HR On the Docket
With the U.S. Supreme Court back in action for the year, employment-law experts say companies should expect a few decisions that may affect their business processes. Here are the cases to watch:
Three consolidated cases — Epic Systems Corp. v. Lewis; Ernst & Young LLP v. Morris; and NLRB v. Murphy Oil USA Inc. — may have a dramatic impact on employment-related litigation. They were argued before the Supreme Court on Oct. 2, 2017.
According to John B. Lewis, a partner in Baker Hostetler’s Cleveland office, the court will answer whether an agreement requiring disputes to be individually arbitrated violates the National Labor Relations Act.
“The decision’s impact could be dramatic,” Lewis says. “Many employers rely on individual arbitration as an effective means for parties to resolve disputes promptly while avoiding the higher costs of traditional litigation.” He adds that class actions are inherently intimidating because of their extreme cost, which causes many companies to settle regardless of the underlying merits.
The Economic Policy Institute has indicated that more than 60 million Americans are covered by mandatory arbitration agreements, Lewis says. And, while the oral argument revealed a divided court, many expect a 5-4 vote, with Justice Kennedy holding the deciding vote.
“Such a vote would be reminiscent of the AT&T Mobility v. Concepcion case in 2011,” Lewis says, adding that the arbitration- and class action-related case saw a 5-4 opinion, in which Justice Scalia wrote the opinion and was joined by Justices Roberts, Kennedy, Thomas and Alito.
“Based on this theory, new Justice Gorsuch would take the place of Justice Scalia to make up the five justices,” Lewis says, adding that a decision is expected later this year. “Obviously, no one can predict what the court will do, and the oral argument shed little light on the possible rationale for the majority opinion.”
Chris Murray, a shareholder in Ogletree Deakins’ Indianapolis office, says that, for many years now, employers and commentators have been looking for ways to make employment litigation quicker, more efficient and less expensive.
With that, many employers have adopted individual arbitration programs that allow employees to fully pursue their claims without imposing the procedural complexity and long wait times of federal court. In 2012, however, the National Labor Relations Board ruled that individual arbitration programs are unlawful because employees cannot waive the right to pursue class actions. Regardless of how the court decides, experts agree, it will have a major impact on employment law.
“These cases could determine whether employment arbitration has a very dim or a very bright future,” Murray says.
Public Employees and Union Membership
In Janus v. American Federation of State, County and Municipal Employees, the issue is whether public employees can be forced, as a condition of employment, to pay certain fees to subsidize a union’s costs of representation, or whether employees have a First Amendment right to opt out. Some observers predict if employees get the option to opt out, unions will see dues payments plummet by up to 30 percent.
“Although this decision may not directly affect private-sector employers,” says Ogletree Deakins’ Murray, “it does so indirectly by impacting unions’ bottom line and overall strength.”
After several related cases didn’t move the needle on this issue, says Collin O’Connor Udell, with Jackson Lewis in Hartford, Conn., a 2016 case made it appear the court was ready to overrule an earlier Supreme Court decision, with Justice Scalia making it a 5-4 conservative majority.
“But then fate intervened and Justice Scalia passed away, leaving the court deadlocked,” she says. “Overruling Supreme Court precedent doesn’t happen every day, but this has been brewing for a long time.”
And with Justice Gorsuch joining the court, she says, “it seems almost certain that he will cast the fifth vote necessary to overturn the existing decision, which would be a severe blow to public-sector unions, but I think it’s all but inevitable.”
Free Speech Vs. Religious Rights
The Supreme Court heard arguments on Dec. 5 in Masterpiece Cakeshop Ltd. v. Colorado Civil Rights Commission, another case that has divided employers, HR practitioners and academicians.
The case essentially asks: Does the act of making a wedding cake entitle a baker to First Amendment protection? And if so, can the baker refuse to make a cake for reasons that go against his or her religious beliefs, guaranteed by their First Amendment rights? More than 100 amici briefs have been filed on both sides of the argument.
According to Baker-Hostetler’s Lewis, some argue that making a wedding cake is a creative expression entitled to First Amendment protection. Others maintain that compelled-speech principles are not implicated in the case. Rather, they state that Colorado anti-discrimination law does not regulate the creative message, but only the selection of customers on the basis of sexual orientation — in this case, a gay couple.
“This controversy over speech versus anti-discrimination law is of great consequence,” Lewis says. “If the making and sale of a cake is entitled to First Amendment protection, what activity would not be? What other religious principles [for observant Christians, Jews and Islamic craftsmen] might be involved in commercial activity? Line-drawing will be very difficult for the court.”
“Again, Justice Kennedy appears to hold the deciding vote,” he says.
Overtime and FLSA
Finally, Encino Motorcars, LLC v. Navarro poses the question of whether car-dealership service advisors are exempt from overtime pay under the Fair Labor Standards Act. According to Jackson Lewis’ O’Connor Udell, underlying that question, however, is another long-standing one the justices may decide to finally address: whether FLSA exemptions for overtime should continue to be narrowly construed.
“This question is an outgrowth of the ‘remedial statutes are to be liberally construed’ canon—one of Justice Scalia’s favorite targets of criticism,” she says. “Should the court decide to address it, Justice Gorsuch may take the same dim view of the canon, and it’s likely that Justices Thomas and Alito will as well.”
O’Connor Udell says appellate attorney Paul Clement, of Kirkland and Ellis, authored an “excellent” brief arguing that the Ninth Circuit Court actually acknowledged that a service advisor qualifies as a salesman under the statutory text. It avoided a “literal” interpretation, however, instead importing a requirement that it would exempt only those “actually and primarily” occupied in sales or service – language that is not in the statute.
Should the Supreme Court narrow the definition of the “salesman, parts man or mechanic” overtime exemption within the FLSA, the result would mean requiring employers to pay overtime compensation to employees who would have previously been exempt.
“I would also expect Justices Thomas, Alito and Gorsuch to take on the canon that exemptions are to be narrowly construed against employers – it’s the perfect vehicle to address it,” O’Connor Udell says. “The question is whether those briefs and the views of Justices Thomas, Alito and [probably] Gorsuch can persuade enough justices to carry the day in favor of the employer, in particular, Chief Justice Roberts and Justice Kennedy.”