In case you missed Employment Law Daily’s in-depth coverage, here’s a recap of just some of the key developments in the L&E community for June 2018.
BUSY END TO SUPREME COURT TERM
Justice Kennedy announces retirement. Although the Court issued several major decisions in June, arguably the biggest news out of SCOTUS was Justice Kennedy’s announcement on June 27 that he will step down at the end of July. Kennedy, the regular swing vote on the High Court, submitted a formal notification to President Trump of his retirement, empowering the President to move the Court further rightward as he leaves an indelible mark on the federal judiciary. “It has been the greatest honor and privilege to serve our nation in the federal judiciary for 43 years, 30 of those years on the Supreme Court,” Kennedy said, noting in parting his “admiration for his colleagues on the Court.” Justice Kennedy was nominated by President Reagan and took his oath of office on February 18, 1988.
Court deals blow to public sector unions . . . On the same day Justice Kennedy announced his retirement, the U.S. Supreme Court issued its highly anticipated decision in Janus v. AFSCME, barring unions from imposing agency fees on public employees who are not union members and overturning High Court precedent that had persisted for four decades: its 1977 decision in Abood v. Detroit Board of Education, which found that levying “agency” fees to cover a union’s costs of collective bargaining, and other activities that advantaged members and nonmembers alike, did not unduly intrude upon the rights of nonmembers.Abood, said the Court, was inconsistent with other First Amendment cases and has been undermined by more recent decisions. The outcome, handed down in a sharply divided 5-4 decision, surprised no one.
The decision is an undisputedly critical blow to public employee unions—and to the labor movement as a whole—which now must redouble its efforts to bring new dues-paying members into the fold. And it will have to do so with union organizing coffers precipitously diminished. One day after this landmark decision, the Supreme Court issued an order directing the Seventh Circuit to reconsider a decision in which it affirmed a district court’s refusal to certify a class of caregivers seeking a refund on their “fair share” fees. The High Court granted certiorari in Riffey v. Rauner, Dkt. No. 17-981, vacated the appellate court’s opinion, and remanded for further consideration in light of Janus.
. . . hands Trump win in battle over ‘travel ban 3.0.’ And just a day before the Janus decision, the Trump Administration scored a big victory when the High Court, in another sharply divided 5-4 opinion, ruled in Trump v. Hawaii that the President lawfully exercised the broad discretion granted to him under the Immigration and Nationality Act when he suspended the entry of aliens into the United States under the third version of his controversial series of “travel bans.” The Court’s decision reversed the nationwide preliminary injunction affirmed by the Ninth Circuit. President Trump’s third iteration of the “travel ban,” Proclamation 9645, suspended and limited indefinitely the entry into the United States of foreign nationals of Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela, and Yemen. (It effectively removed Sudan from the second travel ban and added Chad, North Korea, and Venezuela). On April 10, 2018, Chad was dropped from the travel ban because the country had raised its security standards to meet U.S. national security requirements.
Mincing no words in her dissent, in which Justice Kagan joined, Justice Sotomayor wrote: “The United States of America is a Nation built upon the promise of religious liberty. Our Founders honored that core promise by embedding the principle of religious neutrality in the First Amendment. The Court’s decision today fails to safeguard that fundamental principle. It leaves undisturbed a policy first advertised openly and unequivocally as a ‘total and complete shutdown of Muslims entering the United States’ because the policy now masquerades behind a facade of national-security concerns.”
Will invalidating civil service appointments of ALJs reach beyond the SEC? On June 21, the Court in Lucia v. SEC held that the SEC’s administrative law judges are inferior officers of the U.S. government for purposes of the U.S. Constitution’s Appointments Clause, largely comparing the SEC’s ALJs to the Tax Court’s special trial judges whom the Court previously held were officers in its Freytag opinion. Authored by Justice Kagan, the decision is consistent with the Tenth Circuit’s Bandimere opinion, which held the SEC’s ALJs are officers. An open question of interest to employment lawyers is whether the Court’s opinion will be limited to the SEC or potentially impact OSHA or MSHA citations, or ALJs for the NLRB. According to Ogletree Deakins’ Arthur G. Sapper, who wrote a post about the case when the Court granted cert in January 2018, “The key fact in the SEC challenge is that the SEC ALJs were appointed by the SEC’s Chief Judge, who is not a ‘Head’ of the SEC. By contrast, Occupational Safety and Health Review Commission (OSHRC) ALJs are appointed by the OSHRC’s chairman, who is a ‘Head’ and thus satisfies the requirement of the Appointments Clause.”
