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A big day at the Supreme Court for employers

June 25th, 2013  |  Lisa Milam-Perez

The Supreme Court’s 2012-2013 term is drawing to a close with a bang, not a whimper — or, in the eyes of employees and civil rights plaintiffs, perhaps a thud. And as one management attorney noted, with a “SCOTUS smackdown” of the EEOC as well.

Last week, in a non-employment dispute, a divided High Court handed a victory to parties seeking to avoid class arbitration when it ruled, in American Express Co v Italian Colors Restaurant, that courts may not invalidate class arbitration waivers merely because a plaintiff’s cost of arbitrating a dispute individually would exceed the potential recovery. The commercial case had stark implications for parties seeking to evade mandatory arbitration of employment disputes. As the Equal Employment Advisory Council had argued in an amicus brief in the case, “Invalidating arbitration agreements because they contain class action waivers defeats the advantages and mutual benefits of arbitration, especially in the employment context.” Urging reversal of the appellate decision, it wrote “The Second Circuit’s ruling would send every case in which a party seeks to represent coworkers into court for a mini-trial on his prohibitive costs claim, however thin, despite his prior agreement to arbitrate.” The EEAC needn’t have worried.

But the employment law decisions issued Monday, the last week of the term, were even clearer wins for employers. In Vance v Ball State University, the 5-4 majority endorsed a narrow definition of the meaning of “supervisor” for purposes of determining employer liability under Title VII. In University of Texas Southwestern Medical Center v Nassar, a divided High Court rejected the notion that the reduced “motivating factor” standard of causation adopted for use in Title VII discrimination cases applied with equal force to claims of retaliation under the Act. And, while not an employment case, Fisher v University of Texas at Austin reflected the Court’s continuing willingness to revisit the wisdom of affirmative action, tightening the standards by which the government may implement race-conscious actions.

Several members of the Employment Law Daily Advisory Board shared their perspectives on the impact of today’s rulings for employers and employees.

Supervisory status under Title VII. When is an employee a “supervisor” for purposes of vicarious liability under Title VII? When he or she is empowered to take tangible employment actions against the alleged victim of unlawful conduct, the Court held in Vance v Ball State University, resolving a circuit court split and rejecting the EEOC’s guidance on the matter. (Lorene Park covered the decision for Employment Law Daily.)

Under Title VII, an employer’s liability for workplace harassment may depend on whether the harasser is a coworker or a “supervisor.” An employer is strictly liable for supervisor harassment that involves a tangible employment action. For other forms of harassment, though, the employer may avoid liability by establishing, as an affirmative defense, that it exercised reasonable care to prevent and correct any harassing behavior and the employee unreasonably failed to take advantage of the preventive or corrective opportunities provided. In a divided opinion, the Supreme Court held “an employee is a ‘supervisor’ for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.” In the case at hand, there was no evidence that the employer empowered the individual in question to take any tangible employment actions against the employee, so she was not a supervisor. Therefore, the courts below correctly applied the negligence framework used for coworker conduct.

“In Vance, the Court sets forth a standard that affords employers greater clarity in determining who is and is not a supervisor under Title VII,” according to Keith Watts, managing shareholder in the Orange County office of Ogletree Deakins. “Employers no doubt are welcoming the conservative majority’s decision, because it narrows the definition of supervisor to those who can effect a ‘significant change in employment status’ on the employee.”

“The decision was also a direct rebuke to the EEOC and its ‘nebulous definition’ of a ‘supervisor,’” Watts added. “In what can only charitably be described as a ‘SCOTUS smackdown,’ the Court left little doubt about how it views the EEOC’s expansive, overbroad approach to statutory interpretation, application and guidance. One thing is certain: This will likely not be the last case where a conservative Court majority favors narrowing, rather than expanding, the definitions under and application of Title VII.”

