Supreme Court Strikes Down Federal Law Defining Marriage

Section 3 of the Defense of Marriage Act (DOMA), a federal law passed in 1996, states that “[i]n determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.” In a 5-4 decision in United States v. Windsor, the U.S. Supreme Court held that Section 3 of DOMA was unconstitutional as applied to same-sex couples lawfully married under state law. According to the Court, “no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.” As a result of the decision, same-sex couples who are validly married under state law are entitled to recognition under all federal laws, including tax and employee benefit laws. A major open question with respect to many federal laws is whether a marriage needs to be lawful in the state where the couple resides, or only in the state where the marriage was performed. Significantly, the Internal Revenue Service announced that for purposes of federal tax laws, a marriage is valid if it was lawful in the state where the marriage was “celebrated.” Although the Supreme Court attempted to disclaim that its decision required states to recognize same-sex marriages under state law, a number of courts have recently concluded that the rationale of Windsor requires that state laws banning same-sex marriage be struck down. Employers should monitor these decisions carefully and review their benefit, leave and other policies in light of this quickly changing area.

Supreme Court Continues Trend Supporting Employer Arbitration Programs

In American Express Co. v. Italian Colors Restaurant, the Supreme Court rejected an antitrust challenge by small business owners to the enforcement of a class action waiver contained in an arbitration clause in a credit card use agreement. Although it is not an employment case, the American Express decision represents one of the Supreme Court’s strongest decisions supporting the right of employers to establish mandatory employee arbitration programs that require employees to waive their rights to file class actions. According to the business owners suing American Express, the class waiver was unenforceable because the value of each business’s claim was small and preventing the businesses from proceeding on a class basis imposed “prohibitive costs” that frustrated enforcement of antitrust laws. In a 5-4 decision, the Court sided with American Express, holding that because “the antitrust laws do not guarantee an affordable procedural path to vindication of every claim,” there was no basis for refusing to honor the Federal Arbitration Act’s directive that arbitration agreements be enforced on the same basis as other contracts. Enforcement of the class waiver did not preclude the business owners from “effectively vindicating” their statutory rights because the waiver did not eliminate the businesses’ “right to pursue” their claims under the antitrust laws. The Court’s decision is significant for employers because it clarifies that employees cannot use the relatively small value of individual claims—such as claims for overtime under the Fair Labor Standards Act—as a basis for arguing that they must be permitted to proceed on a class-wide basis. Employers who do not already have an arbitration program in place may want to consider whether such a program may make sense now given the proliferation of class action labor and employment and other suits and the Supreme Court’s growing support for arbitration programs.

Supreme Court Defines Who Is a Supervisor

In Vance v. Ball State, the Supreme Court in a 5-4 decision held that an employee is a supervisor only if the employee is able to take tangible employment actions against other employees. Tangible employment actions include hiring, firing, promoting and disciplining employees. The Court refused to adopt a more expansive definition of “supervisor” that the EEOC supported. Under U.S. law, employers can be held strictly liable for the tangible employment actions of a supervisor, but may be able to mount an affirmative defense in cases where the action was not tangible such as a hostile work environment. By contrast, an employer is liable for a non-supervisor only if it knew or should have known about the offensive conduct and failed to take appropriate action. The practical effect of the Court’s decision is to narrow the group of employees for whom an employer will be held strictly liable. Employers should review job descriptions and actual day-to-day functions carefully to ensure that it understands who its supervisors actually are.

EEOC Issues Guidance for Employers About How to Handle Common Disabilities

Employers in the United States have faced a deluge of claims related to the Americans with Disabilities Act (ADA). The number of such claims and, in particular, whether employers have provided reasonable accommodations is expected to increase over the coming years. In 2013 the EEOC issued guidance to employers about the four most common disabilities in the workplace: cancer, diabetes, epilepsy and intellectual disabilities. The guidance1 provides hypothetical answers and addresses issues related to employers' inquiry about and use of medical information as well as reasonable accommodations. The EEOC guidance also emphasized maintaining the confidentiality of any employee medical or health information as well as whether the employee is receiving a reasonable accommodation. Employers should familiarize themselves with the EEOC guidance on this important issue to minimize the chance of liability by ensuring that the treatment of applicants and employees is consistent with the EEOC’s position.

United States Enacts Two New Laws Protecting Trade Secrets and Increasing Penalties for Those Who Steal Secrets to Benefit a Non-U.S. Business

The United States passed two new laws addressing the protection of trade secrets in the United States. Employers both in the United States and abroad should pay particular note to this significant development. First, Trade Secret Clarification Act of 2012, signed into law in late December 2012, effectively amended the Economic Espionage Act and made the definition of “trade secret” broader to include services and products that are only used internally by the employer. In particular, the Trade Secret Clarification Act was designed to expand protection of computer source code. In addition, in early 2013, the Foreign and Economic Espionage Penalty Enhancement Act became law. This statute has particular significance for foreign and domestic employers because it increases the maximum fines for organizations and individuals who misappropriate trade secrets of domestic companies in order to benefit a non-U.S. entity. The maximum fines are now in the millions of dollars for both individuals and companies.2