SCOTUS will decide "adverse employment action"

The US Supreme Court has granted certiorari in Muldrow v. St. Louis (US Supreme Ct cert granted 06/30/2023) [Briefs].

The formal issue is: "Does Title VII prohibit discrimination in transfer decisions absent a separate court determination that the transfer decision caused a significant disadvantage?"

Federal Circuit Courts are hopelessly divided on this important question.

The facts in the case are simple. Muldrow was transferred to a different job (she says because of sex). The duties were different, but there was no change in pay and no negative effect on future career prospects. The 8th Circuit held that this was not a Title VII violation because there was no "material adverse action."

But here's the problem – Title VII's text says nothing about "adverse employment action" or "material adverse action." Those ideas have been invented by the lower courts.

Title VII does say:
"It shall be an unlawful employment practice for an employer - (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin."

In case you haven't noticed, the Supreme Court is usually not happy about courts adding requirements that Congress did not add. Pretty simple.

Look for oral arguments in the fall of 2023, and a decision in 2024.

Unanimous SCOTUS: No more "de minimis cost."

Title VII requires an employer that denies a religious accommodation to show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business. Groff v. DeJoy (US Supreme Ct 06/29/2023) [PDF].

This "clarification" of Trans World Airlines, Inc. v. Hardison, 432 U. S. 63 (1977) will be a game-changer for determining whether an employer must accommodate an employee's religious beliefs and practices. Employers must now consider forcing other employees to work overtime, voluntary shift swapping, and other options.

No liability for a false drug test

A drug test.
A false positive.
The employee loses his job.
Is the drug-test lab liable to the employee?
In Texas, the answer is NO, because "the third-party testing entities hired by an employer do not owe a common-law negligence duty to their clients’ employees."

Houston Area Safety Council v. Mendez (Texas 06/23/2023) (6-3).
Opinion of the Court
Concurring Opinion
Dissenting Opinion

An arbitration win for employers

A win for employers ---- When a defendant files an interlocutory appeal from an order denying a motion to compel arbitration, the trial court MUST stay the trial court proceedings. Period.

FCA qui tam suits unconstitutional?

US ex rel Polansky v. Executive Health Resources (US Supreme Ct 06/17/2023) [PDF] was unremarkable as to its actual holding – the government can let a False Claims Act qui tam case proceed for years and then intervene and get it dismissed quite easily.

What needs to be noticed is that three Justices opined that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation."

Justice Thomas laid it out this way:

"The FCA’s qui tam provisions have long inhabited something of a constitutional twilight zone. There are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation. Because “[t]he entire ‘executive Power’ belongs to the President alone,” it can only be exercised by the President and those acting under him. And, as “[a] lawsuit is the ultimate remedy for a breach of the law,” the Court has held that “conducting civil litigation . . . for vindicating public rights” of the United States is an “executive functio[n]” that “may be discharged only by persons who are ‘Officers of the United States’” under the Appointments Clause. A private relator under the FCA, however, is not “appointed as an officer of the United States” under Article II. It thus appears to follow that Congress cannot authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation." [Several citations omitted]

Justice Kavanaugh, joined by Justice Barrett, penned a brief concurring opinion expressing the same view.

The False Claims Act has been the main vehicle for fighting fraud against the government, and private whistleblowers (relators in qui tam language) have collected countless millions of dollars. The chance to collect between 15 and 30 percent has been a big incentive for whistleblowers.

NLRB: Common-law rules govern independent contractor analysis

The NLRB is rejecting the idea that entrepreneurial opportunity for gain or loss should be the “animating principle” for deciding whether a worker is an independent contractor vs. an employee.

Here is the press release:

In a decision issued today in The Atlanta Opera, Inc., the Board returned to the 2014 FedEx Home Delivery (FedEx II) standard for determining independent contractor status under the National Labor Relations Act (the Act), and overruled SuperShuttle (2019). In applying the FedEx II standard, the Board found that the makeup artists, wig artists, and hairstylists who work at the Atlanta Opera—had filed an election petition with the Board seeking union representation—are not independent contractors, excluded from the Act, but rather are covered employees.

