The U.S. Supreme Court concluded its 2014-15 Term on June 30, 2015. The Court decided the following cases this Term that touch and concern HR matters:
Integrity Staffing Solutions, Inc. v. Busk (December 9, 2014):
The issue in this case was whether the time spent by an employee waiting in line to go through a security screening at the end of a shift was compensable time under the Fair Labor Standards Act (FLSA) and the Portal-to-Portal Act. The Court held that it was not (9-0).
Integrity Staffing provides non-exempt warehouse employees to Amazon. At the end of each shift, the employees were required to go through security screening intended to prevent employee theft. Wait times were typically around twenty-five (25) minutes to get through the line. Integrity Staffing was not paying employees for this wait time and the employees argued that they should be.
The Portal-to-Portal Act provides that employers are not liable under FLSA for time “walking, riding, or traveling to and from the actual place of performance of the principal activity or activities which such employee is employed to perform” or for “activities which are preliminary to or postliminary to said principal activity or activities” occurring before or after the workday during which principal activities occur. The question raised in this case was whether the security screening was a postliminary activity. In making this determination, the Court noted that principal activities include all activities that are “integral and indispensable,” i.e. “it is an intrinsic element of those activities and one with which the employee cannot dispense with if he is to perform his principal activities.” The Court then explained that the security screenings were not a principal activity (the employees were not hired to go through security screenings), nor were they integral and indispensable to the duties of the warehouse employees. “The screenings were not an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment. And Integrity Staffing could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.” It did not matter to this analysis that the employer required the security screenings; the focus is on what the employee was hired to do. Likewise, the fact that Integrity Staffing could have made the wait time shorter was not a factor in the Court’s analysis because it “does not change the nature of the activity.”
Thus, the Court held, “an activity is integral and indispensable to the principal activities that an employee is employed to perform—and thus compensable under the FLSA—if it is an intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities…the employees’ time spent waiting to undergo and undergoing Integrity Staffing’s security screenings does not meet these criteria…”
Department of Homeland Security v. MacLean (January 21, 2015):
The issue in this case was whether a federal employee could be terminated from his job for disclosing information to the media about cancelled overnight shifts for air marshals. The Court held that he could not be terminated for this activity (7-2).
MacLean was employed by the Transportation Security Administration (TSA) as an air marshal and stationed in Las Vegas. In July 2003, the Department of Homeland Security issued an advisory and other information regarding a potential hijacking scheme to all air marshals. Shortly thereafter, the TSA cancelled all overnight shifts for air marshals for flights from Las Vegas to save money on hotel costs. MacLean believed that this cancellation order was dangerous and illegal in light of the hijacking advisory. MacLean contacted the media and disclosed the order to cancel overnight shifts and the hijacking advisory. MacLean’s employment was thereafter terminated for disclosing sensitive information without authorization. MacLean challenged the termination under federal whistleblower protection laws.
Federal law provides general whistleblower protection to federal employees for disclosing information that the employee reasonably believes shows a violation of any law, rule, or regulation or gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety, but only so long as that disclosure is not specifically prohibited by law or Executive Order. TSA regulations prohibit the unauthorized disclosure of “sensitive security information,” which includes information about air marshal assignments. However, the Court said that since the language of the whistleblower protection exception only mentions “law,” when other places in same statute state “law, rule, or regulation,” the TSA regulation does not qualify as a basis for the exception. Therefore, the Court held, MacLean’s disclosure was protected.
M&G Polymers USA, LLC v. Tackett (January 26, 2015):
This case addressed the meaning of provisions in an expired collective-bargaining agreement pertaining to health care benefits for retirees, their surviving spouses, and dependents. The retirees argued that the provision in question gave them a vested right to lifetime contribution-free health care benefits, even though the contract expired in 2000. The company, however, disagreed that there was a vested right and argued that it was permitted to require that the retirees contribute to the cost of the benefit. As the Court explained, “[t]his case is about the interpretation of collective-bargaining agreements that define rights to welfare benefits plans,” which are exempt from certain parts of the Employee Retirement Income Security Act of 1974 (ERISA).
The Court explained that there is no presumption in favor of the vesting of retiree benefits (the Court of Appeals had erroneously given such presumption). Collective-bargaining agreements should be interpreted the same as any other contract, barring conflict with federal labor laws. This means interpreting language of a contract consistent with the plain meaning of the words used. To the extent that the interpretation depends on definitions derived from known customs or usages in a particular industry, there must be affirmative evidentiary support for that meaning. Ultimately, the Court found that “[w]hen a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended benefits to vest for life.” Importantly, the Court also reaffirmed that “retiree health care benefits are not a form of deferred compensation.” The Court, ruling 9-0, sent the case back to the Court of Appeals (6th Circuit) to interpret the contract again using the standard set forth by the Court.
