The United States Supreme Court decided a number of important employment law cases during the 2013 calendar year.  The Court’s current docket indicates that the trend of the high court hearing and deciding critical employment law issues will continue into the new year.  Below are a few cases to keep on your radar screen in the coming months.

  • When does the limitations clock begin ticking on a claim for wrongful denial of benefits under an ERISA plan?  Heimeshoff v. Hartford Life & Accident Insurance Co., Docket No. 12-729 (oral argument heard on Oct. 15, 2013)

The Court’s 2013 term has already produced one important case regarding the Employee Retirement Income Security Act of 1974 (ERISA) – US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013)Heimeshoff v. Hartford Life & Accident Insurance Co., heard by the Court on October 15, is another ERISA case with potentially significant ramifications.

The plaintiff in Heimeshoff is a former Wal-Mart employee who became permanently disabled.  She filed a claim for long-term disability benefits under Wal-Mart’s ERISA benefit plan, which contains a three-year statute of limitations commencing on the date that proof of loss was required to be submitted under the plan.  The plan administrator denied the employee’s claim, and she filed suit.  The district court dismissed her suit as untimely because it was filed more than three years after the date on which proof of loss was due under the plan.  The Second Circuit affirmed the dismissal.

On appeal to the Supreme Court, the employee contends that the limitations clock on a claim for wrongful denial of disability benefits under an ERISA plan should not begin ticking until the plan’s internal administrative resolution process has been fully exhausted, regardless of the limitations period set forth in the plan.  The defendants have countered that ERISA plans should be enforced according to their terms, and that the result requested by the plaintiff would undermine ERISA’s goal of predictability.  The Court will examine these two competing arguments in determining when limitations should begin to run on an ERISA claim of this sort.

This is an issue for which there is truly no controlling precedent, so it will be interesting to see which policy arguments win the day.  The Court’s decision could affect all employers who operate ERISA benefit plans, so be sure to stay tuned.

  • Does the meaning of “clothes” under Section 3(o) of the FLSA include safety gear?  Sandifer v. U.S. Steel Corp., Docket No. 12-417 (oral argument heard on Nov. 4, 2013)

Under the Fair Labor Standards Act (FLSA), employees must be paid for donning and doffing safety gear (such as flame-retardant jackets and pants, hoods, gloves, wristlets, leggings, and steel-toed shoes) if they are required by law or the employer to change into such clothing at the work site.  But Section 3(o) of the FLSA provides that, in a unionized setting, an employer need not compensate employees for time spent “changing clothes” if that time is excluded from compensable time by a collective bargaining agreement or by a custom or practice of non-compensation for such activities.  The question before the Supreme Court in Sandifer v. U.S. Steel Corp. is: Does the meaning of “clothes” under Section 3(o) include safety gear?

U.S. Steel workers contend that an item does not constitute “clothes” if it is worn to protect against a workplace hazard and was designed to protect against hazards.  U.S. Steel, on the other hand, contends that the term “clothes” was intended to encompass the outfit that industrial workers are required to change into and out of to be ready for work, and thus would include safety gear.  The Department of Labor, in its amicus brief, has argued that the term “clothes” should be given its ordinary meaning – a “covering for the human body, or garments in general.”

The Supreme Court’s decision in Sandifer will dictate whether employers and unions may permissibly bargain regarding non-compensation of time spent donning and doffing safety gear, and will potentially resolve a circuit split on this important issue.

  • What are the limits of Sarbanes-Oxley’s whistleblower protection?  Lawson v. FMR LLC, Docket No. 12-3 (oral argument heard on Nov. 12, 2013)

In the Supreme Court’s first ever Sarbanes-Oxley (SOX) whistleblower case, the issue presented is whether the whistleblower protection contained in Section 806 of SOX extends to individuals employed by private contractors of public companies.

The plaintiffs in Lawson v. FMR LLC contend that they were retaliated against in violation of SOX for raising concerns about potential violations of securities laws in connection with the operation of a publicly traded company.  The district court denied the defendant-employer’s motion to dismiss but the First Circuit reversed, holding that the term “employee” in Section 806 of SOX covers only employees of public companies, and not employees of their private contractors such as the plaintiffs.

Notably, only a few months after the First Circuit’s decision, the Administrative Review Board of the Department of Labor (ARB) reached a different conclusion in In re Thomas Spinner v. David Landau & Associates, LLC, and in fact expressly declined to follow the First Circuit’s decision or reasoning in the Lawson case.  Specifically, the ARB found that a private contractor’s employees enjoy anti-retaliation protection under Section 806 of SOX whenever the contractor provides services for a publicly traded company.  The U.S. Solicitor General has filed an amicus brief supporting the Lawsonplaintiffs, urging that the ARB’s decision in Spinner should be given deference.

The Supreme Court’s decision in this case will likely involve a detailed analysis of Section 806, as both sides have presented plausible readings of the relevant text.  Ideally, the decision will provide greater certainty regarding which employees are protected by – and which employers are subject to liability under – SOX’s whistleblower provision.

