Labor Letter, October 2013: Variety Is The Spice Of The Court: A Preview of the 2013-14 Supreme Court Term

by Fisher Phillips

The upcoming Supreme Court term promises a series of significant decisions for employers.  No less than seven cases (and potentially two more pending petitions) will have at least some impact on all employers this year.  The outcomes of these cases could affect employers’ negotiations with unions, change defense strategies in litigation, or follow recent trends in favor of arbitration.  This article is a brief introduction to the issues presented by each case and what each case may mean for you.   

ADEA:  Will The Court Tire Of Administrative Exhaustion?

In Madigan v. Levin, the Court will consider whether state and local government employees can bypass the procedures set forth in the Age Discrimination in Employment Act (ADEA) and go straight to court to pursue claims for age discrimination under 42 U.S.C. §1983.  Whereas the ADEA sets forth requirements that employees “exhaust their administrative remedies” before filing a lawsuit (including participation by the EEOC, prompt notice, and informal dispute resolution), §1983 does not require the same.  In addition, employees can seek punitive damages under §1983, a form of relief that is not available under the ADEA. 

The outcome of the case will primarily affect state and local employers and employees, but may be significant for private employers because the Court is expected to examine whether Congress, in enacting a law with comprehensive remedies such as the ADEA, must explicitly prohibit recourse to other statutory remedies, or whether such intent to do so can be implied.  The Court has previously held that when remedial devices provided in a particular statute are “sufficiently comprehensive,” they may demonstrate congressional intent to preclude employees from suing under section §1983.

FLSA:  “Changing Clothes” in Unionized Industries

Do you have a unionized workforce?  Does your business require your employees to wear any type of protective gear?  If your answer to these questions is “yes,” you may be affected by the Court’s decision in Sandifer v. United States Steel Corporation

In certain circumstances under the Fair Labor Standards Act (FLSA), employers can be required to pay employees for time spent changing into and out of work clothes.  Under a collective bargaining agreement, however, an employer and a union can agree that the time spent by employees “changing clothes” will be excluded from the calculation of the number of hours worked.  The question the Court will be considering is the definition of “changing clothes” under the FLSA. 

This particular case arose in the context of the unionized steel industry in Gary, Indiana.  Since 1947, collective bargaining agreements between U.S. Steel and the United Steelworkers Union provided that employees’ time spent in preparatory or closing activities would not be compensated.  The Steelworker employees sued U.S. Steel – notably, without participation by the union – to assert that they should be paid for the time that they spend changing into and out of the safety clothing, which they are required to wear. 

The Steelworkers claim that their work clothes do not fall within the meaning of “changing clothes” because the work clothing constitutes safety equipment.  Companies in unionized industries in which workers must wear protective gear could see an impact on their current collective bargaining agreements, future collective-bargaining strategies, pay and overtime practices, and scheduling practices.  In addition, the outcome of the case could significantly affect employers’ exposure in class and collective actions.

SOX:  Will The Court Blow The Whistle?

In Lawson v. FMR LLC, the Court will consider whether an employee of a privately-held contractor or subcontractor of a public company is protected from retaliation by the Sarbanes-Oxley Act of 2002 (SOX).

The section in question, entitled “Whistleblower Protection for Employees of Publicly Traded Companies,” states that no publicly-traded company, mutual fund, or “any officer, employee, contractor, subcontractor, or agent of such company or nationally recognized statistical rating organization” may retaliate “against an employee in the terms and conditions of employment because of” certain protected activity.

In this case, the U.S. Court of Appeals for the 1st Circuit held that the statute does not protect whistleblowers at the privately-held firms that are contractors or subcontractors for publicly-traded companies or mutual funds.  The Labor Department has rejected the 1st Circuit’s interpretation and held that an employee of a privately held auditing firm was covered by SOX.  The company accurately captured the potential far-reaching impact of the case:  “Expanding coverage to private contractors . . . would expose many partnerships and small businesses to a particularly expensive and potentially destructive form of civil liability.”  

Should the Court side with the employees, employers who do business with public companies will need to familiarize themselves with the complex regulations governing public companies, including when those regulations have been violated and the specific whistleblower protections contained within SOX.

Neutrality Agreements:  Business Basics Or Bribery?

In UNITE HERE Local 355 v. Mulhall, the Court will determine whether an employer and union violate the Labor-Management Relations Act (LMRA) by entering into an agreement under which the employer promises to remain neutral to union organizing and grants union representatives access to the employer’s property and employees, in exchange for the union’s promise not to picket, boycott, or otherwise put pressure on the employer’s business.  The LMRA makes it unlawful for an employer “to pay, lend, or deliver . . . any money or other thing of value” to a labor union that seeks to represent its employees and prohibits the labor union from receiving the same. 

