The U.S. Supreme Court has granted certiorari and will review several matters with important employment and labor law ramifications during its 2013-2014 term. These cases touch on the Fair Labor Standards Act, the Sarbanes-Oxley Act, the Employee Retirement Income Security Act, and the Labor Management Relations Act, as well as, the validity of President Obama’s intrasession National Labor Relations Board member appointments in January 2012.

Lawson v. FMR, LLC, No. 12-3

The Supreme Court will decide whether the whistleblower protections of the Sarbanes-Oxley Act (“SOX”) apply to employees of privately held contractors and subcontractors of public companies.

FMR is a publicly traded company. Plaintiffs Jackie Lawson and Jonathan Zang were employees of FMR’s privately held subsidiaries. Those privately held subsidiaries are contracted to advise and manage mutual funds and are subject to the Investment Advisers Act of 1940. After allegedly being retaliated against for reporting mistakes and misconduct involving the mutual funds, Plaintiffs brought suit against FMR claiming that it had violated Section 806 of SOX, 18 U.S.C. § 1514A, which prohibits publicly traded companies from discriminating against an employee for lawfully engaging in certain protected activity. FMR moved to dismiss on the ground that the plaintiffs were not covered employees and, therefore, had not engaged in protected activity. The district court denied FMR’s motions to dismiss, holding that SOX is not limited to employees of publicly traded companies, but rather also protects the employees of such companies’ contractors and subcontractors. The First Circuit disagreed and reversed. The Supreme Court granted the plaintiffs’ petition for certiorari and will clarify whether employees of private companies contracted or subcontracted by public companies are covered under SOX.

Notably, although the Solicitor General had opposed Supreme Court review as premature, the government agrees with plaintiffs that the First Circuit erred in holding that employees of contractors and subcontractors of public companies are not protected, under SOX, from retaliation.

Unite Here Local 355 v. Mulhall, No. 12-99

The Supreme Court will decide whether an employer violates Section 302 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 186, by agreeing to remain neutral, grant the union limited access to its property, and recognize the union upon a showing of majority support in exchange for the union agreeing not to picket, boycott, or impose any other economic pressure upon the employer’s business. The circuits are split on this question: the Third and Fourth allow these sorts of ground rules for union organizing; the Eleventh Circuit does not.

Section 302 of LMRA makes it illegal for an employer “to pay, lend, or deliver, any money or thing of value…to any labor organization.” Here, UNITE HERE Local 355 (“Unite”) entered into a memorandum of agreement with a company doing business as Mardi Gras Gaming (“Mardi Gras”). Among other things, Mardi Gras agreed to grant Unite access to non-public work areas, give Unite  a list of employees and their contact information, and remain neutral during Unite’s organizing efforts. In exchange, Unite agreed to financially support a local gaming ballot initiative, for which Unite eventually spent $100,000. Mardi Gras employee Martin Mulhall filed a complaint seeking to enjoin enforcement of the agreement claiming that the things Mardi Gras promised were “things of value” under Section 302.

The district court dismissed the case for failure to state a claim. But the Eleventh Circuit reversed, holding that neutrality and other forms of assistance can “become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.” In contrast, the Third and Fourth Circuits have upheld neutrality agreements, ruling that setting ground rules for union organizing does not violate Section 302. In opposing Mardi Gras’ petition for certiorari, the government took the position that employers and unions may set “ground rules” without running afoul of Section 302, and that the Eleventh Circuit “went astray in concluding that the legitimacy of such agreements turns on an inquiry into the parties’ intent.” The Supreme Court’s decision may resolve this circuit split.

Sandifer v. United States Steel Corp., No. 12-417

The Supreme Court granted review to clarify the meaning of “changing clothes” as it is used in Section 203(o) of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 203(o). The statute provides that employees shall not be compensated for “any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time ... by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.” The statute does not define “clothes” or “changing clothes.

