Before each term, the U.S. Supreme Court identifies the cases it will hear in that term. While the Court has identified only three cases directly involving claims under various federal labor and employment statutes, in an additional four cases, the Court’s decisions are likely to have a significant effect on the rights and practices of employers, employees, and unions.
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Title VII
The Lewis v. Chicago case raises a very important question: When must an employee file an Equal Employment Opportunity Commission (EEOC) charge in a deferral state? In 1995, the city of Chicago administered a written examination to over 26,000 applicants for firefighter jobs. The applicants were then grouped according to test scores. The applicants were told their test scores, but it was more than 300 days before they were told exactly how their test scores and the various cutoffs would function.
African American applicants filed an EEOC charge in March 1997, and in July 1998, a suit was filed on behalf of more than 6,000 applicants. The district court denied Chicago’s request to have the suit dismissed without a trial, but the court of appeals held that the applicants had waited more than the statutory 300 days after they learned of their test scores and should have been aware of their claimed disparate impact, “especially in light of the mayor’s comment about [the disproportionate number of whites scoring in the top category].”
The applicants, joined by the U.S. solicitor general, asked the Supreme Court to hear the case and rule that the hiring of each new firefighter was a separate new violation under Title VII of the Civil Rights Act of 1964 and that the 300 days should be measured from each hire.
The Supreme Court’s decision could result in periods of extended liability for employers using testing and other selection devices to prepare a “pool” of candidates to be drawn upon from time to time.
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Class claims in arbitration
Although the facts in the case of Stolt-Nielsen SA v. AnimalFeeds International involve international claims against marine shipping companies, the issue before the Supreme Court is whether an arbitrator could treat an individual claim as a “class claim,” even though the arbitration agreement did not authorize such an expansion, and award damages to both the claimant and similarly situated parties.
This issue is quite important to employers. Employers have increasingly relied on arbitration for employment-related claims as a way to reduce costs and jury risks. Employers have also hoped arbitration awards would avoid class-action claims, whereby an employee sues on behalf of himself and a large number of similarly situated employees.
However, if the Supreme Court extends its broad endorsement of arbitration and deference to arbitrators’ decisions, employers may find arbitration more expensive than expected. Employers and counsel should closely watch this case.
ERISA
In Conkright v. Fromment , Xerox Corporation used improper methods of calculating benefits for employees who left the company, received a lump-sum distribution, and were later rehired. After affirming the district court’s finding of a violation, the court of appeals sent the case back for the calculation of damages. The plan administrator submitted a calculation, but without holding it improper, the district court adopted a more generous interpretation and calculation. In most Employee Retirement Income Security Act (ERISA) cases, courts have deferred to the plan administrator’s interpretation of the plan’s language, outside of the calculation of the plan’s benefits.
The Supreme Court’s decision to hear the case could significantly narrow plan administrators’ ability to interpret a plan’s benefits. Other circuits have held that plan administrators’ interpretations are entitled to deference, and their decisions create different standards for interpretation so that a nationwide plan could be subject to different interpretations in different areas of the country.
Keep up with the latest changes in laws regarding employee benefits with the Benefits Complete Compliance.
Labor arbitration — who decides whether a contract exists?
Granite Rock Company v. International Brotherhood of Teamsters involves a fairly unique set of facts but threatens to further limit judicial review of arbitration. It has long been held that although courts should greatly defer to an arbitrator’s decision, arbitrators do not establish their own jurisdiction, and courts decide whether there is a contract that authorizes the arbitration.
In the Granite Rock case, during a strike, the company and the local union reached a tentative agreement, including a no-strike clause and broad arbitration powers. Local union members ratified the contract, but according to pleadings, the Teamsters International representative ordered the employees to continue the strike.
Teamsters International was not part of the collective bargaining agreement, so Granite Rock sued the local for breach of contract and alleged that the international union had tortiously (wrongfully) interfered. The district court denied a preliminary injunction and later held that the international union was not a signatory to the contract so the court had no jurisdiction to hear the tortious interference claim. The case proceeded, and a jury found that the union members had ratified the contract, but the district court held an arbitrator must decide whether the union violated the contract and, if so, the damages. The U.S. Court of Appeals for the Ninth Circuit, probably the most proemployee of the 12 circuits, had limited the trial court’s ability to determine whether a contract exists to a few unique circumstances.
As in many cases, the Ninth Circuit has different sets of rules than most circuits, and it appears the Supreme Court may have agreed to hear the case to resolve that conflict among the circuit courts.
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Attorneys’ fees enhancement awards
According to the U.S. solicitor general, over 100 separate statutes provide for “fee shifting arrangements” whereby a prevailing plaintiff may collect attorneys’ fees from the defendant. This arrangement is part of Title VII, the Americans with Disabilities Act (ADA), the Fair Labor Standards Act (FLSA), and most U.S. employment statutes.
Typically, the prevailing plaintiff presents a fee request showing the number of hours allegedly spent and a per-hour rate. The court reviews the hours and establishes a “reasonable” hourly rate (which considers the experience and quality of the representation). The product constitutes the “lodestar” amount, which typically is the amount awarded. In Perdue v. Kenny, after three years of litigation and negotiations, the parties agreed to a consent decree with the understanding the court would set the fees for the “prevailing” party.
The court discounted some of the requested hours but added a 75 percent “enhancement” to the lodestar amount for what the court called a “truly exceptional” result. However, the state of Georgia, interestingly joined by the U.S. solicitor general, sought a hearing before the Supreme Court. Georgia argued that there was no standard a court could apply and that unchecked discretion would create serious budgetary risks. At the recent argument, several justices seemed to share those concerns.
Incidental effect
The appeal in Mohawk Industries v. Carpenter arises from a Racketeer Influenced and Corrupt Organizations Act (RICO) claim that Mohawk hired undocumented workers as a way to force down wages in the market. The issues in this case, however, are whether the employer must produce the investigation report of its lawyer and whether it can immediately appeal the trial court’s order.
The lower court ordered the report to be produced. Generally, discovery (the pretrial exchange of facts and documents) decisions are considered “interim” decisions and only final decisions may be appealed. The employer’s claim, of course, is that if it waited until after the case had been finally resolved, the “horse would already be out of the barn” and its confidences exposed. Employers will watch this case with interest because in employment-related cases, it is almost always the employer, not the employee, that is attempting to defend information under either the attorney-client privilege or the attorney work-product doctrine.
No final word
Generally speaking, the Supreme Court has had the final word on the interpretation of both the U.S. Constitution and, in most cases, statutes. Of late, however, Congress has evidenced an increasing willingness to second-guess the Court’s interpretation and “overrule” its decisions by amending the statutes. That happened just this spring with the Lilly Ledbetter Fair Pay Act, and Congress has recently held hearings on bills to overrule two other Supreme Court decisions. This is particularly interesting because the current Court seems committed to determining and following “congressional intent.” It may well be that the current Congress’ “intent” is considerably more expansive than the earlier Congress that passed the statutes, and it also means that an employer victory on a contested statutory issue may be short-lived.