to make recess appointments, but there has to be a sufficiently long recess. Moreover, the house of Congress that is controlled by the political party not in power may re-call the Congress from recess and thwart recess appointments. Checks and balances.

Because the appointments were invalid, the NLRB operated without a quorum for several months.  As a result, hundreds of decisions are invalid. It remains to be seen precisely what the NLRB will do with those decisions. The Board currently has a full compliment of members.  Therefore, recent decisions issued since the Senate confirmed the 5 members will be valid and enforceable.  We will update what happens next when we find out.

This case is National Labor Relations Board v. Noel Canning and the opinion is here. 

U.S. Supreme Court Protects Public Sector Employee's First Amendment Rights

Central Alabama Community College hired Edward Lane to be Director of Community Intensive Training for Youth (CITY).  After learning CITY had budget problems, he audited the program’s expenses.  During the audit, Lane found out Schmitz, an Alabama state representative, was on the CITY payroll, but not working.  Lane pressed the issue, demanding Schmitz report to work.  She refused.  Lane fired Schmitz.

Schmitz took offense that Lane would try to save the tax payers some money by firing someone collecting a salary for not doing any work.   She allegedly told another employee she would seek retribution against Lane and that she would see to it that his agency would not receive favor from the legislature.  The FBI became involved, and Schmitz was later convicted of corruption charges.   Lane testified under oath before a grand jury and at trial, under subpoena.

Meanwhile, the CITY agency continued its budget woes.  Lane's boss, Franks, later laid off Lane and another probationary employee.  Lane sued Franks under 42 U.S.C. 1983 for violation of his civil rights (First Amendment right to testify without retaliation, among other things).  He sued Franks in his "official capacity" as a substitute for the state, and in his individual capacity.

But the lower courts held that Lane was not entitled to First Amendment protection because the testimony he haves were related to his official duties.  Precedents establish that when government employees speak within the course of their duties, the First Amendment provides minimal protection, because of the employer's interest in orderly operation of its work place. 

The U.S. Supreme Court accepted the case to determine if the First Amendment protects employees who provide testimony under oath on matters that concern the job site.  The Court unanimously held that it does, thereby giving Lane a retaliation claim against Franks in his "official capacity" as a representative of the state.  (Lane sought reinstatement and equitable relief against Franks in his official capacity).  

From the Court's unanimous opinion:

Truthful testimony under oath by a public employee outside the scope of his ordinary job duties is speech as a citizen for First Amendment purposes. That is so even when the testimony relates to his public employment or concerns information learned during that employment.

The Court also held:

The content of Lane’s testimony—corruption in a public program and misuse of state funds—obviously involves a matter of significant public concern.

The Court also held that the government did not have an adequate justification to tip the balance in its favor:

an employee’s sworn testimony is not categorically entitled to First Amendment protection simply because it is speech as a citizen on a matter of public concern. Under Pickering, if an employee speaks as a citizen on a matter of public concern, the next question is whether the government had “an adequate justification for treating the employee differently from any other member of the public” based on thegovernment’s needs as an employer. * * * 

Here, the employer’s side of the Pickering scale is entirely empty: Respondents do not assert, and cannot demonstrate, any government interest that tips the balance in their favor. There is no evidence, for example, that Lane’s testimony at Schmitz’ trials was false or erroneous or that Lane unnecessarily disclosed any sensitive, confidential,or privileged information while testifying . . . .  

So, Lane's case against the state could proceed via his suit against Franks in his "official capacity."  But the Court also held that the lawsuit against Franks personally would be barred by "qualified immunity.":

Qualified immunity “gives government officials breathing room to make reasonable but mistaken judgments about open legal questions.” Ashcroft v. al-Kidd, 563 U. S. ___, ___ (2011) (slip op., at 12). Under this doctrine, courts may not award damages against a government official in his personal capacity unless “the official violated a statutory or constitutional right,” and “the right was ‘clearlyestablished’ at the time of the challenged conduct.” * * * 

The relevant question for qualified immunity purposes is this: Could Franks reasonably have believed, at the time he fired Lane, that a government employer could fire an employee on account of testimony the employee gave, under oath and outside the scope of his ordinary job responsibilities? Eleventh Circuit precedent did not preclude Franks from reasonably holding that belief. And no decision of this Court was sufficiently clear to cast doubt on the controlling Eleventh Circuit precedent. * * * *

So, Lane's official capacity case was returned to the lower courts.  Franks is off the hook personally.

This case is Lane v. Franks and the opinion is here.

U.S. Supreme Court: Severance is Wages; California Employers Take Note

Quality Stores laid off many employees as part of a bankruptcy. The Company paid severance, duly withheld taxes, and duly reported the severance on employees' W-2 forms.  Then the Company sought a refund of the "FICA" taxes paid on behalf of employees (and presumably the employer's portion of the FICA paid as well).

