The United States Supreme Court issued several decisions during the past year that may affect California employers:

Mount Lemmon Fire District v. Guido

The federal Age Discrimination in Employment Act (“ADEA”) applies to private employers with 20 or more employees.  It also applies to public employers, but is silent as to public employer size.  The Mount Lemmon Fire District ­argued the 20-employee threshold applicable to private-sector entities also should apply to public employers. The Court disagreed, concluded that the ADEA applies to all public employers regardless of size.

Of course, California’s Fair Employment and Housing Act (“FEHA”) prohibits age discrimination by public employers of any size, and private employers of just five employees or more. However, the federal Older Workers Benefit Protection Act (part of the ADEA) includes special provisions regarding releases of federal age discrimination claims. The Guido decision therefore may be relevant to smaller California public-sector employers in some cases.

Henry Schein, Inc. v. Archer & White Sales, Inc.

Parties to arbitration agreements may permit the arbitrator, rather than a court, to decide whether a dispute falls within the scope of their agreement.  Lower courts, however, sometimes used to refuse to compel arbitration if the judge believed a dispute was obviously outside the scope of the arbitration agreement (the “wholly groundless” exception).

The Supreme Court in Henry Schein, Inc. v. Archer & White Sales, Inc. decided that a court cannot override the parties’ intent to delegate the arbitrability question to an arbitrator — even if the court concludes that there is no chance that the dispute is subject to the arbitration agreement.  

This decision streamlines litigation of arbitration agreements in court.  It also means there will be little recourse if an arbitrator makes an absurd decision over whether a dispute is arbitrable. This decision underscores that delegating to an arbitrator all questions of arbitrability requires careful consideration of the risks and benefits.

Lamps Plus, Inc. v. Varela

Class action waivers in arbitration agreements have been the subject of litigation for some time. The Supreme Court held in its 2010 decisions, Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp., that class arbitration (i.e., bringing a claim with a group of similarly aggrieved employees) under the Federal Arbitration Act (“FAA”) requires the parties’ consent.  The Court also decided in Stolt-Nielsen that an arbitration agreement that is silent on the issue of classwide arbitration does not constitute the requisite consent. 

Stolt-Nielsen involved a commercial dispute. This year, in Lamps Plus, Inc. v. Varela, an employment law case, the Court considered whether consent to class arbitration can be inferred when the language of the arbitration agreement is “ambiguous.”  The Court held that ambiguity — like silence — is not enough to demonstrate the parties’ consent to class arbitration under the FAA. 

Employers may therefore enter into arbitration agreements with employees under which they agree to arbitrate all employment-based claims, and only on an individual basis. Effectively, that will avoid class-wide arbitration.

However, the FAA must apply to the dispute. The statute covers only employers engaging in sufficient commerce to invoke federal jurisdiction, and there are exceptions to the FAA.

An arbitration agreement does not have to include an explicit class action waiver under the FAA. However, clarity is rarely a bad thing, and may prevent litigation like in Lamps Plus over what the parties intended.  For California employers, this decision still doesn’t help avoid “representative” actions, such as PAGA claims.

Fort Bend County, Texas v. Davis

At least in the private sector, an applicant or employee claiming a violation of Title VII of the Civil Rights Act of 1964  (the federal law prohibiting most types of discrimination and harassment), generally is required to file an administrative complaint with the Equal Employment Opportunity Commission (“EEOC”) before filing suit. The purpose of the administrative complaint (or “charge”) is to provide the EEOC with a chance to investigate and, if appropriate, conciliate and resolve the complaint before it is litigated in court.  

The administrative process is mandatory. But is the plaintiff’s failure to do so fatal to a civil lawsuit?

In Fort Bend County, Texas v. Davis, Davis never submitted an EEOC claim before filing a religious discrimination lawsuit against Fort Bend County.  After two years of litigation, the County asserted the court entirely lacked jurisdiction over the Title VII claim, because Davis did not file the EEOC charge. 

The Supreme Court disagreed. The Court decided that although exhaustion of administrative remedies is mandatory, the defendant may waive the right to object to the plaintiff’s failure to do so.  The County’s two year delay was too long to wait.

California courts also have held that a “failure to exhaust” defense under the Fair Employment and Housing Act can be waived.  Defense counsel should always check whether an employee has timely filed an administrative charge or complaint before filing suit.

Parker Drilling Management Services, Ltd. v. Newton

Newton worked for Parker Drilling on an oil-drilling platform on the Outer Continental Shelf, off the California Coast. Newton sued, claiming Parker did not provide meal periods in accordance with California law. The novel legal issue was whether California law would apply on the Outer Continental Shelf, or whether the federal Fair Labor Standards Act alone applied.

The Supreme Court held that California law had no applicability on the Outer Continental Shelf.  Except in that small corner of the world, this case will have little applicability to California employers. However, it is important for employers to consider which federal, state, and local laws apply to their businesses.

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