The United States Supreme Court decided several important cases affecting employers during its October 2010 Term. The decisions addressed the scope of liability for retaliation and discrimination, arbitration, class actions, and benefits. Below is a summary of the Court’s major decisions in chronological order.

NASA v. Nelson (January 19, 2011)

Contract employees at NASA challenged a policy requiring them to complete a standard background check to determine suitability for continued employment. The background check included a questionnaire covering topics such as recent drug use, finances and mental health, as well as adverse employee references. The employees claimed invasion of their right to informational privacy.

Assuming without deciding that the Fourth Amendment protects against invasion of “informational privacy,” the Supreme Court held that NASA’s questions did not violate the right to privacy. NASA’s questions served the government’s interest in hiring and retaining good employees, and were similar to those used in the private sector. Although this case was decided under the Fourth Amendment, it may have application to the private sector, particularly in California where courts borrow Fourth Amendment jurisprudence in evaluating invasion of privacy claims.

Thompson v. North American Stainless (January 24, 2011)

In Thompson v. North American Stainless, the Supreme Court expanded the scope of a plaintiff’s standing to bring a claim for retaliation under Title VII of the Civil Rights Act of 1964. Both Eric Thompson and his fiancí© worked for North American Stainless (NAS). Thompson’s fiancí© filed an EEOC charge alleging sex discrimination. Three weeks later, NAS terminated Thompson’s employment.

Thompson claimed he was fired because his fiancí©e filed the charge.

The district court granted summary judgment for NAS, concluding that Title VII

“does not permit third party retaliation claims.” The Sixth Circuit Court of Appeals affirmed the district court’s decision and reasoned that because Thompson did not personally engage in any statutorily protected activity, he was not “included in the class of persons for whom Congress created a retaliation cause of action.”

The Supreme Court decided Title VII creates a cause of action for retaliation even for persons who did not themselves engage in protected activity. The test is whether the plaintiff falls within Title VII’s “zone of interests.” The Court reasoned Thompson fell within the zone because “a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancí© would be fired.” The Court, however, declined to define precisely Title VII’s “zone of interests.” However, the Court explained that firing a close family member will almost always fall within the “zone of interests,” and that the firing of a mere acquaintance will almost never fall within the zone.

Staub v. Proctor Hospital (March 1, 2011)

In Staub v. Proctor Hospital, the Supreme Court addressed whether an employer may be liable under the Uniformed Services Employment and Reemployment Rights Act (“USERRA”), based on the unlawful intent of supervisors who caused or influenced the termination decision, but did not make the ultimate decision to fire the employee. USERRA prohibits discrimination against members of the military and protects service-related leaves. Vincent Staub, an x-ray technician at a hospital, was a reservist entitled to job protection under USERRA.

Two lower-level employees were annoyed at Staub’s reserve duty because his absences had to be covered. A non-biased human resources manager later fired Staub, partly based on a prior disciplinary warning and criticism the biased supervisors issued.

The district court found the employer liable under USERRA, but the Seventh Circuit Court of Appeals reversed, holding that the employer was entitled to judgment as a matter of law because the ultimate decision maker relied on more than the biased supervisors’ advice to her in reaching her decision to terminate.

The Supreme Court disagreed. The Court found that the “cat’s paw” theory of employer liability controls in cases regarding violations of USERRA. The “cat’s paw” theory imposes liability in a situation where the ultimate decision maker did not possess any unlawful intent when taking an adverse employment action, but was strongly influenced by someone who did.

Kasten v. Saint-Gobain Performance Plastics Corp. (March 22, 2011)

The Supreme Court addressed whether the Fair Labor Standards Act’s (“FLSA”) anti-retaliation provision applies to an employee who makes an oral, rather than a written, complaint about wage-hour issues. Kasten claimed he complained to management and other employees about the location of the time clocks at the St. Gobain factory.

Workers there are required to “don and doff” their protective equipment before swiping in and out. Because of the time clock’s placement, Kasten was not paid for “donning and doffing” time. According to Kasten, he made several oral complaints to his supervisors about the location of the time clocks. The company allegedly fired Kasten for violating the company’s timekeeping policy.

Kasten claimed he was fired in retaliation for making verbal complaints about wage-hour issues under the FLSA. The Supreme Court addressed whether the FLSA’s protection of employees who “file any complaint” applies to verbal complaints reported internally to management.

The Supreme Court held the FLSA covers both oral and written complaints. The Court relied on the FLSA’s basic objectives, interpretation by the Secretary of Labor, and consistent with the interpretation of the National Labor Relations Act.

AT&T Mobility v. Concepcion (April 27, 2011)

In Discover Bank v. Superior Court, the California Supreme Court held that class action waivers in consumer arbitration agreements are unconscionable if the agreement is in an adhesion contract. The U.S. Supreme Court held that in Concepcion that the Federal Arbitration Act (“FAA”) preempts California state law that made class action waivers in arbitration agreements unconscionable.