In its decision, the Board reaffirmed longstanding principles—consistent with the instructions of the Supreme Court—and explained that its independent-contractor analysis will be guided by a list of common-law factors. The Board expressly rejected the holding of the SuperShuttle Board that entrepreneurial opportunity for gain or loss should be the “animating principle” of the independent-contractor test.

The Board further explained that entrepreneurial opportunity would be taken into account, along with the traditional common-law factors, by asking whether the evidence tends to show that a supposed independent contractor is, in fact, rendering services as part of an independent business.

In reviewing the facts of this case and applying the FedEx II standard in Atlanta Opera, the Board determined that the majority of the traditional common-law factors point toward employee status.  The Board also determined that the evidence did not show that the stylists rendered services as part of their own independent businesses.

“In today’s decision, the Board returns to the independent contractor test articulated in FedEx II, and reaffirms the Board’s commitment to the core common-law principles that the Supreme Court has determined should guide the Board’s consideration of questions involving employee status,” said Chairman Lauren McFerran. “Applying this clear standard will ensure that workers who seek to organize or exercise their rights under the National Labor Relations Act are not improperly excluded from its protections.”

In December 2021, the Board invited parties and amici to submit briefs addressing whether the Board should reconsider its standard for determining the independent contractor status of workers. 

Members Wilcox and Prouty joined Chairman McFerran in issuing the decision. Member Kaplan dissented from the overruling of SuperShuttle, but concurred in finding that the stylists were employees, not independent contractors.

SCOTUS decides NLRA preemption case

SCOTUS: The NLRA did not preempt an employer’s tort claims alleging that the union intentionally destroyed the company’s property during a labor dispute. Glacier Northwest v. Teamsters (US Supreme Ct 06/01/2023) [PDF]

Glacier Northwest delivers concrete to customers using ready-mix trucks with rotating drums that prevent the concrete from hardening during transit. The drivers union called for a work stoppage on a morning it knew the company was in the midst of mixing substantial amounts of concrete, loading batches into ready-mix trucks, and making deliveries. The union directed drivers to ignore instructions to finish deliv­eries in progress. At least 16 drivers who had already set out for de­liveries returned with fully loaded trucks. By initiating emergency maneuvers to offload the concrete, Glacier prevented significant dam­age to its trucks, but all the concrete mixed that day hardened and became useless.

The company sued the union for damages in state court, claiming that the Union intentionally destroyed the company’s concrete and that this conduct amounted to common-law conversion and trespass to chattels. The Washington Supreme Court held that the matter was preempted by the National Labor Relations Act, but the US Supreme Court reversed (8-1), allowing the state-court lawsuit to move forward.

NLRB GC targets nearly all non-competes in employment agreements

The NLRB's General Counsel seeks to have the Board rule that nearly all non-compete provisions in employment agreements are unlawful unless they are "narrowly tailored to address special circumstances justifying the infringement on employee rights."
[Press Release]
[Memo to Regional Directors]

The Board already applies a similar standard to provisions in severance agreements.

Going after non-competes in current employment agreements - not only in severance agreements - is a big leap. I expect the Board to eventually buy in, so be prepared.

SCOTUS: FLRA can regulate State National Guard labor disputes with dual-status technicians

The Federal Service Labor-Management Relations Statute (FSLMRS) provides for collective bargaining between federal agencies and their employees’ unions; bars each from committing unfair labor practices; and establishes the Federal Labor Relations Authority (FLRA) to investigate and adjudicate labor disputes.

A union representing federal civil-service employees known as dual-status technicians who work for the Ohio National Guard filed an unfair labor practice complaint with the FLRA because the Guard asserted that the Guard was not bound by the FSLMRS when interacting with the Guard’s dual-status technicians.