American Pipe tolling does not preserve subsequent class actions. On June 11, the High Court, in China Agritech, Inc. v. Resh, ruled that American Pipe tolling does not allow a previously absent class member to bring a subsequent class action outside the limitations period. “The watchwords of American Pipe are efficiency and economy of litigation, a principal purpose of Rule 23 as well,” Justice Ginsburg wrote for the eight-member majority. “Extending American Pipe tolling to successive class actions does not serve that purpose.” Justice Sotomayor concurred in the judgment only for cases governed by the Private Securities Litigation Reform Act.
Cake show owner prevails over same-sex couple in wedding cake controversy . . . On June 4, the Court decided Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission, a nonemployment case that pitted a business owner’s personal beliefs against the rights of a gay couple. With Justice Kennedy writing for the majority, the Court ruled that a Colorado civil rights commission violated the cake shop owner/designer’s right to the free exercise of religion by failing to consider, with the constitutionally required neutrality, his religious objections to creating a wedding cake for a same-sex wedding. The “lack of neutrality” was evident to the Court from commissioners’ comments disparaging the shop owner’s faith and likening it to the defense of slavery, and from the disparate treatment his case received compared to cases of other bakers objecting to making cakes with anti-gay messages. Justice Kagan filed a concurring opinion joined by Justice Breyer, and Justice Gorsuch filed a concurring opinion in which Justice Alito joined. Justice Thomas concurred in part. Justice Ginsberg filed a dissenting opinion, joined by Justice Sotomayor.
. . . sending florist’s case back to state high court. On June 25, the Supreme Court sent the case of a florist who refused, on religious grounds, to provide flowers for a same-sex wedding—and was found to have violated her state’s antidiscrimination law as a result—back to the Washington Supreme Court to reconsider its decision in light of Masterpiece Cakeshop v. Colorado Civil Rights Commission. In Arlene’s Flowers, Inc. v. Washington, the Court granted the petition for review, vacated the state high court’s judgment, and remanded.
Challenges to Obama-era tip pooling regulation dropped from docket. Also in June, the Court denied the petitions for certiorari filed by Wynn Las Vegas and the National Restaurant Association (and others) in consolidated cases that challenged a controversial Obama-era tip pooling rule that has since been rescinded and replaced by new provisions. The tip pooling rule took a series of twists and turns that went beyond the Obama-era rule. A fresh controversy erupted when the DOL proposed a new tip rule that was said to permit employers to pocket tips, but that firestorm was squelched when Congress took action to address the concerns about the proposed rule in the Consolidated Appropriation Act, 2018 (CAA) (H.R. 1625).
FEDERAL COURTS OF APPEALS
5th Cir.: Administrative exhaustion is not a jurisdictional requirement; Title VII suit revived. Title VII’s administrative exhaustion requirement is not a jurisdictional bar to suit, the Fifth Circuit held, noting the circuit’s discordant case law on the question and citing the rule of orderliness to choose the line of precedent that finds exhaustion is merely a prudential prerequisite. Consequently, a county employer facing a Title VII action forfeited its exhaustion defense by not timely raising it, so a district court erred in disposing of the employee’s claim on exhaustion grounds. Reviving her suit for a second time, the appeals court reversed summary judgment and remanded (Davis v. Fort Bend County, June 20, 2018, Elrod, J.).
6th Cir.: CBAs clear; no lifetime healthcare benefits for Honeywell retirees. Reversing a district court’s conclusion that Honeywell retirees were entitled to lifetime healthcare benefits, the Sixth Circuit noted that general principles of contract interpretation applied and, because the language of the collective bargaining agreements was clear, there was no need to look to extrinsic evidence as the lower court had. While it might seem unusual, the CBAs specifically provided for lifetime healthcare benefits to surviving spouses and dependents, but did not provide such lifetime benefits to retirees themselves (Fletcher v. Honeywell International, Inc., June 8, 2018, Gibbons, J.).
