Supreme Court Takes on Workplace Disputes

By Joanne Deschenaux Sep 25, 2015
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On Oct. 5, 2015, the U.S. Supreme Court will begin the 2015-16 session. Last term, the high court addressed such hot-button workplace-related issues as same-sex marriage and Affordable Care Act insurance exchanges. Although no similarly high profile cases are on the court’s docket to date (the court will add cases once the session has begun), the upcoming term features several cases that should be of interest to employers and HR. Among the questions coming before the court are:

  • What are the standards for determining whether a wage and hour lawsuit under the Fair Labor Standards Act (FLSA) can go forward as a class or collective action?
  • When must certain employment discrimination claims under Title VII of the Civil Rights Act be filed?
  • Does allowing unions to collect agency fees from public employees who are not union members violate the employees' First Amendment rights to free speech and free association?
  • If an employee credit report contains inaccurate information, must the worker show that he or she was actually injured in order to prevail in a lawsuit?
  • When can a health insurance plan recover overpaid benefits that have not remained in the possession of the plan participant or beneficiary?

Wage and Hour Class Action Lawsuits

Under the federal rules governing most civil litigation, a lawsuit for damages may not proceed as a class action unless “there are questions of law or fact common to the class” that “predominate over any questions affecting only individual members.” The FLSA imposes similar requirements on collective actions. (Under the FLSA, a lawsuit in which a large group of employees is suing the employer is known as a “collective action” rather than the more commonly used term, “class action.”)

In Wal-Mart Stores, Inc. v. Dukes (131 S. Ct. 2541 (2011)), the Supreme Court held that, in order to satisfy these commonality and predominance requirements, plaintiffs must “demonstrate that the class members ‘have suffered the same injury’” by proving that their claims “depend upon a common contention” that is “capable of classwide resolution … in one stroke.” The court also disapproved of “trials by formula,” in which liability is determined for a “sample set” of class members and then “applied to the entire remaining class.”

On Nov.10, 2015, the high court will hear Tyson Foods v. Bouaphakeo (No. 14-1146), which asks two questions about when a class may be certified to proceed under Rule 23 (and a collective action under the FLSA):

  • Whether differences among individual class members may be ignored, and a class certified, when plaintiffs use statistical techniques that presume that all class members are identical.
  • Whether a class may be certified that contains hundreds of members who were not injured and have no legal right to damages.

The employees are hourly workers at a pork-processing facility who allege that the company failed to compensate them fully for time spent donning and doffing personal protective equipment and walking to and from their work stations. The district court certified the class based on the existence of common questions about whether these activities were compensable “work,” even though there were differences in the amount of time that individual employees actually spent on these activities, and hundreds of employees spent no uncompensated time on these tasks at all.

At trial, the court allowed the plaintiffs to prove liability and damages to the class with statistical evidence that presumed that all class members are identical to an “average” employee. The jury returned a verdict for the class, and the district court entered a $5.8 million judgment for the plaintiffs.

On appeal, a divided panel of the 8th U.S. Circuit Court of Appeals affirmed. The majority recognized that individual plaintiffs varied in their donning and doffing routines but held that the class was properly certified because Tyson had a specific compensation policy for donning and doffing, and the class members worked at the same plant and used similar equipment.

Statistics released by the Administrative Office of the U.S. Courts in March 2015 show that FLSA collective action filings increase every year and are the largest category of employment-related class action filings, subjecting employers to the possibility of millions of dollars in damages. The high court, in the Tyson Foods case, has the opportunity to restrict when these suits may be brought.

Time Limit for Filing Constructive Discharge Claim

In Green v. Brennan (No. 14-613), the court will decide whether the filing period under Title VII for a constructive discharge claim begins to run when the employee resigns or when the employer commits the last allegedly discriminatory act leading to the resignation.

Individuals seeking to file employment discrimination suits under Title VII and most other federal employment discrimination statutes must first exhaust their administrative remedies. Federal regulations provide that, in a case involving a complaint by an employee of the federal government, a suit is time-barred unless an administrative proceeding is initiated "within 45 days of the date of the matter alleged to be discriminatory or, in the case of personnel action, within 45 days of the effective date of the action."

Private-sector employees must file an administrative charge of discrimination within 180 days after the alleged unlawful employment practice occurred, or, if state or local proceedings are also initiated, within 300 days after the alleged unlawful employment practice occurred, or within 30 days after receiving notice that the state or local agency has terminated the proceedings under the state or local law, whichever is earlier.

Marvin Green, a former postmaster, initiated administrative proceedings alleging that the U.S. Postal Service forced him to resign by creating unendurable work conditions in retaliation for his earlier filing of an administrative claim of race discrimination. He initiated the administrative proceedings 41 days after his resignation, but more than three months after the allegedly discriminatory conduct had ended.

The district court held that his claim was time-barred, and the 10th U.S. Circuit Court of Appeals affirmed, holding that the filing period for a constructive discharge claim begins to run at the time of the last allegedly discriminatory act leading to the resignation, not at the time of the resignation itself.