“The decision in Vance makes sense,” said Ann Margaret Pointer, a partner in the Atlanta office of Fisher & Phillips. “The Court relied on everyone’s common understanding of what makes a supervisor a supervisor: someone who can affect real, that is, ‘significant’ terms of employment, not just someone who can make daily job assignments, such as scheduling work times and making routine task assignments.”

“No doubt employers want to avoid negligence-type discrimination claims and do not willingly permit team leaders or others to engage in acts of discrimination or harassment against coworkers,” Pointer added. “That’s why employers today typically have good programs for communicating their expectations that all employees treat each other with dignity and respect and make decisions on a nondiscriminatory basis. They also try to have complaint resolution processes so that serious problems do not develop. A Vance decision that had made every job assignment a matter on which an employer could be subject to strict liability would simply be untenable in today’s workplace.”

Causation standard for retaliation claims. Title VII retaliation claims must be proved according to traditional principles of but-for causation, a divided High Court ruled in University of Texas Southwestern Medical Center v Nassar. An analysis of the plain language and the structure of Title VII, as amended by the Civil Rights Act of 1991, and the High Court’s own reasoning in Gross v FBL Financial Servs compelled the conclusion that while allegations of discrimination are subject to the reduced “motivating factor” standard, retaliation claims are not, the majority held. It declined to give Skidmore deference to the EEOC’s position to the contrary, as set forth in its guidance manual, finding the agency’s explanations for its position lacked persuasive force.

“The requirement that retaliation plaintiffs demonstrate that in fact they suffered injury because of having engaged in a protected act is not surprising in light of the precise words of the statute,” said Pointer. “The burden placed on a retaliation plaintiff in regard to that kind of claim is no different from the burden placed on plaintiffs who contend they suffer injuries from an automobile accident, or virtually any other kind of negligence claim. The ruling makes sense from the standpoint of the way most statutes and common law legal requirements work.”

The majority opinion, authored by Justice Kennedy, noted that a lessened causation standard would mean more frivolous claims and would “siphon resources from efforts by employers, administrative agencies, and courts to combat workplace harassment.” Typically appellate courts provide “syllogistic rationales” of this sort, but little to guide practitioners (or employers), noted Richard Gerakitis, a Troutman Sanders partner and leader of the firm’s labor and employment practice group. However, in this instance, “Justice Kennedy’s argument or prediction does provide a useful explanation for how the lessened standard … would tyrannize employers’ indecision on managing a complaining employee’s performance.”

Justice Ginsburg, dissenting, had argued to no avail that the use of two different standards would vex both trial judges and juries. Gerakitis did not share her concern, although he foresees the procedural jockeying to come. “There are many examples of ‘but for’ and ‘a motivating factor’ definitions that courts have long used that should not hamstring judges and juries. But it’s likely that battles will be fought over the submission of special interrogatories and verdict forms that try to identify myriad examples of retaliation and ask juries to decide if those examples would dissuade a reasonable employee from raising concerns of workplace discrimination.”

Does the Nassar ruling affect how he advises his employer clients? The decision offers “yet another example of how contemporaneous documentation by the employer is critical to defending against a retaliation claim,” Gerakitis replied. “Juries will often decide on the basis of workplace fairness that someone is a victim of retaliation if the employer’s treatment was harsh and haphazard. A jury charge on ‘but-for’ still may not prevent a jury from finding for the employee in those instances.”

Of the recent High Court rulings, the Nassar decision was the “biggest deal for employers,” according to Chris Bourgeacq, general attorney, labor/HR, for AT&T Services, Inc. in Austin, Texas. “A huge deal. Not only for retaliation litigation, but also for the dozens of retaliation claims in the regulatory field under the various statutes that OSHA handles. Expect to see some significant fallout from that decision as the courts and OSHA operate under this new framework,” Bourgeacq predicted.

