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ADEA exclusivity for state workers first of many employment issues on Supreme Court docket

By Deborah Hammonds, J.D. and Pamela Wolf, J.D.

Despite the government shutdown, the Supreme Court is expected to officially start its new term on Monday, October 7. There are several provocative employment law issues awaiting the High Court during the 2013-2014 term, including the first case scheduled for oral arguments, Madigan v Levin (Dkt No 12-872), in which the Court will determine whether state and local government employees may avoid the ADEA and bring age discrimination claims directly under the Equal Protection Clause and Section 1983.

After he was terminated, an assistant attorney general filed a lawsuit alleging, among other claims, a Sec. 1983 equal protection claim against the Illinois attorney general and several of her staff individually, asserting that he had been fired due to age discrimination. One judge concluded, on a motion to dismiss, that the employee’s Sec. 1983 claim was precluded because the ADEA is the exclusive remedy for age discrimination in employment. A subsequent judge reached the opposite conclusion again while ruling on a motion to dismiss. The individual defendants appealed.

Resolving a question of first impression, the Seventh Circuit held that the ADEA is not the exclusive remedy for age bias claims and affirmed a district court’s conclusion that the discharged assistant attorney general could proceed with his Sec. 1983 equal protection suit against individual defendants. Further, because it was clearly established at the time of his discharge that age discrimination in employment violates the Equal Protection Clause, the Illinois attorney general and other individual defendants were not entitled to qualified immunity.

Other circuits faced with the question of whether the ADEA precludes a Sec. 1983 claim have relied on the Fourth Circuit’s reasoning in Zombro v Baltimore City Police Dept and concluded that such claims are precluded. District courts are split on the issue, and two Northern District of Illinois judges have held the ADEA does not preclude a Sec. 1983 equal protection claim.

In reaching its determination, the Seventh Circuit considered existing Supreme Court and other precedent, the statutory language and legislative history of the ADEA, and its own comparison of the rights and protections afforded by the ADEA and Sec. 1983. Although the ADEA enacts a comprehensive statutory scheme for enforcement of its own statutory rights, the circuit court found that it does not preclude a Sec. 1983 claim for constitutional rights.

Calling it “admittedly a close call, especially in light of the conflicting decisions from our sister circuits,” the Seventh Circuit based its holding on “the ADEA’s lack of legislative history or statutory language precluding constitutional claims, and the divergent rights and protections afforded by the ADEA as compared to a [Sec.] 1983 equal protection claim.”

The petition for certiorari was filed on January 14 and the High Court granted cert on March 18. The question the Court agreed to address is: “Whether the Seventh Circuit erred in holding, in an acknowledged departure from the rule in at least four other circuits, that state and local government employees may avoid the ADEA’s comprehensive remedial regime by bringing age discrimination claims directly under the Equal Protection Clause and Sec. 1983.”

Also on the docket are the following issues of relevance to labor and employment practitioners:

NLRB recess appointments Perhaps the most controversial labor and employment issue facing the High Court next term is the constitutionality of President Obama’s recess appointments to the NLRB. In NLRB v Noel Canning (Dkt No 12-1281), the Court will review a decision by the D.C. Circuit invalidating a Board ruling against employer Noel Canning, holding that the agency lacked a quorum because the three “recess” appointments to the Board were unconstitutional.

The government has asked the Supreme Court to overturn the D.C. Circuit’s decision. The U.S. Chamber of Commerce’s National Chamber Litigation Center has filed a brief on behalf of its client and Chamber member, Noel Canning — the first time the Chamber has directly represented a Chamber member — asking the Court to uphold the appeals court decision.

Those who have urged the Court to invalidate the recess appointments, including 45 Republican Senators who pressed the Court to take the case and invalidate the recess appointments, argue that because the Senate was not in recess, the president’s recess appointments to the Board were invalid and the Board, accordingly, was operating without a quorum. Citing New Process Steel, LP v NLRB, which holds that the Board cannot act without a quorum of three members, the D.C. Circuit held the Board was not authorized to conduct business on the day that it issued the challenged ruling. The Third and Fourth Circuits have since reached similar conclusions.

The outcome of the case has huge implications, with the potential to invalidate all decisions of the Board since the president’s recess appointments in January 2012. Oral argument has not yet been scheduled.

Affirmative action programs. In Schuette v Coalition to Defend Affirmative Action v Regents of the University of Michigan (Dkt No 12-682), the Supreme Court will review an en banc Sixth Circuit decision that a voter-approved ban on government affirmative action in the state of Michigan, as it applies to race-conscious admissions policies in public colleges and universities, violated the Equal Protection Clause. Although the appeals court ruling was limited to the area of university admissions, the constitutional analysis could be applicable to race-conscious decisions in state employment and the awarding of government contracts.