Perez v. Mortgage Bankers Association (March 9, 2015):
This case looked at the question of whether mortgage brokers are subject to the overtime pay requirements of the Fair Labor Standards Act (FLSA). The FLSA grants the Secretary of Labor the authority to define the meaning of the categories of exempt employees set forth by the FLSA. One of those categories is for workers employed in an “administrative” capacity, which was at issue in this case. In 1999 and again in 2001, the Department of Labor (DOL) issued opinion letters indicating that mortgage brokers do not qualify for this category of exemption. When DOL promulgated new regulations in 2004, the Mortgage Brokers Association (MBA) requested a new opinion interpreting the revised rules. DOL issued a new opinion in 2006 which indicated that mortgage brokers qualify for the exemption. However, DOL reversed itself in 2010 when it issued an opinion letter withdrawing its 2006 letter and opining that mortgage brokers do not qualify for the exemption. None of these opinion letters were issued with notice or opportunity for comment. Because notice-and-comment procedures were not followed, the letters are considered “interpretive” rules. Unlike legislative rules, which are promulgated through notice-and-comment procedures, interpretive rules do not have the force and effect of law. The MBA claimed that the 2010 opinion letter was invalid because of case law from the D.C. Federal Court of Appeals that said a new interpretive rule which significantly revises a previous interpretive rule must be promulgated using notice-and-comment procedures, even though such procedures were not required of the original interpretive rule.
The Court held (9-0) that because an agency is not required to use notice-and-comment procedures to issue an initial interpretive rule, it is also not required to use those procedures to amend or repeal the interpretive rule. The Court explained that its decision was based on a plain reading of the Administrative Procedures Act (APA), which exempts interpretive rules from notice-and-comment requirements. Because notice-and-comment procedures are not required under the APA, courts lack authority to compel such procedures. The Court noted that the APA contains a variety of constraints on agency decision-making, such as the arbitrary and capricious standard and safe harbor provisions, which can act as a safeguard against agencies unilaterally and unexpectedly altering their interpretation of important regulations.
In a concurring opinion, Justice Alito showed concern for the degree of delegation Congress has given to agencies and for the “exploitation by agencies of the uncertain boundary between legislative and interpretive rules.” Nonetheless, he agreed that court made rules were not the solution to this problem.
In a separate concurring opinion, Justice Scalia stated his concern that the deference given to agencies by the courts effectively does give interpretive rules the force of law. Justice Scalia stated that he would apply the APA “as written,” and would find that an agency “is free to interpret its own regulations with or without notice and comment; but courts will decide—with no deference to the agency—whether that interpretation is correct.” However, concurring opinions are merely commentary and do not have the binding effect of the majority opinion.
Although this case is more about the law-making process, then about the FLSA, it is important to the extent that it reaffirms the ability of agencies to issue opinion letters interpreting regulations that, as a practical matter, are as good as law in that agency interpretation is given deference by the courts.
Mach Mining, LLC v. Equal Employment Opportunity Commission (April 29, 2015):
This case involves the EEOC’s obligations to attempt to remedy unlawful workplace practices through informal methods of conciliation before it sues an employer for discrimination. The question was whether a court can review the EEOC’s efforts at conciliation. The Court held (9-0) that courts may review whether the EEOC satisfied its statutory obligation to attempt conciliation before filing suit, although the scope of such review is narrow.
In this case, an applicant for a position at Mach Mining filed a charge with the EEOC claiming that she was not hired because of her sex. After investigation, the EEOC found reasonable cause to believe that Mach Mining had engaged in unlawful discrimination. As such, the EEOC was required by Title VII of the Civil Rights Act of 1964 (Title VII) to “endeavor to eliminate [the] alleged unlawful employment practice by informal methods of conference, conciliation, and persuasion.” The EEOC has ultimate authority to decide whether or not to enter into a settlement or proceed to a lawsuit. The EEOC sent Mach Mining a letter inviting it to participate in informal methods of dispute resolution and stating that the EEOC would contact it to begin the conciliation process. About a year later, the EEOC sent a second letter stating that conciliation efforts had occurred and were unsuccessful and “any further efforts would be futile.” EEOC thereafter filed a lawsuit. It is unclear what had occurred during the intervening year, but Mach Mining claimed that the EEOC had failed to conciliate in good faith and could not proceed with the lawsuit.
