In a flurry of June activity, the US Supreme Court closed out this term’s extremely active labor and employment case docket by issuing five additional opinions. The Court is now on a break from hearing arguments until the new term begins in October. Opinions of interest to employers this year include:
- Chamber of Commerce v. Brown. The Court held that federal labor law preempts a portion of California’s “neutrality law,” which effectively regulates employer speech during union organizing campaigns by prohibiting employers from using state funds “to assist, promote, or deter union organizing.” The Court found this law to be preempted because it regulates conduct within “a zone protected and reserved for market freedom.” Bottom Line: This decision is a huge victory for employers because the so-called neutrality law, sponsored by the labor movement, provides a very powerful advantage to unions during organizing campaigns. This case strikes down the California law, and ripples will be felt in other states that either have or are considering similar laws.
- Metropolitan Life Insurance Co. v. Glenn. The Court held that a conflict of interest exists when a plan administrator fills the dual role of determining eligibility for benefits under an ERISA plan and paying claims under that same plan. It also held that a reviewing court should consider this conflict as a factor when determining whether the administrator abused its discretion in denying benefits, with the significance of this factor depending on the facts of each particular case. Notably, this conflict will prove less important where the administrator has taken active steps to reduce potential bias, for example by “walling off” claims administrators. Bottom Line: This decision may result in increased litigation expense for ERISA plan administrators, which in turn could result in increased premiums for employers. Also, employers that self-fund an ERISA plan will want to review their claims evaluation procedures in light of this decision.
- Meacham v. Knolls Atomic Power Laboratory. An age discrimination case where former employees alleged that an involuntary reduction in force (RIF) had a disparate impact on older workers, but the employer asserted that the RIF was based on “reasonable factors other than age.” The Court held that the employer bears the burden of proving the affirmative defense that the RIF was based on “reasonable factors other than age.” In other words, the employer must prove that the factor causing the disparate impact was “reasonable.” Bottom Line: This decision will make disparate impact age litigation “harder and costlier” for employers, in the words of the Court. Its primary legal impact, however, will be in cases “where the reasonableness of the non-age factor is obscure.” This case also highlights that it remains essential to undertake RIFs in a careful, thorough manner with guidance and training on how to avoid legal problems.
- Kentucky Retirement Systems v. EEOC. The Court held that Kentucky’s disability-retirement plan, which uses age as a factor in calculating benefits, does not violate the Age Discrimination in Employment Act (ADEA). The Court explained that “[w]here an employer adopts a pension plan that includes age as a factor, and that employer then treats employees differently based on pension status, a plaintiff, to state a disparate treatment claim under the ADEA, must [show] that the differential treatment was ‘actually motivated’ by age not pension status.” Bottom Line: The many state pension plans and the many collectively-bargained pension plans that are structured like the Kentucky plan remain secure.
- Enquist v. Oregon Department of Agriculture. The Court held that a public employee who is not a member of a protected class (e.g., based on race, gender, etc.) cannot bring a lawsuit under the Fourteenth Amendment on the basis that the public employer treated her differently from similarly situated employees without a rational reason. In other words, the Court rejected what is commonly called the “class-of-one” theory. Bottom Line: This decision preserves public sector employment-at-will and keeps the courts from becoming involved in subjective, individual public employment decisions.
- Hall Street Associates v. Mattel, Inc. The Court held that an arbitration agreement cannot expand the scope of judicial review under the Federal Arbitration Act (FAA) beyond the grounds specified by the FAA for vacating or modifying an arbitration ruling. Bottom Line: This decision resolves a split among the circuit courts, and employers in circuits that previously allowed parties to contract for expanded judicial review under the FAA are no longer able to do so.
- Details on the May decisions in CBOCS West, Inc. v. Humphries and Gómez-Pérez v. Potter can be found here.
- Details on the February decisions in Federal Express Corp. v. Holowecki, Sprint/United Management Co. v. Mendelsoh, LaRue v. DeWolff, Boberg & Associates, Inc. and Preston v. Ferrer can be found here.