According to the Sixth Circuit, the measure to amend the state’s constitution to prohibit the state, state universities, and all other state entities from discriminating against or granting preferential treatment based on race, sex, color, ethnicity, or national origin violated equal protection under the political process theory because equal protection does not permit the kind of political restructuring that the measure affected.

Specifically, the question before the Court is: “Whether a state violates the Equal Protection Clause by amending its constitution to prohibit race and sex-based discrimination or preferential treatment in public-university admissions decisions.”

The case is scheduled for oral argument on October 15.

ERISA statute of limitations case. The Court has granted review of the question of when a statute of limitations should accrue for judicial review of an ERISA disability adverse benefit determination. The court declined to review two other questions presented in the case that involved notice of the time limits for judicial review of an adverse benefit determination and the remedy for failure to provide such notice. The case is Heimeshoff v Hartford Life & Accident Insurance Co. and Wal-Mart Stores, Inc (Dkt No 12-729)

In an unpublished opinion, the Second Circuit affirmed a lower court’s decision that the plaintiff’s claim for long-term disability benefits was untimely because she filed her action outside the policy-prescribed, three-year statute of limitations period. Hartford’s plan provided that its three-year limitations period ran from the time that proof of loss was due under the plan. The plaintiff filed her claim challenging the denial of long-term disability benefits more than three years after her proof of loss was due. The court rejected her argument that Hartford’s contractual limitations period did not begin to run until the final denial of benefits.

There is conflict among the circuits over the accrual time for ERISA statutes of limitation. The Fourth and Ninth Circuits have ruled that a plan’s statute of limitations cannot begin running until the claimant has exhausted administrative remedies and the plan has issued a formal, final adverse benefits determination. Other circuits, including the Second, have ruled that a plan’s pre-denial statute of limitations is enforceable if “reasonable,” as determined on a case-by-case basis.

The petition indicates that the first approach by the Fourth and Ninth Circuits provides a bright-line accrual time for the statute of limitations, which is consistent with ERISA’s goals for plan fiduciaries to act in the sole interests of beneficiaries. The approach of the remaining circuits impairs the rights to judicial review, contrary to the ERISA statute, regulations, and Supreme Court decisions, according to the petition.

The Court will hear arguments in the case on October 15.

“Changing clothes” under FLSA. The High Court, in Sandifer v U.S. Steel (Dkt No 12-417), will consider what constitutes “changing clothes” within the meaning of Sec. 203(o) of the FLSA. Under this provision, employees’ donning and doffing activities may be exempt from compensable time under the express terms of, or custom or practice under, a bona fide collective bargaining agreement.

Granting a petition filed by a class of some 800 current and former workers employed at a Gary, Indiana, U.S. Steel plant, the Court agreed to resolve a key circuit conflict regarding the scope of this provision. The employees contend that the Seventh Circuit’s decision conflicted with the First Circuit’s holding in Tum v Barber Foods, Inc and, more importantly, with the High Court’s decision in IBP, Inc v Alvarez.

Hourly workers at U.S. Steel’s Gary Works plant had filed an FLSA collective action alleging they were unlawfully denied pay for the time they spent putting on and taking off their work clothes and going to their work stations and back again at the end of the day. The Seventh Circuit held that because the applicable CBA did not require compensation for donning and doffing activities, U.S. Steel did not have to pay workers for such time. The Seventh Circuit’s ruling was in accord with the Fourth, Fifth, and Eleventh Circuits (the Ninth Circuit was the lone outlier).

The employees had argued to no avail that Sec. 203(o) was inapplicable because their “clothes” were not clothes within the meaning of the Act, but rather safety equipment. The appeals court concluded that the required work gear was both clothing and personal protective equipment, reasoning that it would be absurd to exclude all work clothing that had a protective function from the reach of this provision.

The Court will hear argument in the case on November 4.

Scope of “employee” under SOX. The question presented to the Court in Lawson v FMR LLC (Dkt No 12-3) is whether an employee of a privately held contractor or subcontractor of a public company is protected from retaliation under Section 806 of the Sarbanes-Oxley Act (SOX).

The defendants are the privately held parent company and several subsidiary companies that operate the Fidelity family of mutual funds. Each of the hundreds of Fidelity mutual funds is a separate registered investment company required to file reports with the SEC. A mutual fund has no employees of its own, instead contracting to an investment adviser that conducts all the activities of the fund. Employees in the mutual fund industry, including the plaintiffs here, thus work for fund advisers or sub-advisers, not the mutual fund itself. The defendants are investment advisers, or sub-advisers, to particular Fidelity mutual funds.

