But What Does that Mean for My Business: What Employers Need to Know Following Last Week’s Supreme Court Opinions

Last week was a banner news week for the U.S. Supreme Court. One story I watched featured the man who was tasked with literally running the Windsor opinion from the Supreme Court building to an immigration court several blocks away in an attempt to halt a deportation hearing. Rarely does the last week of the Supreme Court’s Term bring such drama or good television. For employers, the decisions generally brought good news. Two Supreme Court decisions issued last week directly address employment law, while two others have employment-related implications. This blog will address briefly all four. For those you Supreme Court nerds like me who love to read the full opinions, they are all available at http://www.supremecourt.gov/opinions/slipopinions.aspx

Both employment law decisions, issued on the same day, were decided by a vote of 5 to 4 in favor of employers. The first, University of Texas Southwestern Medical Center v. Nassar, addressed an employee’s burden in proving retaliation claims pursuant to Title VII. Title VII prohibits what is known as “status-based” discrimination, i.e., discrimination based on the protected statuses we can rattle off in our sleep: race, color, religion, sex, or national origin and also prohibits retaliation for an employee’s protected activity. Title VII, as amended, explicitly states that for an employee to prove status-based discrimination, the employee needs only to show the protected status to have been a “motivating factor” in the adverse employment action. Title VII does not use the same language in its provision prohibiting retaliation due to protected activity. Instead, Title VII, as amended, prohibits retaliation “because of” protected activity. The Court, finding this difference in language to be significant, held that in Title VII retaliation cases the employee must prove that the employment action in question would not have been taken “but for” the employee having engaged in protected activity. This “but for” causation requirement will likely apply to other employment statutes that prohibit employment actions “because of” a particular activity or classification—the FMLA and ADA to be among those. The difference in a motivating factor and “but-for” causation may not sound that important at first. But consider the difference in a poorly performing employee only having to prove that her sex was a motivating factor in her termination and a poorly performing employee having to prove that absent her complaint of sex discrimination she would not have been fired. This increased burden for employees likely means that more employers will prevail in employment lawsuits prior to the trial stage and is particularly important given the increase in retaliation lawsuits in the last two years.

The second, Vance v. Ball State University, addressed the definition of “supervisor” in determining employer liability in harassment cases. Under Title VII, an employer’s liability for workplace harassment will often depend on the status of the alleged harasser. If the alleged harasser is a supervisor and the harassment culminates in an adverse employment action, the employer is strictly liable. If no adverse employment action is taken, the employer must rely on affirmative defenses. On the other hand, if the alleged harasser is a co-worker, the employer is liable only if it was negligent in controlling the working conditions. However, which employees constitute “supervisors” has been a question open for debate in many situations. Is controlling the working environment of the employee enough? What about daily directing work? Does the individual have to have some type of authority to qualify as a “supervisor”? The Supreme Court answered that question in Vance, holding that an employee is a “supervisor” for purposes of Title VII only if he or she is empowered by the employer to take tangible employment actions against the victim of the harassment. Thus, for an employee to be a supervisor and subject the employer to vicarious liability, the employee must have the authority to hire, fire, demote, promote, transfer or discipline the victim employee. This means that many “frontline” supervisors will not be categorized as supervisors for purposes of Tile VII liability. Employers should review their job descriptions and reporting structures in light of this decision to insure they are limiting liability as much as possible in the delegation of management duties, while also meeting their business needs.

The case getting a lot of the media attention last week was United States v. Windsor, in which the Supreme Court struck down Section 3 of the Defense of Marriage Act (“DOMA”). The media coverage on exactly what this decision means, however, has not been particularly clear. Many employers do not understand how, if at all, the decision in United States v. Windsor affects them. The short answer is that if an employer has employees in a state that recognizes same-sex marriage, then the employer is required to treat same-sex spouses as spouses for all federal law purposes: FMLA, health benefits, taxation, etc. However, if an employer has employees in a state that does not recognize same-sex marriage, the Windsor case does not affect that employer at all. Here is why: The Windsor decision struck down § 3 of DOMA (DOMA). The constitutionality of § 3 of DOMA was the only issue before the Court in Windsor. Prior to the Windsor decision, same-sex couples could be legally married in 11 states, plus D.C., but not legally married for purposes of federal government benefits. The Supreme Court, in striking down § 3 of DOMA, held that the federal government could no longer define marriage differently than the state in which the individual is located. However, § 2 of DOMA was not before the Court and remains intact. Section 2 of DOMA provides that states that do not recognize same-sex marriages are not required to recognize same-sex marriages occurring in other states. So, even if a couple is legally married in New York, and that couple moves to North Carolina, the state of North Carolina does not have to recognize the couple as married. As a result, pursuant to Windsor, same-sex couples in the state of North Carolina do not have any additional entitlement to federal benefits after Windsor. Employers in North Carolina do not need to make any changes as a result of Windsor unless they also employ individuals in states that recognize same-sex marriage.

Finally, employers with arbitration agreements should be aware of the decision in American Express Co. v. Italian Colors Restaurant. Merchants who accept American Express cards sued American Express in a class action in federal court alleging violations of the federal antitrust laws. Their agreements with American Express contained a clause that requires all disputes between the parties to be resolved by arbitration and provided that “[t]here shall be no right or authority for any claims to be arbitrated on a class action basis.” American Express moved to compel individual arbitration by each class member and dismiss the class action that had been filed in federal court. In opposing that motion, the merchants provided evidence that the cost of individual arbitration far exceeded the damages available to each individual plaintiff and thus, the only economical way for the merchants to bring their claims was through a class action. The Court held that the Federal Arbitration Action does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. While this was not an employment related case, many commentators believe it will be applied to employee arbitration agreements.

As a professed Supreme Court nerd, this term was particularly interesting and dramatic. Each of the opinions discussed in this post were decided by only five justices in favor of the Opinion of the Court. Given the current Court’s make-up, not surprisingly, employers came out on the better end of these splits.


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