Decision Clarified Landmark 1977 Ruling on “Undue Hardship”

SCOTUS suggested the EEOC revisit its “undue hardship” interpretations

The federal courts are now quickly coming full circle on the initial patent hostility they showed to employee accommodations in the workplace. The SCOTUS’ latest employee accommodation case opinion is just another decision helping to plot the new direction the federal courts have been setting on the general issue of company responsibilities to their employees. The courts, following state and federal legislative prods, are increasingly turning employers back to the corporate operating mantra before the 1970’s arrived: “Loyalty up; loyalty down.”

The SCOTUS last week made two adjustments to our understanding of the definition of the phrase “undue hardship” under Title VII law (making discrimination because of religious belief, among others, unlawful) in a unanimous ruling in Groff v. DeJoy (No. 22-174). The Court, however, made no reference to whether its decision might carry over to the “undue hardship” analysis under disability accommodations law.

SCOTUS has now re-interpreted Title VII of the Civil Rights Act of 1964 (“Title VII”) to require a covered employer that denies a religious accommodation:

• to show that the burden of granting an accommodation would result in “substantial” increased costs (rejecting the SCOTUS’ 46-year-old “de minimis” standard), and
• to consider showing the substantial “increased cost” in relation to the overall conduct of its particular business (and not considering just the impact on other employees).

Most employers will likely greet this decision with repressed consternation fearing that all the SCOTUS has done is to replace one inscrutable and thus uncertain legal definition (“de minimis” increased costs) with another equally inscrutable and uncertain legal definition (“substantial” increased costs). On-the-floor corporate managers and their HR advisers will only find solace in undertaking individual resort—accommodation by accommodation—to legal counsel, and/or deciding the issue after close consultation with future EEOC guidance surely to follow the Groff case decision (and which the SCOTUS specifically invited).

Although federal contractors may typically think of disability accommodations when one mentions reasonable required accommodations, contractors should take note of this new decision because the substantive compliance standards required under Executive Order 11246 generally follow those required under Title VII. (See 41 CFR §60-50.3 for OFCCP’s Rule on “Accommodations to religious observance and practice.” Also see our story from October 2020: “OFCCP Reminded Contractors To Grant Religious Accommodations.”)

Background

Congress amended Title VII in 1972 to track the U.S. Equal Employment Opportunity Commission’s (“EEOC”) regulatory language and to clarify that employers must reasonably accommodate an employee’s or prospective employee’s religious observance or practice unless the employer is “unable” to do so “without undue hardship on the conduct of the employer’s business” (42 USC §2000e(j)).

What Happened in this Case?

In Groff, the Court revived a lawsuit by an evangelical Christian former mail carrier accusing the U.S. Postal Service (“USPS”) of violating Title VII when it disciplined him for refusing to work on his sabbaths (Sundays). A federal trial court dismissed his claim, and the U.S. Court of Appeals for the Third Circuit (Philadelphia) affirmed that dismissal.

The trial court had found that Groff’s Sunday absences placed an “undue hardship” on his co-workers and the USPS. Sometimes, the USPS could successfully accommodate the worker by facilitating shift swaps, but that was not always possible. Moreover, Mr. Groff’s absences caused tension among other mail carriers who had to cover his shifts, the USPS asserted. The USPS relatedly disciplined Groff until he eventually resigned in 2019.

The Third Circuit’s decision relied directly on the SCOTUS’ landmark 1977 decision in TWA v. Hardison (432 U.S. 63). SCOTUS decided Hardison almost 50 years ago on the basis of very similar facts. (Hardison was a Member of the Worldwide Church of God (Adventist) who objected on religious grounds to working on his sabbaths…(Saturdays) in violation of the seniority agreement embedded in his union contract. Hardison and his co-workers worked shifts designed to supply parts and tools 24 x7, 365 days a year at TWA’s major airplane repair hangar complex).

The Third Circuit followed the Hardison case decision’s interpretation of Title VII’s accommodation obligation. That interpretation construed Title VII’s accommodation of religion language to mean that an accommodation requiring an employer “to bear more than a ‘de minimis cost’ to provide a religious accommodation was an ‘undue hardship.'”

Undue Hardship & the “De Minimis” Standard

In last week’s 21-page unanimous opinion written by Justice Samuel Alito, the High Court pointed out that the case presented “the Court’s first opportunity in nearly 50 years to explain the contours of Hardison.” After spending over ten pages reviewing the background of Hardison and how courts have construed that decision, Justice Alito concluded:

“We hold that showing ‘more than a de minimis cost,’ as that phrase is used in common parlance, does not suffice to establish ‘undue hardship’ under Title VII. Hardison cannot be reduced to that one phrase. In describing an employer’s ‘undue hardship’ defense, Hardison referred repeatedly to ‘substantial’ burdens, and that formulation better explains the decision. We therefore […] understand Hardison to mean that ‘undue hardship’ is shown when a burden is substantial in the overall context of an employer’s business. [citation omitted]. This fact-specific inquiry comports with both Hardison and the meaning of ‘undue hardship’ in ordinary speech.”