Consideration of race in admissions. In applying the narrow tailoring aspect of strict scrutiny, the Fifth Circuit erred in giving deference to the University of Texas’ assertion that its way of considering race in its admissions process was constitutionally permissible, ruled the Supreme Court in a 7-1 decision. Remanding Fisher v University of Texas at Austin, the Court directed the Fifth Circuit to assess whether the university has offered sufficient evidence that its admissions program is narrowly tailored to obtain the educational benefits of diversity and that no workable race-neutral alternatives would suffice. (Cynthia L. Hackerott analyzed the affirmative action decision for Employment Law Daily.)

The ruling “will certainly have fallout in the employment context as well,” according to Pointer. She cited employers’ use of criminal background checks as one example. In El v Southeastern Pennsylvania Transit Authority, a Third Circuit decision, an employer allegedly violated Title VII by rejecting job applicants with certain types of criminal records to operate buses used by individuals who were mentally disabled. “In that case, the employer put forth substantial proof from expert witnesses to establish why it had adopted the particular screening requirements it had adopted, and it tried to show that it had explored and found no alternative that would have been less discriminatory. The substantial burdens undertaken by the transit authority show how difficult it is to show — that is, to meet the burden of proof — by admissible evidence that there is no other means to achieve a laudatory goal or necessary goal; in that case, avoiding injury to a vulnerable ridership population.”

“It is going to be very difficult and very expensive for a university or other public institution to demonstrate that it has narrowly tailored an affirmative action plan and that there is no workable race-neutral means to achieve the educational benefits of diversity than the course it has taken,” Pointer concluded.

A plaintiff lawyer’s view.Vance and Nasser are a lot alike — a five-justice majority and the same dissenters recommending legislative action,” noted David Wachtel, a founding partner of the Washington, D.C., firm Bernabei & Wachtel. “Both results are in favor of employers but neither completely bars any type of claim.”

“Despite the disappointing result, a verdict for plaintiff is still possible in a strong coworker harassment or retaliation case,” Wachtel said. “If an employer cannot prove it took reasonable steps to prevent and correct sexual harassment, it should at least be possible for the employee to prove the employer was negligent. And if an employee can prove that retaliation was a motivating factor behind her firing, that employee should at least have an opportunity to show that retaliation was the ‘but for’ cause of her firing. ‘But for,’ after all, does not mean ‘sole cause.’”

“Still,” he observed, on balance, “the two decisions will make it harder to enforce employee rights because in these two important areas (31,000 retaliation charges in 2012, Wachtel noted), we can expect more challenging jury instructions.”

Gerakitis also predicted that the view from across the aisle is not so bad as it might first seem. Speaking to the Nassar decision, he noted that “in instances of ‘constructive discharge,’ it would appear that the retaliation will have to be highly pronounced and considerable to warrant the retaliation claim. However, in those instances where there is a tangible employment action taken by the employer (such as discharge or demotion), this case should not dissuade plaintiffs’ attorneys from continuing to pursue them.”

Will Congress “grant cert”? Justice Ginsburg (joined by Justices Breyer, Sotomayor, and Kagan) issued a sharp dissent in both Vance and Nassar. In the latter, for example, she wrote that the majority had seized on a statutory provision that was adopted to strengthen Title VII “and turned it into a measure reducing the force of the ban on retaliation.” She urged legislative action in both cases “to restore the robust protections against workplace harassment the Court weakens today.” Ending on a call to arms, Ginsburg noted that “the ball was once again in Congress’ court to correct the error into which this Court has fallen.”

Watts sees a Congressional response as a distinct possibility. Commenting specifically on Vance, he noted that “Congress may be called on to overturn the Court’s interpretation of who is and is not a supervisor in much the same way it stepped in with legislation following the aftermath of the Ledbetter case (the Supreme Court’s 2007 decision in Ledbetter v Goodyear Tire & Rubber Co, Inc) — to right what Congress perceived as a wrong outcome.” Watts urged employers to “be cautious in their celebration. We may expect a Lilly Ledbetter revisited.”

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