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Weighing the Supreme Court's Decisions

From DOMA to Nassar to Vance, the U.S. Supreme Court recently decided a trio of cases that have an HR impact.

Thursday, June 27, 2013
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Within the past few days, the U.S. Supreme Court issued three important decisions of interest to employers. Taken separately, none could be considered earth-shattering. Together, however, the High Court's decisions will likely alter the employment-law landscape and spur HR executives to re-evaluate their policies and practices.

Two of the cases, Vance v. Ball State and University of Texas Southwestern Medical Center v. Nassar, were based on Title VII of the Civil Rights Act discrimination claims. Vance focused on defining who qualifies as a workplace supervisor regarding harassment and Nassar addresses employer retaliation claims. In both instances, the Court's conservative majority carried a 5-4 vote that offers relief to employers on the Title VII discrimination front.

In the third case, also decided 5-4, Justice Anthony Kennedy crossed over to join the Court's liberal Justices in striking down a federal law that defined marriage as a union between a man and a woman, thereby making it illegal to deny federal benefits to same-sex married couples. In a related matter, the Court effectively allowed same-sex marriage to stand in California. By in effect overturning the 1996 Defense of Marriage Act, the Court created much work for employers regarding employee benefit plans, even for employers who do not operate in the dozen states that recognize same-sex marriage.

http://www.hreonline.com/images/140383382SCdecisionsL.jpg"The Vance and Nassar decisions give employers and HR professionals more clarity to ensure their workforce is properly educated and trained on anti-discrimination policies, and added guidance on how employers can defend themselves against Title VII retaliation allegations," says Cara Woodson Welch, vice president of public policy, news and publications at WorldatWork, a global human resource association in Washington.

"Both Vance and Nassar represent clear wins for employers and should set the stage for summary judgments to be entered more frequently in favor of employers," adds Nancy Conrad, a partner with White and Williams, a Philadelphia law firm. Summary judgments entered by a court for one party against another party are done without a full trial. 

Regarding the DOMA decision, Cincinnati-based George Schein, a lawyer in the employee benefits and executive compensation practice at the law firm Thompson Hine, says the Supreme Court's decision will have a significant impact on employee benefit plans. For example, in the retirement plan context, employers with retirement plans will be required to recognize same-sex spouses for certain purposes. In the welfare plan context, the decision will simplify life for employers who currently provide welfare benefits to same-sex couples by eliminating the current situation in which employers provide tax-free benefits to opposite-sex partners, but must tax benefits to same-sex partners.

"While federal law does not require employers to provide any, employers who do provide spousal coverage must either begin providing same-sex spousal coverage or face legal challenges," Schein explains.

The Vance and Nassar decisions, while unrelated on the specifics, clarified for employers how workplace discrimination can be avoided.

In the Ball State case, Maetta Vance, an African-American employee, had sued over the alleged taunts and threats of physical harm by a Caucasian woman who Vance considered to be her supervisor at the Muncie, Ind., university.

The Court majority held that a supervisor is someone with the authority to make "tangible employment decisions," including hiring, firing, demoting or disciplining, not simply the authority to direct and oversee an employee's typical work.

 In 1998, the Supreme Court said Title VII let harassment victims hold employers responsible for supervisors' improper conduct, but it did not define supervisor. In Vance, Justice Samuel Alito described a much narrower supervisor definition than Vance wanted, upholding a 2011 7th U.S. Circuit Court of Appeals ruling.

Katharine Parker, a New York-based partner at Proskauer, called Vance a win for employers but also a win for employees because now there is a clear, workable standard for determining supervisory status.

"Now, all parties will know what standard governs a harassment claim," Parker says. "But it also reinforces the importance for employers to have internal policies and procedures designed to prevent harassment and discrimination and to immediately address any incidents brought to their attention."

She adds that the Court's decision is consistent with previous rulings and reinforces the "overarching public policy" in having workplace disputes resolved as soon as an incident occurs.

"The decision really reinforces that policy goal," she says. "Most employers do have comprehensive complaint policies in place. There will still be a remedy, but the first stop should be the employer's internal process. If that fails, then they can go to court."

Camille Olson, partner in the Chicago and Los Angeles offices of Seyfarth Shaw, called Vance a "huge decision" for many reasons, but two really stick out. First, she cited the much-needed "supervisor" definition. Second is the fact that the Supreme Court would champion this "bright-line" definition suggests that at least a majority of the Court believes that it will help simplify complicated Title VII lawsuits, if not help to resolve them altogether before costly litigation takes place. 

"The lasting lesson of Vance may be that the Court has recognized that Title VII lawsuits have become increasingly complicated and costly since Faragher and Ellerth [earlier cases] were decided 15 years ago," she says, "and that a certain amount of simplicity therefore is necessary in this area of law to benefit litigants, courts and jurors alike."