EEOC’s Religious Accommodation Guidance

Expounding further, Alito wrote that the Court had “no reservations in saying that a good deal of the EEOC’s guidance in this area is sensible and will, in all likelihood, be unaffected by our clarifying decision today.” (That guidance can be found here). “Accordingly, today’s clarification may prompt little, if any, change in the agency’s guidance explaining why no undue hardship is imposed by temporary costs, voluntary shift swapping, occasional shift swapping, or administrative costs,” Justice Alito wrote. (See 29 CFR §1605.2(d).) Nevertheless, “it would not be prudent to ratify [as a whole] a body of EEOC interpretation that has not had the benefit of the clarification we adopt today. What is most important is that ‘undue hardship’ in Title VII means what it says, and courts should resolve whether a hardship would be substantial in the context of an employer’s business in the commonsense manner that it would use in applying any such test,” Alito noted.

Accordingly, the High Court vacated the Third Circuit’s ruling and sent the case back to the lower courts to determine the context-specific application of the now-clarified standard.

Employers Will find Justice Sotomayor’s Concurring Opinion Most Helpful to Understand What SCOTUS Now Expects of Them

Justice Sotomayor, joined by Justice Jackson, filed a separate 3-page concurring opinion. She noted that the former postal carrier had asked the Court to rule that an employer must show “undue hardship to [its] business,” not to an employee’s co-workers. However, Sotomayor emphasized that the Court rejected this argument, and instead recognized that Title VII requires “undue hardship on the conduct of the employer’s business” (emphasis in the original). “There is no basis in the text of the statute, let alone in economics or common sense, to conclude otherwise,” she observed. “Indeed, for many businesses, labor is more important to the conduct of the business than any other factor,” she added.

Elaborating on this point, she continued:

“To be sure, some effects on co-workers will not constitute ‘undue hardship’ under Title VII. For example, animus toward a protected group is not a cognizable ‘hardship’ under any antidiscrimination statute. [citation omitted]. In addition, some hardships, such as the labor costs of coordinating voluntary shift swaps, are not ‘undue’ because they are too insubstantial. [citation omitted]. Nevertheless, if there is an undue hardship on ‘the conduct of the employer’s business,’ [42 USC §2000e(j)], then such hardship is sufficient, even if it consists of hardship on employees.”

What is a Responsible Employer Now Supposed to Do to Make the Needed Daily “Line-Drawing” Decisions: Yes or No on the Latest Accommodation Request?

So, employers are now left to wonder: “substantial” compared to what? Revenues? Profits? Impacts on co-workers, customers and shareholders? All of the above? The cost of the accommodation to that division, group or Team which is hosting the accommodation? Or is the accommodation cost compared to the revenues or profits of the entire company (as the Groff decision seems to state)?

And what does “substantial” mean, anyway, and is it the same in every context of those who feel the impact? Is a penny a share loss to shareholders of a large publicly owned company not “substantial” even though the cost of the accommodation to the company could be several hundreds of thousands of dollars? NOTE: the USDOL Job Accommodation Network reported a 2020 survey of companies reporting that most workplace disability (not religious) accommodations in the United States cost less than $500. This issue of the precise definition of “undue hardship” thus affects only the small percentage of accommodation requests which carry a much larger price tag than $500 or impact co-workers, investors and/or customers.

Example: If your company shows a profit of $161 Billion (as Saudi Aramco did in 2022: I know, hard to imagine!), is an accommodation costing 1% of that company’s profits ($1,610,000,000 = One Billion Six Hundred Million dollars) “substantial” enough to allow Saudi Aramco to deny the accommodation, or must it be more, or could it be less? And as one considers whether the accommodation cost is “substantial,” and how to determine that, do you measure against the drop in the company’s profits, the drop in the Shareholder value per corporate share of ownership, or the impact on gas prices to consumers nationwide (worldwide?). Or do all of those considerations get rolled into a “bouillabaisse” soup and cause you to consider subjectively, holistically, altogether? (By the way, I think that is what the SCOTUS is advising companies covered by Title VII.)

What if a company’s union members convene a vote and declare that any impact on their “seniority” “rights” guaranteed in their union contract is “substantial?” If we throw that fact into the broth, how much weight should the company accord that union vote in the bouillabaisse of “cost considerations” to the company? 1%? 50%? 51%?

Is the final analysis of what is “substantial,” “objective,” or “subjective”? And, how much deference, if any, does the company get if it undertakes a careful and full analysis, and then denies the accommodation?

Is there any “safe harbor” for a company that acts in good faith? Or is the going forward reality that company’s act at their peril with every accommodation decision they deny being second-guessed, eventually perhaps by a jury deciding whether the increased costs to the company of the requested accommodation were NOT “substantial”?

[We are reminded of the mock trials the American Bar Association hosted with a federal judge, first in New Orleans and then in San Francisco, shortly after President George H.W. Bush (the father) signed the Americans with Disabilities Act (“ADA”) into law in 1990. Title I (Employment) was becoming legally effective two years later in April 1992 so the Employment Law Bar thought in 1991 it was a good time to see what an ADA trial might look like.