Everyone with a paycheck knows that FICA is a mandatory withholding from employees' paychecks, which goes towards funding social security.  "FICA" is the Federal Insurance Contributions Act.  As explained by the Court:

FICA taxes “wages” paid by an employer or received by an employee “with respect to employment.” 26 U. S. C. §§3101(a), (b), 3111(a), (b) . . . . FICA defines “wages” as “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” §3121(a). The term “employment” encompasses “any service, of whatever nature, performed . . . by an employee for the person employing him.” §3121(b).

So, that's a broad definition.  Does it include severance payments to laid off employees?  Yes, said the Court.  (Unanimous opinion, except Justice Kagan was recused):

Under this definition, and as a matter of plain meaning, severance payments made to terminated employees are“remuneration for employment.” Severance payments are,of course, “remuneration,” and common sense dictates that employees receive the payments “for employment.” Severance payments are made to employees only. It would be contrary to common usage to describe as a severancepayment remuneration provided to someone who has not worked for the employer. Severance payments are made in consideration for employment—for a “service . . . performed” by “an employee for the person employing him,”per FICA’s definition of the term “employment.” Ibid.

(emphasis mine).

Caveat for California employers: 

Some severance plans are covered by ERISA.  If so, then federal law governs the payment  of severance, the timing, and the conditions.  However, the Division of Labor Standards Enforcement may decide that a severance claim is not subject to ERISA. The DLSE will consider whether there is a plan in place, the discretion involved in calculating the eligibility and formula for payment, and other factors. 

If ERISA does not apply, California law may consider severance to be in the form of a deferred payment of wages.  Wages must be paid timely under California law. 

Employers should therefore ensure that they pay severance when it is earned in accordance with the contract (severance agreement or plan).  For example, if ERISA does not apply, a promise to pay a lump sum severance, without any conditions such as the signing of a release, may require payment on the date of termination.  

On the other hand, if the employer requires the employee to sign a release to "earn" the severance, then the severance is not due until earned.  (That is another good reason to require signing a release before severance is earned.)

This case is U.S. v. Quality Stores, Inc. and the opinion is here.

U.S. Supreme Court Decides What the Definition of "Clothes" Is

Section 203(o) of the federal Fair Labor Standards Act permits unions and employers to include provisions in their collective bargaining agreements re whether "changing clothes" is compensable time or not.

Sandifer and others sued their employer U.S. Steel under the FLSA.  They claimed that the protective gear they had to wear as part of their job duties were not "clothes." Therefore, they were not under the exemption in Section 203(o), or covered by their collective bargaining agreement's exclusion.

The principal dispute was over these items:

Petitioners point specifically to 12 of what they state are the most common kinds of required protective gear: a flame-retardant jacket, pair of pants, and hood; a hardhat; a “snood”; “wristlets”; work gloves; leggings; “metatarsal” boots; safety glasses; earplugs; and a respirator.

A "snood"?   More later.

Anyway,  if Section 203(o) did NOT apply, then the normal rules on "donning and doffing" would.  Under those regulations and under case law, the changing into these items likely would be compensable.  Therefore, the employees wanted Section 203(o) to be inapplicable. U.S. Steel wanted the CBA's provision and Section 203(o) to bar the claim.   As a result, the Supreme Court had to decide:  what does "changing clothes" mean under Section 203(o).

Justice Scalia, writing for a unanimous court (except Justice Sotomayor did not join fn 7), concluded the following:

Dictionaries from the era of §203(o)’s enactment indicate that “clothes” denotes items that are both designed and used to cover the body and are commonly regarded as articles of dress. See Webster’s New International Dic- tionary of the English Language 507 (2d ed. 1950) (Web- ster’s Second) (defining “clothes” as “[c]overing for the human body; dress; vestments; vesture”); see also, e.g., 2 Oxford English Dictionary 524 (1933) (defining “clothes” as “[c]overing for the person; wearing apparel; dress, raiment, vesture”). That is what we hold to be the meaning of the word as used in §203(o).

 

The Court rejected the employees' argument that "clothes" did not include any type of covering that was "indispensable" to performing the job, such that anything that provided extra safety would be excluded from the definition. The Court also rejected the employer's argument that clothes means the entire ensemble or "outfit."

That task accomplished, the Court next defined "changing." The employees argued that "changing" meant only substituting one article of clothing for another (i.e., changing shirts or pants from street wear to work pants). The Court, however, disagreed:

We think that despite the usual meaning of “changing clothes,” the broader statutory context makes it plain that “time spent in changing clothes” includes time spent in altering dress.

