This article is Part 1 of a two-part series providing an overview of recent United States Supreme Court decisions in employment law.
The United States Supreme Court issued several decisions during the past year that may affect California employers. We summarize the most important of these decisions below.
Artis v. District of Columbia (January 22, 2018)
Artis, an employee of the District of Columbia, alleged in a lawsuit against the District a federal employment discrimination claim and three similar state claims. The federal district court rejected Artis’ federal claim. Then it declined to exercise jurisdiction over the state law claims and dismissed them.
Fifty-nine days after the federal court’s decision, Artis refiled her state claims in D.C. court. But the two-year statute of limitations for her state claims expired during the pendency of the federal case. The D.C. court therefore dismissed Artis’ state claims as time barred, holding that the statute only provided Artis 30 days beyond the dismissal of her federal case to refile her state claims.
Artis argued that the statute of limitations period was suspended for her state-law claims while her federal claim was pending, and that federal procedural law provided her with 30 days to file the state law claim after the federal claim was dismissed.
The Supreme Court agreed with Artis and held that a federal tolling provision “stopped-the-clock” on supplemental state court claims while the underlying federal suit is pending and for 30 days after it is dismissed, unless state law provides for a longer tolling period. The Court rejected the argument that the statute merely provides for a 30-day post-dismissal grace period to refile these claims in state court.
CNH Industrial N.V. v. Reese (February 20, 2018)
CNH Industrial N.V.’s (“CNH”) collective bargaining agreement provided group health care benefits to certain employees retiring under a company pension plan. Other benefits, including life insurance, ceased upon retirement. When the agreement expired in May 2004, a class of CNH retirees filed suit seeking a legal determination that their health care benefits had vested for life and that CNH could not change them. Simply put, the parties disputed how the terms of collective bargaining agreements should be interpreted by courts.
The Supreme Court previously held in M&G Polymers USA, LLC v. Tackett, that collective bargaining agreements must be interpreted according to ordinary principles of contract law. For example, a contract’s clear terms govern and a contract is not ambiguous unless it is subject to more than one reasonable interpretation). The Court in CNH explained that the lower court’s interpretation of CNH’s agreement, using a series of “inferences” resulting from extrinsic evidence, was improper because such inferences are inconsistent with the contract principles. The only reasonable interpretation of the agreement between CNH and its retirees is that the health care benefits expired when the collective bargaining agreement expired in May 2004.
Digital Realty Trust v. Somers (February 21, 2018)
Digital Realty Trust (“DRT”) fired Somers after he internally reported possible securities violations to senior management. Somers sued DRT, claiming that his termination was illegal because he was a “whistleblower,” even though he did not report the possible securities law violations to the SEC. Somers relied on the anti-retaliation provision in the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, arguing the Act expands federal whistleblower protection to those who report securities law violations internally.
The Supreme Court rejected Somers’s position. The Court explained that Dodd-Frank explicitly defines “whistleblowers” as reporting to the SEC and that this definition is corroborated by Dodd-Frank’s purpose to aid the SEC’s enforcement efforts by incentivizing people to tell the SEC about violations. As such, because Somers did not report the possible violations to the SEC, he was not a “whistleblower” under that law.
Of note, other laws’ anti-retaliation provisions protect employees who make internal reports, rather than reports to government agencies.
Encino Motorcars, LLC v. Navarro (April 2, 2018)
Encino Motorcars employed Navarro and other “service advisors.” These employees’ roles include listening to car owners’ concerns, evaluating maintenance and repair needs, suggesting service, writing up estimates, and following up with car owners about repair work being done.
Navarro and the other plaintiffs sued Encino Motorcars, alleging they should have been paid overtime wages under the Fair Labor Standards Act (“FLSA”). The FLSA, however, exempts from overtime pay any “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trailers, trucks, farm implements, or aircraft.” California law, by the way, contains no such exemption.
The Supreme Court held that Navarro and the other service advisors are exempt from overtime pay under the FLSA, because they are “salesm[e]n…primarily engaged in…servicing automobiles.” Service advisors are “salesmen” because they sell vehicle repair and maintenance services to customers. And they are “primarily engaged” in “servicing automobiles,” because they are integral in the process of providing maintenance and repair services to customers, even if they do not spend most of their time physically repairing vehicles.
Although California courts are unlikely to adopt the Supreme Court’s view here, this interpretation of the FLSA is an important development, particularly as many California employers have operations outside of California where the FLSA is the only applicable wage-hour law. In addition, the Supreme Court rejected the principle that exemptions to the FLSA are construed “narrowly,” which could have ripple effects in cases involving other types of exemptions unrelated to automobile service advisors.
Part 2 of this article will be printed next time.