Despite criticism from the Plaintiffs’ Bar participants that the facts of the coming Mock trials were too favorable to companies and the Plaintiffs’ Bar stood little chance of winning the requested accommodation at the Mock trials, the trials nonetheless went forward. The Bar used “double-blind juries” in each location. (In a double-blind jury, used for trial demonstration purposes, each jury does not see, hear or participate in the deliberations of the second jury. While they hear the case together, the two juries deliberate separately so those observing the deliberations may obtain a broader sense of how jurors react to the facts and law presented to the juries: two for the price of one).

The facts of these Mock trials (as best as I can now remember them) generally involved a $60,000/per year salaried outside traveling salesperson (this is 1991 money) with a nationwide territory to which he had to fly on airplanes or reach via trains several days each week. The company for which he worked was a large corporation with thousands of employees nationwide and made tens of millions of dollars per year in profits for its Shareholders. The stipulated facts were that the salesperson unfortunately became a paraplegic following an automobile accident unrelated to his work. The salesperson could no longer dress or bathe himself, and he needed full-time caretakers to manage his everyday affairs and assist with his business duties. As I distantly recall, those additional costs for full-time 24×7 caretakers were pegged at about $160,000/year in 1991 money. The salesman’s accommodation request also sought corporate payment of the costs of the caretakers, the costs of two First Class airplane tickets (before the accident the salesman flew Coach Class) for the 100+ airplane trips per year crisscrossing the country, special ground transportation vehicle cost reimbursements, two hotel rooms the salesman and his caretaker would occupy in each city they visited on business, and three meal costs per day for the salesman and his caretaker while they traveled across the country to allow the salesman to continue to sell the company’s products. The total annual accommodation cost was estimated to be in excess of $500,000.

To create the issues the employment lawyers in the audience watching the Mock Trials wished to observe the jury deliberate, the make-believe employer testified that it had denied the accommodation request as an “undue hardship” as it imposed more than a “de minimis” cost on the employer. (The employer borrowed the Hardison definition under Title VII and argued that Congress had in mind the same legal standard when it drafted and passed the ADA as to the “reasonable accommodation” Congress had earlier required using the same accommodation language under Title VII).

Note: The very prominent federal District Court (trial) Judge presiding over the San Francisco trial charged the two juries and then dismissed them, as planned, to repair to their respective nearby ballrooms to undertake the needed publicly observed deliberations and to thereafter deliver a verdict. However, after he had dismissed both juries and no juror could hear him, the Judge then told the assembled employment lawyers observing the Mock trial that if he were then sitting on his federal bench in an actual trial of this matter, he would have ruled from the bench in favor of the company. The Judge explained that in real life he would have dismissed the case in its entirety, before the jury ever retired to deliberate, because he would have ruled that the accommodation sought was inherently unreasonable. However, the Judge went on to explain, that he had nonetheless charged the juries to allow this demonstration Mock trial to proceed so it could fulfill its purpose to allow employment lawyers to see how juries thought about ADA accommodation cases. (Those in the audience were able to watch one or the other of the juries deliberate as each jury did so on a stage in the nearby hotel ballrooms.)

The first jury in San Francisco granted the accommodation request in full. They had no naysayers on the jury, and it seemed pretty obvious very quickly to them that this economically well-to-do company should put this salesperson back where he was before his unfortunate accident. The second jury did the salesperson one-better: it granted his accommodation request in all respects save one: Rather, this second jury ordered that the employer must supply the salesperson with a private corporate jet to carry him and his caretaker to the salesmen’s nationwide sales destinations. (You just can’t make this stuff up.)

While it is little remembered today, it was from these mock trials, by the way, that the cry first went out nationwide from employment defense lawyers that wealthy companies could basically not reject costly accommodation requests as an “undue hardship.” And remember, this was after these Mock trials were heard…USING THE HARDISON “de minimis” LEGAL STANDARD. NOTE: The Mock trial judge explained to the jurors what law to apply (charged the jury) to the facts they found from listening to the testimony of the witnesses. In so doing, the Judge charged the jury to use the Hardison legal standard of “undue hardship” to render its verdict.

Now that the SCOTUS has last week ruled that the “de minimis” cost increase standard is not enough and that employers must deny only accommodations seeking a ”substantial cost increase,” you can just imagine what the advice will soon be of defense lawyers in future accommodation cases when advising companies which show a profit or which do not have fellow employees complaining about taking the weight shift from a disabled co-worker!

Punchline: Thirty-one years after the federal judiciary hostilely greeted the arrival of the ADA (this was true generally, as to most ADA legal issues which arose and across the country, and not just in San Francisco), the federal bench has now accomplished a full “about-face.” The federal courts (generally) are increasingly embracing and furthering the accommodations of employees the courts expect of employers. Companies and defense counsel need to internalize the ramifications of the changed federal judiciary reaction to Title VII accommodation requests, but also as to ADA accommodation requests.

Note: ADA complaints were the most numerous of the many types of claims filed in the federal District (trial) Courts in 2022. Indeed, ADA complaints comprised almost 24% of the federal trial court dockets last year.