The US Supreme Court (7-2) holds that The FLRA had jurisdiction over this labor dispute because a State National Guard acts as a federal agency for purposes of the FSLMRS when it hires and supervises dual-status technicians serving in their civilian role. Ohio Adjutant General’s Department v. FLRA (US Supreme Ct 05/18/2023) [PDF]

It all depends on whether the Guard is an "agency" under the statute when acting as a supervisor of dual-status technicians. "Agency" includes the Department of Defense, and each dual-status technician is an employee of the Department of the Army or the Department of the Air Force. Those Departments, in turn, are components of the Department of Defense. Thus, when the Guard employs dual-status technicians, the Guard—like components of an agency—exercise the authority of the Department of Defense, a covered agency.

The DISSENT points out that the majority says the Guard “act[s] as a federal ‘agency,’” “exercise[s] the authority of” a covered agency, and even “functions as an agency," but it is not actually a federal agency – so "the FLRA lacks jurisdiction to enter remedial orders against them."

Here comes the end of Chevron deference

The US Supreme Court has granted certiorari on this question: "Whether the Court should overrule Chevron or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency." Loper Bright Enterprises v. Raimondo (US S Ct cert granted 05/01/2023) [Briefs].

This heralds the end of deference under Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984). Chevron held that courts should defer to a federal agency’s interpretation of an ambiguous statute as long as that interpretation is reasonable.

In the Loper case, commercial fishing companies challenged a rule adopted by the National Marine Fisheries Service that requires fishing companies to pay for the costs of observers who monitor compliance with fishery management plans. The DC Circuit ruled (2-1) that the court should defer to the agency's interpretation. Loper Bright Enterprises v. Raimondo (DC Cir 08/12/2022) [Opinion]

In my opinion, Chevron died on March 4, 2019 in BNSF Railway v. Loos (US Supreme Ct 03/04/2019) [PDF]. That was a boring payroll tax case in which the IRS had interpreted a tax statute. In an opinion by seven Justices, there was NO mention of Chevron. See my blog on the BNSF case here.

SCOTUS will decide whistleblower case

The US Supreme Court has granted certiorari to decide whether a Sarbanes-Oxley whistleblower must prove his employer acted with a “retaliatory intent” as part of his case in chief, or whether the lack of “retaliatory intent” is part of the affirmative defense on which the employer bears the burden of proof. Murray v. USB Securities (US S Ct cert granted 05/01/2023) [Briefs].

Trevor Murray claims that UBS Securities fired him in retaliation for reporting alleged fraud on shareholders to his supervisor. Murray sued UBS under the whistleblower protection provision of the Sarbanes-Oxley Act, and he ultimately prevailed at trial. The district court,  however, did not instruct the jury that a SOX antiretaliation claim requires a showing of the employer's retaliatory intent.

So the 2nd Circuit reversed, holding that a whistleblower-employee like Murray must prove by a preponderance of the evidence that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e. , an intent to "discriminate against an employee ... because of" lawful whistleblowing activity. Murray v. USB Securities (2nd Cir 08/05/2022) [PDF].

We expect oral arguments in the fall, with a decision in 2024.

ChatGPT writes a rap

My prompt to ChatGPT: "Write a rap about arbitrator Ross Runkel." Below is the response. Remember, AI intelligence is artificial.

Listen up y'all, I'm about to tell a tale
'Bout an arbitrator who never fails
Ross Runkel's his name, he's a legal whiz
With his keen mind, he settles disputes with ease

Arbitrator Ross Runkel, he's the man
When it comes to resolving disputes, he's got a plan
He's fair and impartial, he's the real deal
If you're in a legal bind, Ross Runkel's who you need to feel

He's got the law down pat, he knows it inside out
With his vast knowledge, there's no need to doubt
He's got a sharp eye for detail, and a way with words
In the courtroom, he's the king of the nerds

He's got a reputation that's second to none
With his sharp mind, he gets the job done
From labor disputes to employment law
He's the arbitrator who knows it all

So if you're ever in need of an arbitrator's hand
Look no further than Ross Runkel, he's your man
With his expertise and legal know-how
He'll settle your dispute, and do it right now

Arbitrator Ross Runkel, he's the one to call
He's got the skills and expertise, to settle it all
So if you want justice, and you want it fast
Give Ross Runkel a call, and he'll make it last

Almost illegible arbitration agreement

Many California car dealers are using an arbitration agreement that uses type that makes it almost impossible to read. Outrageous! Yet OK says the California Court of Appeal in a 2-1 decision.