But seriously - what is a Snood? The Court answered the question when it applied its definition of "changing clothes" to the protective gear discussed above:

Petitioners have pointed to 12 particular items: a flame- retardant jacket, pair of pants, and hood; a hardhat; a snood; wristlets; work gloves; leggings; metatarsal boots; safety glasses; earplugs; and a respirator. The first nine clearly fit within the interpretation of “clothes” elaborated above: they are both designed and used to cover the body and are commonly regarded as articles of dress. That proposition is obvious with respect to the jacket, pants, hood, and gloves. The hardhat is simply a type of hat. The snood is basically a hood that also covers the neck and upper shoulder area; on the ski slopes, one might call it a “balaclava.” The wristlets are essentially detached shirt- sleeves. The leggings look much like traditional legwarm- ers, but with straps. And the metatarsal boots—more commonly known as “steel-toed” boots—are just a special kind of shoe.

Not sure why 9 Supreme Court justices would analogize to an Eastern European ukulele or a flaky pastry. I thought that ski slope gear was called a "dickey."  Live and learn.

But what of the remaining items: earplugs, glasses, and the respirator?  They are definitely not "clothes," the Court said.  The employer then argued that putting these items on was "de minimis."  No sale. The Court noted,

A de minimis doctrine does not fit comfortably within the statute at issue here, which, it can fairly be said, is all about trifles—the relatively insignificant periods of time in which employees wash up and put on various items of clothing needed for their jobs. Or to put it in the context of the present case, there is no more reason to disregard the minute or so necessary to put on glasses, earplugs, and respirators, than there is to regard the minute or so necessary to put on a snood.

Yep, he mentioned the s-word again.

So, here's where the Court worked some magic that only the highest court in the land can do. It simply held that although ear plugs etc. were not "clothes," these additional items would still be subject to Section 203(o) collective bargaining.  That is, putting on earplugs would be compensable if the parties negotiated that.  

The employees won the argument, but lost the case.  Why?  Because the Court did not want to have district judges serving as time-study experts.  Not kidding:

it is most unlikely Congress meant §203(o) to convert federal judges into time-study professionals. That is especially so since the consequence of dispensing with the intricate exercise of separating the minutes spent clothes-changing and washing from the minutes devoted to other activities is not to prevent compensation for the uncovered segments, but merely to leave the issue of compensation to the process of collective bargaining.

This is a narrow decision that affects only the negotiation of "clothes changing" in a collective bargaining agreement.  It will have little applicability in the nonunion context.

The opinion in Sandifer v. U.S. Steel Corp. is here.

U.S. Supreme Court: Retaliation Causation

University of Tex. Southwestern Med. Ctr. v. Nassar (opinion here) is the Supreme Court opinion setting forth the "causation" standards that apply to retaliation cases under Title VII of the Civil Rights Act of 1964.

Nassar was a doctor and professor at Univ. of Texas. He also worked at the University's medical center.  He  complained of harassment and discrimination by Dr. Levine. He tried to work only at the hospital to avoid Dr. Levine's harassment at the University. But the University blocked his effort, claiming that University policy required attending doctors also to be professors at the medical school.

So, Nassar sued for retaliation, claiming discrimination / constructive discharge, and retaliation in that the University blocked his hiring at the hospital.  After Nassar won a verdict, the Supreme Court accepted review to determine whether the retaliation claim was decided under the correct "causation" framework.

The Court decided that in Title VII cases, the causation standard is "but for," which means that the employer would not have taken negative action against the employee "but for" the employee's engaging in protected activity. Put another way, the harm would not have occurred if the employee had not complained.

Along the way, the Supreme Court majority explained the causation standard that applies to Title VII discrimination cases.  This is known as the "motivating factor" standard:

An employee who alleges status-based discrimination under Title VII need not show that the causal link between injury and wrong is so close that the injury would not have occurred but for the act. So-called but-for causation is not the test. It suffices instead to show that the motive to discriminate was one of the employer’s motives, even if the employer also had other, lawful motives that were causative in the employer’s decision. This principle is the result of an earlier case from this Court, Price Water­house v. Hopkins, 490 U. S. 228 (1989), and an ensuing statutory amendment by Congress that codified in part and abrogated in part the holding in Price Waterhouse, see §§2000e–2(m), 2000e–5(g)(2)(B). 

Why the separate standards, you ask?  Because in Title VII, the discrimination provisions are covered by a specific statute, and that statute was amended to include the motivating reason standard.    The anti-retaliation section is in another part of Title VII.  So, what the Court really decided was that the 1991 amendment to Title VII's causation provision did not apply to the retaliation piece. 

It remains to be seen whether this decision will influence California courts' interpretation of the causation standard. Earlier this year, the California Supreme Court examined causation standards in "mixed motive" cases (discussed here). We will see what the lower courts do with Nassar in the coming months. 

DGV