The Court noted that there is a strong presumption in favor of judicial review of administrative action. This presumption can be rebutted if a statute demonstrates that Congress wanted an agency to police its own conduct. In this case, although Title VII provides the EEOC with wide latitude over the conciliation process, it does not leave everything to the discretion of the EEOC. In fact, the EEOC is required by the statute to engage in the conciliation process, such that failure to do so would be a failure to satisfy a prerequisite for a lawsuit. Title VII also sets forth certain concrete standards for what the process must entail. “Those specified methods necessarily involve communications between parties, including the exchange of information and views.” In order to satisfy the requirement for communication, the EEOC “must tell the employer about the claim – essentially, what practice has harmed which person or class – and must provide the employer with an opportunity to discuss the matter in an effort to achieve voluntary compliance.” Because the EEOC does not have complete discretion when it comes to the conciliation process, but rather does have standards imposed upon it by the statute, the Court held that the presumption in favor of judicial review was not overcome. The EEOC’s conciliation efforts are subject to review by the courts.
However, that review is limited to enforcing Title VII’s requirements “just as described – in brief, that the EEOC afford the employer a chance to discuss and rectify a specified discriminatory practice – but goes no further.” The “judicial review is . . . to verify the EEOC’s say-so – that is, to determine that the EEOC actually, and not just purportedly, tried to conciliate a discrimination charge.” But, judicial review is not to determine if the EEOC acted in “good faith,” simply whether they met the bare minimum requirements of the statute. The case was sent back to the Court of Appeals (7th Circuit) to determine if the EEOC had met the bare minimum statutory requirements in this case.
Young v. United Parcel Service (March 25, 2015):
This case examined the proper interpretation of the Pregnancy Discrimination Act of 1978 (PDA). The PDA amended the definition of sex discrimination in Title VII of the Civil Rights Act of 1964 (Title VII) to include pregnancy. The second clause of the Act, which was at issue in this case, provides that employers must treat “women affected by pregnancy… the same for all employment-related purposes…as other persons not so affected but similar in their ability or inability to work.” The employer in the case, UPS, generally required that employees be able to lift 70 pounds, but made accommodations for workers in three circumstances: (1) those who were injured on the job; (2) those who had disabilities covered by the Americans with Disabilities Act of 1990 (ADA); and (3) those who had lost Department of Transportation (DOT) certifications. However, UPS refused to accommodate its employee, Ms. Young, when she became pregnant and her physician imposed a lifting restriction of 10 to 20 pounds.
The Court rejected the notion that the PDA requires that any employer who accommodates any subset of workers must provide the same accommodation to pregnant workers who are similar in the ability to work, even if other non-pregnant workers who are similar in the ability to work do not receive the same accommodations (which has sometimes been referred to as “most-favored nation status”). The Court noted that the statute does not say that the employer must treat pregnant employees the same as “any other persons” similar in their ability to work; rather, it simply references “other persons” without specifying which other persons Congress had in mind. Further, “disparate-treatment law normally permits an employer to implement policies that are not intended to harm members of a protected class, even if their implementation sometimes harms those members, as long as the employer has a legitimate, nondiscriminatory, nonpretextual reason for doing so.” As such, to show discrimination that violates the PDA, an employee may proceed under the standard indirect method of proof as applies to other types of discrimination claims (called the McDonnnell Douglas framework). The framework permits the plaintiff to establish a minimum case by “showing actions taken by the employer from which one can infer, if such actions remain unexplained, that it is more likely than not that such actions were based on a discriminatory criterion illegal under” Title VII. The employer may then seek to justify its refusal to accommodate the pregnant employee by relying on “legitimate, non-discriminatory” reasons for denying the accommodation. The plaintiff can then respond by showing that reasons given by the employer are pretextual (that is, a lie rather than a mistake or poor judgment).
The Court went on to explain that a plaintiff may also show that a question of fact for the jury exists 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 Court sent the case back to the Court of Appeals (4th Circuit) for further ruling consistent with the framework in its ruling (which was a 6-3 decision).
Tibble v. Edison International (May 18, 2015):
This case addressed the question of when the statute of limitations begins to run for a breach of fiduciary duty action in relation to an Employee Retirement Income Security Act (ERISA) plan when the allegation is that the fiduciary imprudently retained an investment. The statute of limitation for a claim under ERISA for breach of fiduciary duty is six (6) years from the date the act or omission occurs. In this case, beneficiaries of Edison International’s 401(k) Plan claimed that the Plan fiduciaries breached their fiduciary duties by continuing to offer six higher priced retail-class mutual funds as Plan investments when identical lower priced institutional-class mutual funds were available. The beneficiaries claimed that circumstances significantly changed after the high-priced mutual funds were obtained that should have prompted a review of the investments and a change to the lower priced mutual funds. The Plan argued that the lawsuit was filed too late because it was more than six (6) years after the investment had been selected. The Court, however, held that because the fiduciary has an ongoing obligation of prudence, the trigger is not necessarily when the investment was acquired but when the failure to monitor and remove an imprudent investment occurred. The Court explained that ERISA fiduciaries are bound by the same ordinary trust laws as a non-ERISA trustee. This includes the requirements of continually oversight of the suitability of investments already made and disposing of inappropriate investments within a reasonable time. As such, the Court held (9-0) the trigger is when the alleged breach of the continuing duty occurred, not when the investment was procured. The case was sent back to the Court of Appeals (9th Circuit) to determine if the beneficiaries properly alleged their claims and, if so, if the Plan breached its continuing duty to monitor and remove imprudent investments.
Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc. (June 1, 2015):
Title VII of the Civil Rights Act of 1964 (Title VII) prohibits an employer from refusing to hire an applicant in order to avoid accommodating a religious practice that it could accommodate without undue hardship. This case addressed the issue of whether this prohibition only applies if the applicant informs the employer of his or her need for religious accommodation. The Court held 9-0 that this prohibition applies if the applicant can show that the need for accommodation was a motivating factor in the decision not to hire, not that the employer had knowledge of the need.
In this case, Samantha Elauf applied for a position at an Abercrobie & Fitch store. Ms. Elauf is a practicing Muslim and wore a headscarf to the interview. There was no discussion about the headscarf during the interview and Ms. Elauf did not indicate she would require a religious accommodation to wear the headscarf. Ms. Elauf did well in her interview and was deemed by the assistant manager who interviewed her to be qualified for hire. However, Abercrombie & Fitch had a “Look Policy” that prohibited store employees from wearing caps. The assistant manager sought guidance from her supervisors regarding the appropriateness of Ms. Elauf’s headscarf and indicated to them that she thought Ms. Elauf wore it for religious reasons. The district manager determined that the headscarf would violate the Look Policy and told the assistant manager not to hire Ms. Elauf.
The Court determined that even though Ms. Elauf had not requested an accommodation, Abercrombie & Fitch could still be found liable for religious discrimination if the presumed need for accommodation was a motivating factor of the decision not to hire. This was because Title VII does not impose a knowledge requirement, even though some antidiscrimination laws (like the Americans with Disabilities Act) do. Title VII prohibits motives, regardless of knowledge. Thus, the Court said, “An employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions.”
Obergefell v. Hodges (June 26, 2015):
This case addressed the question of whether the refusal by a state to allow same-sex couples to marry and/or to fully recognize same-sex marriages lawfully performed in another state violates the Fourteenth Amendment of the U.S. Constitution. The Court ruled 5-4 that such refusal does violate the Fourteenth Amendment.
The Court noted that it has long held that the right to marry is protected by the U.S. Constitution as a fundamental right pursuant to the Due Process Clause of the Fourteenth Amendment. Reviewing the long list of Supreme Court cases that have addressed the issue of marriage and other intimate associations, the Court determined that the rationale for this protection is equally applicable to same-sex marriage as it is to opposite sex marriage. First, “the right to personal choice regarding marriage is inherent in the concept of individual autonomy,” i.e. liberty. Second, “the right to marry is fundamental because it supports a two-person union unlike any other in its importance to the committed individuals.” Third, “it safeguards children and families and thus draws meaning from related rights of childrearing, procreation, and education.” The Court recognized that “many same-sex couples provide loving and nurturing homes to their children . . . [a]nd hundreds of thousands of children are presently being raised by such couples. Excluding same-sex couples from marriage thus conflicts with a central premise of the right to marry.” Finally, “marriage is a keystone to our social order.” The Court noted that many states make marriage the basis for many governmental rights, benefits, and responsibilities and have thus placed marriage “at the center of so many facets of the legal and social order.”
The Court therefore concluded that although “[t]he limitation of marriage to opposite-sex couples may long have seemed natural and just . . . its inconsistency with the central meaning of the fundamental right to marry is now manifest. . . If rights were defined by who exercised them in the past, then received practices could serve as their own continued justification and new groups could not invoke rights once denied.”
Similarly, the Court found that prohibitions on same-sex marriage violate the Equal Protection Clause of the Fourteenth Amendment of the U.S. Constitution, stating that the marriage laws in question “are in essence unequal.”
Finally, the Court addressed the notion that this is a question better left to the democratic process: “Of course, the Constitution contemplates that democracy is the appropriate process for change, so long as that process does not abridge fundamental rights. . . Indeed, it is most often through democracy that liberty is preserved and protected in our lives.” However, the Court went on, when the rights of people are violated the Constitution required redress in the courts, “notwithstanding the more general value of democratic decisionmaking. . .An individual can invoke a right to constitutional protection when he or she is harmed, even if the broader public disagrees and even if the legislature refuses to act. The idea of the Constitution, ‘was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and officials and to establish them as legal principles to be applied by the courts.’”
This article is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or how the law applies to you.
About the Author
Sara Blevins is a partner at Lewis & Kappes, P.C. where she practices employment law and general civil litigation. She can be reached at sblevins@lewis-kappes.com or (317) 639-1210. Sara serves on the IndySHRM Legislative Affairs Committee.