Concepcion involves a consumer class action based on AT&T Mobility’s collecting sales tax after advertising a cell phone was “free.” Although AT&T Mobility’s arbitration agreement contained many provisions favoring consumers, it also contained a class action waiver. The U.S. Supreme Court held that the FAA preempts California’s Discover Bank rule because the FAA’s overarching purpose is to ensure the enforcement of arbitration agreements and arbitration is poorly suited to class claims. The Discover Bank rule essentially operated to interfere with the promotion of streamlined dispute resolution. Under the Supreme Court’s ruling, parties can now voluntarily agree to class action arbitration, but state law cannot require it.

CIGNA Corp. v. Amara (May 16, 2011)

In CIGNA Corp v. Amara, the Supreme Court determined that a Summary Plan Description (SPD) under the Employee Retirement Income Security Act (ERISA) is not part of an ERISA plan. As a result, ERISA Section 502(a)(1)(B) provides no relief to a plan participant who is seeking to enforce the language of an SPD that is inconsistent with a plan instrument. However, if there are inconsistencies between a SPD and plan instrument, there can be judicial reformation of the plan instrument under ERISA Section 502(a)(3). The Court found that equitable relief is authorized by Section 502(a)(3) to redress violations of ERISA or the Plan’s terms. Courts may order changes to the terms of a pension plan to remedy false or otherwise unlawful disclosures by the plan to the plan participants.

Chamber of Commerce of the United States v. Whiting (May 26, 2011)

Arizona’s Legal Arizona Workers Act allows the state to suspend or revoke the business licenses of employers who knowingly or intentionally hire unauthorized aliens. It also mandates the use of “E-Verify,” a federal program permitting electronic verification of an employee’s authorization to work in the United States.

The Supreme Court held that the Federal Immigration Reform and Control Act does not stop Arizona from either suspending business licenses or requiring use of E-Verify. The Supreme Court concluded that Arizona’s requirement that employers must use E-Verify did not obstruct the federal program from achieving its goals.

Wal-Mart Stores v. Dukes (June 20, 2011)

In Wal-Mart Store v. Dukes, the Supreme Court issued a ruling in the largest employment law class action in United States history. The Supreme Court reversed the lower courts’ certification of a class of approximately 1.5 million female employees in a sex discrimination cased based on promotion decisions.

Federal Rule of Civil Procedure 23 governs class action litigation in federal courts. The Supreme Court found that the class members did not have common facts or law to proceed as a nationwide class action under Rule 23(a). The Court concluded that the workers had not provided convincing proof of a company-wide discriminatory pay and promotion policy.

The Court also limited the remedies available under Federal Rules of Civil Procedure Rule 23(b)(2). The plaintiffs in Dukes attempted to obtain certain backpay remedies along with injunctive relief. But the Court held that plaintiffs generally must proceed under the more exacting standards contained in Rule 23(b)(3) to obtain monetary recovery.

CSX Transportation v. McBride (June 23, 2011)

To close out the October 2010, the Court considered the proper standard for liability under the Federal Employers’ Liability Act (FELA). This statute is designed to improve health and safety conditions for railroad workers by holding rail carriers responsible for employee injuries “resulting in whole or in part from [carrier] negligence.”

Robert McBride was a conductor working for the rail transportation company CSX. McBride was injured when his hand became fatigued and fell into one of the brakes. McBride filed suit under the Federal Employers’ Liability Act (FELA), alleging that CSX negligently (1) required him to use unsafe switching equipment and (2) failed to train him to operate that equipment. The jury awarded damages to McBride and CSX appealed on the ground that the trial judge’s jury instructions did not add a requirement that the company’s negligence also had to be the proximate cause of the injury (i.e., the harm was the probable consequence of the risk). The appeals court approved the district court’s instruction.

The Supreme Court affirmed, holding that FELA does not incorporate the proximate cause standards developed in non-statutory common-law tort cases. Instead, the Court found that a lower negligence standard applied, where a railroad causes or contributes to an employee’s injury if the railroad’s negligence “plays any part” in bringing about the injury.

Pending Cases

The Court already has agreed to review several employment law cases in the 2011 Term, which starts in October 2011. These include:

Hosanna-Tabor Evangelical Lutheran Church and School

The Court will decide whether the “ministerial exception,” which bars most employment-related lawsuits brought against religious organizations by employees performing religious functions, applies to a teacher at a religious elementary school.

Coleman v. Maryland Court of Appeals

The Court will consider whether the Eleventh Amendment to the U.S. Constitution precludes individuals from suing states in federal court regarding the portion of the Family and Medical Leave Act relating to medical leave for “self-care.”

Conclusion

Both the California Supreme Court and the United States Supreme Court issued some important decisions during the past year affecting employers. Employers should carefully review the recent rulings and make sure that their policies are in line with the decisions, and with new federal and state regulations.

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