In this case, a federal district court in Florida reasoned that the purpose of the LMRA is to prevent the corruption of union officers and found “no indication of corruption or bribery of UNITE HERE officials.” On appeal, the 11th Circuit Court of Appeals, conflicting with other circuits that have examined the issue, concluded that “innocuous ground rules can become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.”  

If the Court upholds the 11th Circuit’s ruling that provisions of these commonly-used neutrality agreements amount to bribery, unions will lose a powerful weapon in their arsenal. 

NLRB:  Can The Court “Can” Countless Board Decisions?

To exercise its authority under the National Labor Relations Act, the National Labor Relations Board (NLRB), a five-member body, requires a quorum of at least three appointed members.  On January 3, 2012, the NLRB was reduced to two members, leaving it with no authority to operate. On January 4, 2012, President Obama appointed Sharon Block, Terence F. Flynn, and Richard F. Griffin to sit on the Board.  In NLRB v. Noel Canning, the Court will grapple with the question of whether President Obama’s appointment of these three members was constitutionally permissible. 

Under the Constitution, the President has the power to make appointments to the NLRB without the consent of the Senate, but only if a vacancy happens while Senate is in recess.  The underlying dispute arose when Teamsters Union Local 760 filed a complaint with the NLRB against a soft-drink bottling company, Noel Canning, claiming that the company committed an unfair labor practice by refusing to execute a verbal agreement allegedly reached by the parties as part of collective bargaining negotiations. 

After the NLRB ruled against the company, the company filed an appeal with the U.S. Court of Appeals for the D.C. Circuit, challenging the validity of the NLRB’s quorum and the recess appointments.  Ultimately, the Circuit Court held that the President’s recess appointments were unconstitutional because the Senate was not in recess at the time of the appointments and because the recess appointment power could not be exercised to fill a vacancy unless the vacancy arose during the recess.  As a result, the court held that the appointments were unconstitutional and that the NLRB did not have the quorum or authority to decide the Noel Canning dispute.

If the Court finds that the recess appointments are invalid, hundreds of NLRB decisions made by the so-called recess appointees will be invalidated.

FAA:  Arbitration Awareness

The Court has already agreed to answer one question regarding the arbitration process in BG Group PLC v. Republic of Argentina.  In that case, the Court will determine whether, in disputes involving a multi-staged dispute-resolution process, a court or an arbitrator should determine whether a precondition to arbitration has been satisfied. 

The Court may also decide to answer the question presented in Toyota Motor Corp. v. Choi:  whether a non-signatory defendant can compel arbitration of the arbitrability of the plaintiffs’ claims.  Given the Court’s recent history of upholding the national policy favoring the business-friendly FAA, employers should look for decisions in favor of the arbitrator determining whether a precondition to arbitration has been satisfied, and the arbitrability of the case.

ERISA:  Time To Review Timing

In a key case that may impact all ERISA plan sponsors and participants, the Court will be considering when a statute of limitations should begin to run for judicial review of an adverse benefits determination under an ERISA disability plan.

In Heimeshoff v. Hartford Life & Accident Insurance Co., an employee filed a claim for long-term disability benefits under her employer’s plan, which required that any lawsuits be filed within three years after the proof of loss was due.  The employee proceeded through the internal appeal process, which resulted in a final denial of benefits, but, in the meanwhile, the three-year period ran out.  The employee contends that the limitations period should not begin to run until the final denial of benefits. 

The U.S. Court of Appeals for the 2nd Circuit held that the employee’s lawsuit was untimely, finding the policy language unambiguously set out that the limitations period began to run before a final decision is made on a claim for benefits. This case raises a challenge to the general principle that the terms of an ERISA plan govern in ERISA litigation.  The Court’s ruling could impact the use of a statute of limitations defense in response to claims for benefits.  And it’s possible that the Court’s decision could have a broader impact on parties’ agreements to change limitations periods in other contexts.

Other Pending Petitions To Watch

In Young v. United Parcel Service, the Court may consider whether, and in what circumstances, the Pregnancy Discrimination Act requires an employer to provide work accommodations to pregnant employees who are similar to other employees in their ability or inability to work.  If the Court decides to grant Young’s petition, employers should start reexamining their “neutral” policies to be sure that the unintended result is not to exclude pregnant workers from accommodations granted to employees who are similarly limited. 

In United States v. Quality Stores, Inc., the Court may examine the issue of whether severance payments made to employees whose employment was involuntarily terminated are taxable under the Federal Insurance Contributions Act (FICA). 

In this case, a bankrupt company made lump-sum severance payments at the end of an employee’s service.  The employer treated the severance payments as taxable under FICA, but filed for a refund of approximately $1 million.  Ultimately, the Court of Appeals for the 6th Circuit held that the payments were not wages for tax-withholding purposes and, therefore, not subject to taxation under FICA.  If the Court decides to take up the issue presented in this case and rules in favor of Quality Stores, all employers that have paid severance in connection with involuntary workforce reductions may be eligible for sizable refunds.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.