Under SOX Sec. 1514A, a publicly traded company, mutual fund, or contractor or subcontractor of a company may not discriminate against “an employee” in the terms and conditions of employment because of protected whistleblower activity. In the proceedings below, the First Circuit held that under Sec. 1514A, privately held contractors and subcontractors may retaliate against their own employees and are prohibited only from retaliating against employees of the public companies for which they work.

The DOL strenuously objected to the First Circuit’s ruling, according to the petition; its Administrative Review Board rejected the court’s reasoning and held that Sec. 1514A does protect such whistleblowers. The SEC also objected, pointing out that because virtually all employees in the mutual fund are employed by investment advisers rather than the mutual funds themselves, the First Circuit’s decision would mean that the anti-retaliation provision would not protect most of the workers in the industry.

Under the First Circuit’s reasoning, as applied to the participants in the original Enron scandal that prompted the enactment of SOX, Sec. 1514A would only have forbidden the consulting firm Arthur Anderson from somehow retaliating against a whistleblower who worked for Enron itself, the petitioners observed. It would have allowed Arthur Anderson to use retaliation to prevent its own employees from reporting Enron-related fraud to the SEC, Congress, or managers or directors of either firm.

Oral argument will be held November 12.

A “thing of value” under LMRA. In Unite Here Local 355 v Mulhall (Dkt No 12-99), the question of exactly what is a “thing of value” for purposes of the LMRA’s anti-bribery provisions will be under the Supreme Court’s microscope. Contrary to Third and Fourth Circuit rulings, the Eleventh Circuit held that organizing assistance offered by a casino employer to a union can be a “thing of value” under Sec. 302, which bars an employer from giving or a union from receiving any “thing of value” for organizing purposes, subject to limited exceptions.

In this case, the Supreme Court will resolve the question of whether an employer and union may violate Sec. 302 “by entering into an agreement under which the employer exercises its freedom of speech, by promising to remain neutral to union organizing; its property rights, by granting a union representative limited access to the employer’s property and employees; and its freedom to contract, by obtaining the union’s promise to forego its rights to picket, boycott, or otherwise put pressure on the employer’s business.”

The union contends that the Eleventh Circuit ruling departs from decades of jurisprudence holding that agreements of the sort entered into by UNITE HERE, Local 355 and the casino in this case are lawful. “Only now, 65 years after the passage of the Taft-Hartley amendments to the National Labor Relations Act … has the propriety of this important part of cooperative labor-management relations been put in doubt,” wrote the union in its petition for certiorari.

Oral argument is scheduled for November 13.

Mandatory union fees. In Harris v Quinn (Dkt No 11-681), assisted by the National Right to Work Foundation, a group of Medicaid home-based personal care providers filed a class-action federal suit against Illinois Governor Pat Quinn and Illinois SEIU and AFSCME locals over an executive order that designated 20,000 providers as public employees for collective bargaining purposes. As such, a CBA that required the attendants to pay an agency fee to a union did not violate the First Amendment, the Seventh Circuit held. Because the attendants were state employees, the union’s collection and use of fair share fees would be permitted by the Supreme Court’s mandatory union fee jurisprudence, according to the appeals court. However, the circuit court rejected as unripe the claims of home care assistants who had opted not to join a union and were not presently subject to mandatory fair share fees.

Two issues are raised for review: (1) Whether a state may, consistent with the First and Fourteenth Amendments, compel personal care providers to accept and financially support a private organization as their exclusive representative to petition the state for greater reimbursements from its Medicaid programs; and (2) whether the lower court erred in holding that the claims of certain home care attendants were not ripe for judicial review.

The petition for certiorari was granted on October 1. Oral argument has not been scheduled.

Unemployment taxes. In United States v Quality Stores Inc. (Dkt No 12-1408), the Sixth Circuit held that payments made by Quality Stores to its employees upon ending their employment involuntarily due to business cessation constituted supplemental unemployment compensation benefits that were not taxable as wages under FICA, affirming judgment for the retailer. Accordingly, Quality Stores and the employees who agreed to be represented by the company were entitled to a refund of more than $1 million paid in FICA taxes.

The question to be addressed by the High Court is “Whether severance payments made to employees whose employment was involuntarily terminated are taxable under the Federal Insurance Contributions Act, 26 U.S.C. 3101 et seq.”

The petition for certiorari was granted on October 1. Oral argument has not been scheduled.