In the Nassar retaliation case, Naiel Nassar, a doctor, had been employed on the university faculty and as a physician at an affiliated hospital. He resigned from teaching, claiming supervisor harassment, including comments about his Middle Eastern ethnicity. Nassar claimed the hospital later backed off a job offer, retaliating for his complaining about the harassment.

The Supreme Court majority said Title VII plaintiffs must show that "but for" having enforced their rights to complain, retaliation would not have happened. The Supreme Court sent the case back to the 5th Circuit, the last court that allowed the case to move forward.

"For Nassar, the Court said the plaintiff must pass the 'but for' standard, which is harder to prove," says White and Williams' Conrad. "In other words, Nassar must prove he would have gotten the promised job 'but for' his harassment allegation alone. It's a stricter standard of proof. He must show but for the retaliation he would have gotten the job."

Patrick Bannon, a partner in Seyfarth Shaw's Boston office, calls Nassar "a relief" for employers but not a great victory. However, the Court's decision does greatly clarify this particular standard for retaliation.

"The Court held that in this instance it was not enough to support a retaliation case, you have to prove that single thing, your complaining about harassment, was the deciding factor," Bannon says. "Now, an employer can go to a court and explain why it made a decision in a situation where retaliation may appear to be at issue."

"The Nassar decision is one of a long line of cases that provides guidance to employers and employees on retaliation claims," says Welch. "It is appropriate for the courts to be specific in terms of what must be shown to prove a retaliation case, and this decision gives all parties additional guidance and clarity."

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Welch warns however that while both Vance and Nassar limit employers' Title VII liability to some extent, employers should not interpret either of these opinions as a trend toward weakening Title VII.

"Employers and HR professionals must remain vigilant in combating any form of discrimination in the workplace," she says, adding that while employers may not be liable for an off-the-cuff statement made by a co-worker, supervisors have a duty to know what is happening in the workforce. If they fail to do this and ignore complaints or evidence of discriminatory behaviors, employers should still expect to wind up in court.

"This also applies to retaliation claims," she says, noting that the Nassar decision today only clarifies the burden of proof required for retaliation claims.

"Employers and HR professionals must take all necessary precautions to ensure that employment decisions are based on legitimate, employment-specific factors," she says.

Finally, in striking down DOMA, the Court's majority ruled that it violates the U.S. Constitution's equal protection clause by singling out a class of persons entitled to marry under state law. Same-sex couples legally wed under state law now must be treated as spouses under the U.S. tax code, ERISA, and more than 1,000 other federal laws.

New York-based Roberta Chevlowe, a senior counsel in Proskauer's Employee Benefits, Executive Compensation & ERISA Litigation Practice Center, says that, when it comes to the health-benefits issue, employers will need to revisit the definition of "spouse" in their plans to ensure the definition is consistent with the employer's intent in light of the decision. Employers may also need to cease imputing income to employees for the value of the health benefits they provide to same-sex spouses. With regard to qualified pensions, plan language and procedures will need to be considered because same-sex spouses have additional rights to federally-protected benefits. 

"Employers should expect that employees will immediately start asking questions about their rights with regard to various employee benefits," Chevlowe says, "and employers will need to consider carefully the scope of the decision and various issues relating to the implementation and effective date of the decision with regard to these issues."

Catherine Stamm and Valerie Grace, co-authors of a report by Mercer's Washington Resource Group, explain that the same-sex marriage rulings have wide-ranging implications for most workplace benefit plans, requiring immediate employer action. From a benefits perspective, for example, the ruling's broad impact extends to matters such as spousal protections and rollover rights in retirement plans, the taxation of group health benefits, COBRA health coverage elections, special enrollment rights under the Health Insurance Portability and Accountability Act, and leave rights under the Family and Medical Leave Act.

"The rulings take effect immediately, possibly even retroactively," Stamm says. "If marital status affects the delivery of benefits to an employee's same-sex spouse or that spouse's child, employers may need to amend the plan's 'spouse' definition; reprogram tax reporting systems; and update enrollment forms, distribution election packages, tax notices, beneficiary designation forms, SPDs and the like."

Other steps may involve filing refund claims for taxes paid on the value of same-sex spouses' healthcare coverage, revisiting domestic partner policies and evaluating whether DOMA "workarounds" adopted in the past are still needed to achieve HR objectives.

"The Supreme Court's DOMA decision leaves many questions to be resolved by subsequent regulation and undoubtedly litigation," says Schein. "Conspicuously unresolved at this point is the interplay between the states that recognize same-sex marriage and those that do not."

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