Employees at United States Steel Corp (“U.S. Steel”) in Gary, Indiana brought a collective action under the FLSA claiming that they should have been paid for time spent changing into their work clothes and traveling back and forth to the locker room. The district court agreed in part, ruling that the FLSA requires compensation for time spent traveling to and from the locker room, but not for time spent changing clothes. The employees appealed, arguing that they were not changing into clothes, but putting on “personal protective equipment.” But the Seventh Circuit ruled against the employees on both claims finding: (1) the employees’ gear was clothing and, was therefore excluded under the FLSA and (2) because time spent changing clothes was not a “principal activity,” the time going to and from the locker room was not required to be compensable under the FLSA.

The U.S. Solicitor General has now pressed the Supreme Court to affirm the Seventh Circuit, telling the Court that the flameretardant items worn by the workers were “clothes” within the meaning of Section 203(o). The Solicitor General’s position is particularly notable given that the U.S. Department of Labor had backed the workers in a 2011 Seventh Circuit amicus brief.

Heimeshoff v. Hartford Life & Accidental Insurance Co., No. 12-729

The Supreme Court will address if the statute of limitations may begin to run on a long-term disability benefit claim under Employee Retirement Income Security Act (“ERISA”) before the plan participant has exhausted all plan remedies.

Julie Heimeshoff left her job in June 2005 because of health problems and filed a claim for Long Term Disability benefits with Hartford Life & Accidental Insurance Co. (“Hartford”). Determining that Heimeshoff could perform the duties of her position, Hartford denied her claim in December 2005, again in November 2006, and for a final time on November 26, 2007. On November 18, 2010, Heimeshoff filed a complaint asserting that Hartford’s denial of her claim violated ERISA. The district court dismissed the claim as time barred, finding that the plan had an unambiguous limit of three years after proof of loss to pursue legal action. Heimeshoff appealed arguing that the statute of limitations should begin when the benefits are denied for the final time— that is, after a plan participant has exhausted plan remedies. The federal circuits, after all, uniformly require exhaustion before judicial review may be sought. But the Second Circuit affirmed. The Supreme Court now will consider whether the statute of limitations may begin to run before the plan has made its final decision.

NLRB v. Noel Canning, No. 12-1281

Finally, the Supreme Court will rule on the validity of President Obama’s 2012 intrasession recess appointments to the National Labor Relations Board (“NLRB” or “Board”). On January 4, 2012, while the Senate was in a pro forma session, a time in which a single senator sometimes appeared in chambers every third day, President Obama appointed Sharon Block, Terence F. Flynn, and Richard F. Griffin to the NLRB.

The Noel Canning case arose after Teamsters Local 760 filed unfair labor practice charges against Noel Canning, a bottler and distributor. An Administrative Law Judge found against Noel Canning and the company appealed. The NLRB, with the three recess appointment Board members, affirmed the decision in February 2012.

In its groundbreaking January 2013 decision, the D.C. Circuit ruled that the President’s recess appointments to the NLRB were unconstitutional because the Constitution’s Recess Appointments Clause only allows appointments during intersession congressional recesses (i.e., the period between one Congress and the next), and only when such vacancies arise during such recess. Further, because the Board was comprised of only three members, two of whom were invalid recess appointees, the Board lacked the required quorum to rule on Noel Canning’s appeal. In accepting review of the case, the Supreme Court asked the parties to brief one additional issue: whether the President can make recess appointments when the Senate is convening in pro forma sessions every three days, as the Senate was doing when the President made his recess appointments.

Since the D.C. Circuit issued its opinion in Noel Canning, the Third and Fourth Circuits have agreed that the three January 4, 2012 intrasession appointments were unconstitutional. Insofar as all recess appointments to the NLRB during the Obama Administration have been intrasession, the Supreme Court’s ruling could invalidate hundreds of NLRB decisions made since January 2012, and more than 1,300 published and unpublished decisions, dating back to August 2011, are now also suspect.