7th Cir.: No fee award in EEOC’s Sec. 707(a) severance agreement suit against CVS. Finding the EEOC’s Section 707(a) pattern or practice lawsuit against CVS Pharmacy over its use of a broad (and potentially chilling) severance agreement to be neither legally nor factually frivolous, the Seventh Circuit reversed an attorneys’ fee award to CVS of over $300K. Stressing that “it takes much more than a loss on the merits to warrant a fee award,” the appeals court found the EEOC’s novel legal distinction between Section 707(a) and Section 707(e) procedural requirements affecting conciliation to be a “colorable legal argument” with some basis in the text and with no precedent squarely against it. Plus, even the district court found the EEOC’s factual foundation for bringing the case was reasonable, and the appeals court agreed, concluding that the “district court’s decision impermissibly rested on hindsight” (EEOC v. CVS Pharmacy, Inc., June 8, 2018, Wood, D.).
7th Cir.: Disputed whether maintenance man was employee or independent contractor. Finding genuine disputes of fact material to the determination of a plaintiff’s employment status, the Seventh Circuit reversed a district court’s grant of summary judgment holding that the plaintiff was an independent contractor, rather than an employee. Not only did the appeals court find disputed facts as to the nature and degree of control the putative employer exercised over the manner in which the plaintiff performed his work, there was a fact dispute as to the origins of the tools, materials, and equipment the plaintiff required to perform his work. Finally, the appeals court found unanswered questions as to how long and to what extent the parties’ contracts actually governed their relationship (Simpkins v. DuPage Housing Authority, June 20, 2018, Bauer, W.).
9th Cir.: Hotel owner on constructive notice of predecessor’s pension plan liability. A corporate hotel owner incurred withdrawal liability for the predecessor owner’s unpaid employee pension payments because the new owner had constructive notice of the withdrawal liability, the Ninth Circuit ruled. The appeals court reversed the district court’s determination that the new owner had no actual notice and constructive notice didn’t apply, finding instead that constructive notice was consistent with the Multiemployer Pension Plan Amendment Act’s purpose and legislative history. The equity group purchaser reasonably should have discovered the withdrawal liability because it had previous experience with similar purchases and could have reviewed publicly available documents, required the predecessor company to produce the information, or contacted the pension plan directly (Heavenly Hanna LLC dba Travaasa Hotel Hana v. Hotel Union & Hotel Industry of Hawaii Pension Plan, June 1, 2018, Thomas, S.).
D.C. Cir.: Union gets second shot to contest regulations allowing student aliens to stay for STEM jobs. In a lawsuit stemming from regulations allowing certain nonimmigrant aliens on student visas to remain in the United States for up to three years after finishing a degree in order to pursue related work, the D.C. Circuit returned the case to the district court that had dismissed all of a union’s claims. Partially reversing the lower court’s decision, the appeals court instructed the lower court to reconsider one of the counts related to a rule promulgated in 2016 that allowed the students to remain for up to three years working in STEM jobs (Washington Alliance of Technology Workers v. U.S. Dept. of Homeland Security, June 8, 2018, Henderson, K.).
AT THE NLRB
NLRB to issue ‘joint employer’ rule. Stymied in its efforts to undo its Obama-era Browning-Ferris decision, which expanded the definition of “joint employer” and thereby increased potential liability under the NLRA for companies that utilize contingent workforce and franchise arrangements, the NLRB on May 9 announced it was considering resolving the matter through issuance of a proposed rule. That news prompted a May 29 letter to NLRB Chairman John F. Ring from three senators, pushing back against the news that the agency was toying with formal rulemaking. In a June 5 letter to the senators, Ring responded: “Candor requires me to inform you that the NLRB is no longer merely considering joint-employer rulemaking. A majority of the Board is committed to engage in rulemaking, and the NLRB will do so. Internal preparations are underway, and we are working toward issuance of a Notice of Proposed Rulernaking (NPRM) as soon as possible, but certainly by this summer.”
“Rulemaking is appropriate for the joint-employer subject because it will permit the Board to consider and address the issues in a comprehensive manner and to provide the greatest guidance,” Ring wrote. “Although legal standards of general applicability can be announced in a decision of a specific case, case decisions are often limited to their facts. With rulemaking, by contrast, the Board will be able to consider and apply whatever standard it ultimately adopts to selected factual scenarios in the final rule itself. In this way, rulemaking on the joint-employer standard will enable the Board to provide unions and employers greater “certainty beforehand as to when [they] may proceed to reach decisions without fear of later evaluations labeling [their] conduct an unfair labor practice,” as the Supreme Court has instructed us to do.”