According to Green’s petition for review, this holding was consistent with the views of the District of Columbia and the 7th Circuit that the Title VII limitations period for a constructive discharge claim begins to run from the employer's alleged discriminatory act that causes an employee to quit. However, Green said, five federal appeals courts have said a constructive discharge claim accrues when an employee actually resigns. The justices should resolve the circuit conflict because “clear and uniform limitations periods vindicate the interests of both employees and employers,” Green said.

Oral argument in the case has not yet been scheduled.

Fee Collection by Public Employees' Unions

Does allowing unions to collect agency fees from public employees who are not union members violate the employees' First Amendment rights to free speech and free association? That is the question raised by Friedrichs v. California Teachers Association (No. 14-915).

The high court granted the petition for review filed by a group of California public school teachers, agreeing to examine a decision of the 9th U.S. Circuit Court of Appeals that California laws requiring nonmember teachers to contribute to a union's bargaining, grievance adjustment and contract administration costs do not violate the U.S. Constitution because nonmembers aren't forced to support union political activities.

The court's grant of review is “an important first step” toward “finally respecting the First Amendment rights” of public employees, said Mark Mix, president of the National Right to Work Legal Defense Foundation in Springfield, Va., which filed a friend-of-the court brief supporting the teachers. “The question of whether teachers and other government employees can be required to subsidize the speech of a union they do not support is now squarely before the court,” Mix said.

Public employee union leaders, however, expressed disappointment that the court “has chosen to take a case that threatens the fundamental promise of America—that if you work hard and play by the rules you should be able to provide for your family and live a decent life.”

“The Supreme Court is revisiting decisions that have made it possible for people to stick together for a voice at work and in their communities—decisions that have stood for more than 35 years—and that have allowed people to work together for better public services and vibrant communities,” the union leaders said in a statement, signed by National Education Association President Lily Eskelen Garcia, American Federation of Teachers President Randi Weingarten, California Teachers Association President Eric C. Heins, American Federation of State, County and Municipal Employees President Lee Saunders and Service Employees International Union President Mary Kay Henry.

If the Supreme Court overrules the appellate court decision, public sector unions could be barred from collecting any dues payments even while being required, at considerable cost, to represent all members in bargaining, “in effect subsidizing free riders,” National Nurses United said in a separate statement.

The case has not yet been scheduled for oral argument.

May Worker Who Suffered No Injury Sue?

Thomas Robins initiated a class action against Spokeo for violating the Fair Credit Reporting Act (FCRA). Spokeo aggregates data from phone books, social networks, marketing surveys, real estate listings, business websites and other sources into an online database. The FCRA regulates consumer information—including consumer credit information—that is collected, disseminated and used in consumer reports.

Spokeo allegedly posted false information about Robins’ wealth, education and marital status. Robins claims that these misrepresentations will negatively affect his credit, insurance and employment prospects. The 9th U.S. Circuit Court of Appeals found that Robins had not suffered actual damages, but ultimately held that the statutory FCRA violation satisfied the U.S. Constitution’s requirement for standing to bring a lawsuit, which requires “an injury in fact.”

Dozens of federal class actions are brought under the FCRA every year—many against employers who run background checks on prospective employees—and that number has risen since the 9th Circuit decision in the case, according to Spokeo.

The appellate court’s decision in the case has gotten the attention of companies in nearly every industry. Their concern, as expressed by a friend-of-the-court brief filed in the case by the U.S. Chamber of Commerce, is that granting standing to sue to plaintiffs who have not suffered an injury-in-fact will open the flood gates to “no-injury” class actions. The case, Spokeo Inc. v. Robins (No. 13-1339), will be heard on Nov. 2.

Medical Insurance Benefits Reimbursement

On Nov. 9, the court will hear Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (No. 14-723), an Employee Retirement Income Security Act (ERISA) case asking whether a man injured by a drunk driver, who received a settlement from that driver, is required to reimburse his health plan administrator for medical expenses.

The high court will review a decision of the 11th U.S. Circuit Court of Appeals upholding a lower court’s opinion that Robert Montanile must pay back more than $120,000 to The Board of Trustees of the National Elevator Industry Health Benefit Plan after the 2008 accident in Florida. Montanile had reached a six-figure settlement with the driver at fault in the accident but had spent much of the settlement money on legal fees and caring for himself and his daughter. The appeals court ruled that the summary plan documents gave the benefits plan a first-priority claim to the settlement payment and that the plan could therefore recover the money paid out, even if Montanile had already spent it on everyday living expenses.

The circuit courts have split on whether a provision of the statute—which requires that any lawsuits by plan fiduciaries seek only “equitable relief”—allows a fiduciary to sue a participant who is no longer in possession of the disputed benefit payments. This is sometimes referred to as ERISA’s “tracing requirement,” with the courts that impose such a requirement ruling against fiduciaries in cases where participants are no longer in possession of the sought-after funds.

The majority of courts to have considered this issue have agreed with the 11th Circuit and allowed plans to bring these kinds of lawsuits. However, two circuit courts of appeal have

rejected attempts by ERISA plans to recover benefits no longer possessed by the participant or beneficiary. Those courts have found that these lawsuits didn’t seek appropriate equitable relief as required by the law.

A decision by the high court would end doubt for self-insured employers as to when they can recover benefits paid out when the recipient was later reimbursed by a third party.

Joanne Deschenaux, J.D., is SHRM’s senior legal editor.

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