U.S. Supreme Court's HR Docket


Thursday, October 18, 2012
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The nation's highest court will soon hand down rulings whose impact will be felt in HR-centric areas such as employer culpability in harassment, the Fair Labor Standards Act, the Employment Retirement Security Income Act and class-action-certification jurisdiction, experts say.


By Tom Starner


As happens every fall, the U.S. Supreme Court convened on the first Monday in October with important decisions on the docket, including a sprinkling of cases that will affect employers. During the upcoming months, employment-law attorneys point to several cases that will have an impact on HR and the workplace, some more than others.


"None of the cases are earth-shattering, but they continually raise the importance of workplace policies and how they are enforced," says Nancy Conrad, chair of the labor and employment Group at White & Williams, a Philadelphia-based law firm. "It is always advisable -- whether it is discrimination, harassment, overtime, benefits, whatever -- that employers and HR should consistently review and ensure all policies are up to date and being applied fairly and according to the law."


The first case, Vance v. Ball State University, will have the High Court reviewing a 7th Circuit (Illinois, Indiana and Wisconsin) decision on an issue that several federal appellate courts have not seen eye-to-eye on. The case pivots on whether an employer can be held vicariously liable for "severe or pervasive" workplace harassment by "supervisors" who oversee an employee's work on one hand. Or, on the other, is employer liability restricted to the action of "supervisors" who have the specific power to hire, fire, demote, promote, transfer or discipline an employee claiming harassment or discrimination. In this case, the 2nd, 4th and 9th Circuits support liability in the former scenario, while the 1st, 7th and 8th Circuits limit employer liability to the latter scenario.


In essence, the Supreme Court could end up defining the term "supervisor" for purposes of determining an employer's liability for harassment under Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, religion or sex. Conrad explains that the central conflict created by this case is what level of authority an individual must exercise over an employee to be deemed a supervisor.


In this specific case, an African-American employee in the catering department at Ball State University alleges she was subjected to racially derogatory remarks and hostility by a person that managed her work duties, and was, as a result, acting in a supervisory role. The District Court found that the person who made the derogatory remarks was not a supervisor and ruled in Ball State's favor. The U.S. Court of Appeals for the Seventh Circuit agreed with the lower court. So Vance appealed the case to the Supreme Court.


"It could have significant impact because this case will define what constitutes a supervisor for a claim in a hostile work environment," Conrad says. "If the harasser is considered to be a supervisor in this specific case, then liability shifts to the employer."


Conrad says as it stands, the law clearly says that when a supervisor harasses an employee, the employer is vicariously and strictly liable for the supervisor's actions. However, if a co-worker (not a supervisor) is the harasser, it is a more difficult obstacle for the employee to overcome, because the employee has to show the co-worker's harassment was directly due to the employer's negligence or fault.  For example, by not enforcing its policies against such behavior. Conrad explains that, should the Supreme Court rule that a supervisor is someone who merely oversees an employee's work duties (but can't hire, fire, etc.), then it would make employee harassment lawsuits easier to file. Employers would face much higher standards and be susceptible to many more harassment claims under Title VII.


"This has been murky because the federal appeals courts have been divided," Conrad says. "The Issue focuses on how much authority an agent must exercise to be deemed a supervisor. It could really have a long-term impact because it increases the number of employees who would be considered supervisors."


Lori Adelson, a partner and labor and employment attorney in the Fort Lauderdale, Fla., office of Arnstein & Lehr, calls the case significant because it really can redefine what constitutes a hostile workplace claim.


Although the lower court decision was favorable to Ball State, the court made some significant changes as to the way it defined terms related to the claims, she explains. "Before, if the employer had a policy and applied it equally and an employee didn't use it properly, the employer had a defense," she says. "Now the lower court is saying if an employee has a dispute and it turns out to be a co-worker and not a supervisor, the employer will have to prove there was not a discriminatory atmosphere. Rather than on a case-by-case basis, employers will have to prove constantly that the workplace is not hostile.