Board upholds Member Emanuel’s disqualification from participation in Hy-Brand II . . . Finding that an employer had not identified any material error or extraordinary circumstances warranting reconsideration under Section 102.48(d)(1) of the Board’s Rules and Regulations, a four-member panel of the NLRB denied its motion for reconsideration of Hy-Brand II, 366 NLRB No. 26. The Board rejected challenges by the employer and General Counsel to the determination by the NLRB’s Designated Agency Ethics Official that Member Emanuel was disqualified from participating in the case. Chairman Ring and Member Kaplan filed a concurring opinion. Members Pearce and McFerran filed a separate concurring opinion. Member Emanuel was disqualified from participating in the case (Hy-Brand Industrial Contractors, Ltd., June 6, 2018).
. . . will conduct ethics and recusal process review. The Board subsequently announced that it would undertake what it called “a comprehensive review of its policies and procedures governing ethics and recusal requirements for Board Members.” The initiative is intended to ensure that the agency’s stakeholders and the American people generally can have full confidence in the Board’s integrity and its recusal processes. The move comes in the aftermath of concerns raised by the Board’s December 2017 Hy-Brand Industrial Contractors decision, which would have overturned the controversial Browning-Ferris joint-employment standard had the decision not later been vacated in response to ethical concerns raised over Board Member William Emanuel’s participation in that ruling. The decision was rendered during a narrow window of a Republican majority on the Board, before the departure of Republican Chair Philip Miscimarra closed that window, albeit temporarily.
New memo talks permissible vs. impermissible handbook rules in light of Boeing. In the aftermath of its December 2017 Boeing Company decision, the NLRB issued new guidance on handbook rules. The June 7 General Counsel memorandum provides general guidance for Regions about the placement of various types of rules into the three categories set out in Boeing, as well as the Section 7 interests, business justifications, and other considerations that Regions should take into account in arguing to the Board that specific Category 2 rules are unlawful. Not only did the Board in Boeing add a balancing test, it also significantly altered its jurisprudence on the reasonable interpretation of handbook rules. The Trump Board “severely criticized” Lutheran Heritage and its progeny for prohibiting any rule that could be interpreted as covering Section 7 activity, as opposed to only prohibiting rules that would be so interpreted. The new memo states that ambiguities in rules are no longer interpreted against the drafter (upending any traditional contract interpretation approach), and generalized provisions should not be interpreted as banning all activity that could conceivably be included.
OTHER AGENCY NEWS
Proposed Executive Branch reorg plan would merge labor and education departments . . . On June 21, the White House announced a proposed reform and reorganization plan that President Trump contends will make the federal government “more responsive and accountable to the American people.” That plan includes a proposed merger of the Departments of Education and Labor into a single Cabinet agency which, according to the Trump Administration, would better meet the needs of American workers and students. The move follows Trump’s earlier Executive Order 13781, directing the Office of Management and Budget to work on a comprehensive plan to reorganize the Executive Branch. The reform proposal came after a year of planning about how the Trump Administration believes the federal government could be made more efficient, effective, and accountable. The White House said that the planning included input from stakeholders, agencies, and the public. Conspicuously missing in the aftermath of the merger announcement was any official statement by Secretary of Labor Alexander Acosta, who has previously been vocal in his support of Trump Administration policies.
CSX Transportation to pay $3.2M to settle EEOC disparate impact suit over pre-employment testing. CSX Transportation, Inc. (CSXT), one of the nation’s leading transportation suppliers, will pay $3.2 million and furnish other relief to settle a companywide sex discrimination lawsuit filed by the EEOC, the federal agency announced on June 13. According to the EEOC, CSXT conducted isokinetic strength testing as a requirement for workers to be hired for various jobs. The EEOC said that the strength test used by CSXT, known as the “IPCS Biodex” test, caused an unlawful discriminatory impact on female workers seeking jobs as conductors, material handler/clerks, and a number of other job categories. The EEOC also charged that CSXT used two other employment tests, a three-minute step test seeking to measure aerobic capacity and a discontinued arm endurance test, as a requirement for selection into certain jobs, and that those tests also caused an unlawful discriminatory effect on female workers.
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