  • Can a neutrality agreement constitute a “thing of value” prohibited by the Section 302 of the NLRA?  UNITE HERE Local 355 v. Mulhall, Docket No. 12-99 (oral argument heard on Nov. 13, 2013)

Neutrality agreements are frequently used in the labor union world.  Although they can take many different forms, these agreements generally involve a union offering an employer certain concessions in exchange for the employer’s commitment to remain neutral during an organizing campaign.

In UNITE HERE Local 355 v. Mulhall, the Court will decide whether neutrality agreements are prohibited in certain circumstances by Section 302 of the National Labor Relations Act (NLRA), which makes it a crime “for any employer . . . to pay, lend, or deliver, or agree to pay, lend, or deliver any money or other thing of value . . . to any labor organization, or officer or employees of a labor organization, that represents or seeks to represent the employer’s employees,” or for a labor union “to request, demand, receive, or accept, or agree to receive or accept, any payment, loan, or delivery of any money or other thing of value prohibited” by the statute.

The unions and the U.S. Solicitor General have argued that Section 302 does not preclude a request for or negotiation of a neutrality agreement, noting that the language of the NLRA presupposes (at least indirectly) the existence of such agreements.  The unions and the Solicitor General further contend that the purpose of Section 302 is to prohibit bribery, corruption, and the provision of benefits to union officials rather than employees, and that the benefits provided in the Mulhall case (union access to private property and employee lists, a card-check procedure, and an arbitration clause, among other things) had no commercial market value.  In response, the plaintiffs have argued that employees are not involved in the negotiation of neutrality agreements, and that they are therefore more akin to the kinds of agreements associated with bribery and corruption.  The plaintiffs have also noted that Congress established specific exceptions to Section 302, and neutrality agreements were not included among those exceptions.

The Supreme Court’s decision in this case will have far-reaching implications.  In particular, a ruling that neutrality agreements can constitute a “thing of value” for purposes of Section 302 would dramatically alter the landscape of United States labor relations.

  • The President’s recess appointments to the NLRB – constitutional or unconstitutional?  NLRB v. Noel Canning, Docket No. 12-1281 (oral argument scheduled for Jan. 13, 2014)

In NLRB v. Noel Canning, a case of great constitutional importance, the Supreme Court will examine the breadth of the President’s constitutional recess-appointment power.

Under Article II, Section 2, Clause 3 of the U.S. Constitution (the “Recess Appointments Clause”), the President has the power “to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.”  In January 2012, the membership of the National Labor Relations Board (NLRB) dropped to two, such that the NLRB lacked a quorum to operate.  On January 4, 2012, during Senate pro forma sessions, President Obama invoked the Recess Appointments Clause and appointed three new NLRB members – Richard Griffin, Terrence Flynn, and Sharon Block – to fill the empty seats.  In an NLRB case that arose thereafter, Noel Canning, a Washington soft drink bottling company, argued that the President’s appointments were not authorized by the Recess Appointments Clause.

In Noel Canning, the Supreme Court must decide when the Senate is in “recess” and when vacancies “happen,” as those terms are used in the Recess Appointments Clause.  In the decision below, the D.C. Circuit found that the recess that matters is the recess between the Senate’s annual sessions, not the three-day recesses that occur during an annual meeting.  Because the NLRB vacancies arose, and the appointments were made, during the latter time period, the D.C. Circuit found them to be unconstitutional and invalid.

The D.C. Circuit’s opinion, decided on January 25, 2013, set off a series of events that led to an eventual standoff in the Senate.  As a compromise, the President made four new appointments to the NLRB and the Senate confirmed them on August 12, 2013.  Since that date, the NLRB has had full authority to act.  The question of the NLRB’s authority to act between the date of the recess appointments and the date the new Board members were confirmed is still on the table, however.

The Noel Canning case has been hotly debated and will be closely watched by many.  If the Supreme Court determines that the President’s recess appointments are invalid, all 300+ decisions by the NLRB between January 4, 2012 and August 12, 2013 could be called into question.

  • Is a severance payment following an involuntary termination taxable under FICA?  U.S. v. Quality Stores, Inc., Docket No. 12-1408 (oral argument scheduled for Jan. 14, 2014)

U.S. v. Quality Stores, Inc. will resolve a circuit split on the following question: When a severance payment is made to an employee whose employment is being involuntarily terminated, is that payment taxable under the Federal Insurance Contributions Act (FICA)?

The case involves Quality Stores, which went bankrupt in 2001 and subsequently closed all of its stores and distribution centers.  Thousands of workers were laid off, with severance pay, and the company both withheld and paid FICA taxes on the severance payments.  In 2002 the company claimed an IRS refund of just over $1 million in FICA taxes, arguing that severance payments are supplemental unemployment benefits (SUB payments) excluded from the definition of “wages” under FICA.  The IRS contends that severance payments are indeed “wages” that are taxable under FICA.

As of the IRS’s May 31, 2013 filing for certiorari, this issue is pending in 11 cases and more than 2,400 administrative claims, with more than $1 billion at stake.  There is no question, then, that the Supreme Court’s decision in Quality Stores will have significant ramifications in proceedings across the country.