"It's almost like now they have to be super-vigilant," Adelson says. "My hope is they affirm this decision, but look at the standards the lower court issued. In other words, the Supreme Court agrees with the results but not with some other aspects of the case."


Whatever definition of supervisor comes out of it, Conrad adds, the case should remind employers about the importance of having a policy that prohibits discrimination and provides training to both supervisors and employees who are not technically supervisors.


In another employment-related case, Genesis Healthcare Corp. v. Symczyk, the Court will review a 3rd Circuit (Philadelphia) decision that considers whether a potential Fair Labor Standards Act class-action lawsuit should be disallowed when an employer offers to satisfy all of the claims of the lead plaintiff in a case.


According to Conrad, the focus will be whether or not federal courts maintain jurisdiction over the other class members' FLSA claims when the lead plaintiff's alleged damages are satisfied through settlement.


In this case, the employee claimed the employer subjected her to automatic meal breaks without pay and filed an FLSA action. She refused the settlement offer but her case was later dismissed. The conflict is an offer of judgment is designed to settle cases and end the claim. In agreeing to hear the case, the Supreme Court should clarify whether the offer can eliminate possibility of a class action lawsuit.


"This case is much more about the class certification issue than the labor and work issue," Conrad says.


In a non-employment case related to class action certification, Comcast Corp. v. Behrend, the issue, also from the 3rd Circuit, is whether a federal trial court can certify a class action without showing if the plaintiff class has offered sufficient evidence to demonstrate that the litigation may result in class-wide damages. In a past decision, Wal-Mart Stores Inc. v. Dukes, the Supreme Court struck down one of the largest potential class-action employment lawsuits on the basis that the plaintiffs failed to meet the procedural requirements for class certification. 

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"While this is an antitrust case and the facts are unrelated to labor and employment, it could make class certification easier to obtain," Conrad says. "So it could have a significant impact on labor and employment."


Finally, an ERISA case, U.S. Airways v. McCutcheon, focuses on a decision that the 3rd Circuit issued which conflicts with decisions from the five other circuit courts. Conrad explains that an employee was in an auto accident and settled a claim for $100,000. After attorney's fees and costs, the employee was left with $41,000. The medical benefit plan's language provided that the beneficiary, in this case a United Airlines employee, had to pay back the medical expenses out of any amount recovered in a settlement. Of course, the employee argued that the plan did not factor in legal fees, which made the settlement less than the amount owed. US Airways filed suit under the ERISA. The district court ordered the employee to pay the full $66,866.


Conrad says the 3rd Circuit set aside the district court's judgment, saying that to determine appropriate equitable relief, the district court must take into account the distribution of the amount recovered from third parties between the employee and his attorneys.


"This case really is more applicable to plan providers than employers," Conrad says. "The district court went with the 'plain reading' of the plan, but the Third Circuit said that it was important to take 'equity' into account. The question for the Supreme Court is whether or not the 3rd Circuit is permitted to apply equitable relief."


For employers, Conrad says the takeaway is to look closely at what their plans provide. Whether the Court rules the claim language applies to the employers' benefit or if it decides that equity must be taken into account, employers have to know that plan language will not always protect them.


Most of all, medical-benefit plans need a standard and must know what is appropriate and/or reasonable, says Adelson.


"It's a very compelling case," she says. "The employee has a major accident and gets less than their cost of medical benefits. I definitely think this is a challenging case."


Adelson suggest that Congress needs to revisit the law's language, but for now the Court needs to define what is appropriate. One suggestion is that the employee and their attorneys launch efforts to recover earlier from third parties in recovering medical costs in a case like this one.


"As it stands, it could provide a windfall for plan sponsors," she says. "Having a heart, it's hard to see a plaintiff getting nothing and the plan or employer getting everything."


Overall, neither attorney is willing to make any predictions on how the Supreme Court will decide employment-related cases, but going by recent history, nothing is certain.


"They may surprise us this year, but I am not inclined to venture any guesses," Adelson says. "The Vance case could redefine the terms of Title VII and this Court is starting to lean to being more expansive when it comes to employee rights. That case is the most concerning for employers."

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