In a familiar sequence, an employee signed an arbitration agreement and later sued the employer, the employer moved to send the case to arbitration, and the employee claimed the agreement was unconscionable.

In California (as in most states) in order for an agreement to be found unconscionable there must be both procedural unconscionability (that is, the way the agreement was formed) and substantive unconscionability (that is, the actual terms contained in the agreement). One or the other alone is not enough.

In Fuentes v. Empire Nissan (Cal Ct App 04/21/2023) [PDF] the California Court of Appeal held (2-1) that the agreement was procedurally unconscionable but not substantively unconscionable. So the agreement is enforcable.

The DISSENT argued that the agreement was substantively unconscionable simply because it was so incredibly difficult to read. Here's how the dissent put it: "The print is so fine it is unreadable without magnification. See if you can read it without giving up."

The dissent's basic reasoning is that because of the difficulty in reading the agreement, the employer knows what it contains but the employee does not.

Grossman update on employment discrimination

Free and valuable: The inimitable Paul Grossman has just put out a 99-page supplement to Lindemann, Grossman & Weirich, Employment Discrimination Law (6th ed. 2020).

To get on the mailing list, email to Cathy Smith-Joo, cathysmithjoo@paulhastings.com

With a few exceptions, this update begins with cases decided after January 1, 2018. It focuses almost exclusively on Court of Appeals and Supreme Court decisions.

Biometric Information Privacy Act claims are preempted

William Walton filed a class-action complaint against his former employer alleging that the collection, use, storage, and disclosure of Walton’s and similarly situated employees’ biometric data violated the Illinois Biometric Information Privacy Act. The Illinois Supreme Court held that his claim is preempted by Section 301 of the Labor Management Relations Act. Walton v. Roosevelt University (Illinois 03/23/2023) [PDF].

Basic reasoning: Walton belonged to a union that had a collective bargaining agreement with the employer. The CBA had a "broad" management rights clause, so his claim involved interpreting the CBA. Thus, his claim has to be decided by an arbitrator, who will interpret the CBA. Of course, by now, it's probably too late to file a grievance under the CBA.

This case will mean that, in Illinois, almost any unionized employee will need to proceed under the CBA grievance procedure rather than bringing a lawsuit.

What I find interesting is that the management rights clause is pretty standard stuff:

“Subject to the provisions of this Agreement, the Employer shall have the exclusive right to direct the employees covered by this Agreement. Among the exclusive rights of management, but not intended as a wholly inclusive list of them are: the right to plan, direct, and control all operations performed in the building, to direct the working force, to transfer, hire, demote, promote, discipline, suspend or discharge, for proper cause, to subcontract work and to relieve employees from duty because of lack of work or for any other legitimate reason. The Union further understands and agrees that the Employer provides an important service to its tenants of a personalized nature to fulfill their security needs, as those needs are perceived by the Employer and the tenants. Accordingly, this Agreement shall be implemented and interpreted by the parties so as to give consideration to the needs and preferences of the tenants.”

Also interesting is that the court at one point said there is an arguable claim for preemption: "[W]e defer to the uniform federal case law on this matter and find that when an employer invokes a broad management rights clause from a CBA in response to a Privacy Act claim brought by bargaining unit employees, there is an arguable claim for preemption. Accordingly, because we do not believe the federal decisions were wrongly decided, and here the CBA contained a broad management rights clause, we find Walton’s Privacy Act claims are preempted by the LMRA."