Nicholas Fortuna, November 11, 2013.

Case New Holland, Inc. (CNH) sued the U.S. Equal Employment Opportunity Commission (EEOC) claiming it stole employee work time and violated the Fifth Amendment’s taking clause. The action complained of is that the EEOC sent out more than 1,300 emails to CNH’s employees and business accounts in an effort to drum up plaintiffs and evidence for a potential class action against the company. The email sought information regarding discrimination “against job applicants and current and former employees from January 1, 2009 to present.” The email pertains to an investigation launched in March 2011 into alleged age discrimination by CNH and its affiliated businesses. The company alleges that the EEOC gave no notice of the email blast and in addition to being a violation of the Constitution; it violated its own administrative rules. The lawsuit seeks an injunction that would prohibit the EEOC from using any information it gathered through the mass email. The case is pending in the D.C. federal court before Judge Reggie Walton.

The argument asserted by CNH is that it has a property interest in the time and work product they compensate employees for and that the EEOC’s actions amounted to a “taking” of that time.  Further, CNH alleged the EEOC harmed business operations by sending 1,330 “unannounced workplace interviews” of its employees. The email did not specify that the inquiry was limited to age discrimination and that no finding of discrimination had yet been made.

The EEOC has filed a motion to dismiss the suit. It argued that the email falls within the agency’s investigatory power to communicate with employees. Additionally, “investigations by federal agencies may disrupt the process of normal business operations, but this is the cost of doing business and does not result in a cognizable harm.” The National Association of Manufacturers filed an amicus brief in support of CNH. EEOC’s motion to dismiss has not yet been decided.

Nicholas Fortuna, November 8, 2013.

Chai Feldblum, the Commissioner of the Equal Opportunity Commission (EEOC), advised employers to maintain very clear job descriptions of what they expect accomplished to avoid running afoul of the Americans With Disabilities Act (ADA). Lawyers for employers have provided the same advice to their clients since the enactment of the ADA.

Feldblum spoke about compliance with the ADA at the American Bar Association’s Annual labor and Employment Law Conference. She explained that if employers have clear, succinct job descriptions that lay out the essential functions of the job as well as their expectations from employees, it would help better understand whether they are able to give accommodations to workers with disabilities. In the first instance, the employee must be qualified to perform the job. She went on to say: “The whole point of the reasonable accommodation is to enable the person to perform the job up to the standards you (the employer) have established, quantitative and qualitative standards.”

The courts and the EEOC give deference to an employer in determining what the essential job functions are and whether the employee can perform them with or without reasonable accommodations. Feldblum warned though, that employers should not take that to mean that regulators or courts will accept anything that an employer deems an essential function to be essential if it does not reflect the reality of the position.


Nicholas Fortuna, October 18, 2013.

This term, the U.S. Supreme Court will rule on the scope of the President’s power to make recess appointments under the Constitution. Article II of the Constitution provides that the president shall have power to fill vacancies subject to Senate confirmation during a recess of the Senate to ensure smooth operation of the government. The D.C. Circuit Court of Appeals ruled in National Labor Relations Board (NLRB) v. Noel Canning that President Obama’s three appointments to the NLRB during a recess by the Senate were unconstitutional. The effect was to void the NLRB’s Noel Canning decision and put at risk all the rulings made by the Board since the recess appointments were made.

Congress created the NLRB in 1935 to promote labor peace by encouraging companies and unions to bargain over their workers’ pay and other benefits. The Board decides thousands of cases like the one at issue here. Labor unions view the Board as a key ally in a time of diminishing union membership and clout. Employers see the Board as too pro-union. The NLRB has five members that decide matters relating to unions and employers.

The Supreme Court ruled three years ago that the Board shall not carry out its duties if its membership falls below three. Typically, when a vacancy occurs on the Board, the President chooses someone to fill it and the Senate decides whether to approve that nominee. Because of partisan gridlock, the Senate refused to vote on any of President Obama’s nominees to the Board. As a result, the membership fell below three and the Board did not have a quorum to operate. In turn, President Obama made three recess appointments in January of 2012.

The D.C. Circuit’s decision severely limits the President’s appointment power. It ruled first that the President can only make a recess appointment when the Senate is out of town during the interval between its annual sessions; and second, that the only vacancies the President can fill by such appointments are those that have opened up during such annual recess.

The current battle is a rehash of fights during the George W. Bush administration, just with party affiliations flipped. In 2004, President George W. Bush was fighting a challenge by Senate Democrat, Ted Kennedy, of his right to make intrasession appointments. At that time, the D.C. Circuit ruled in favor of the President and upheld the disputed appointments. In 2012, the Solicitor General in the Obama White House is defending intrasession recess appointments from attacks by the right. This time D.C. Circuit ruled against the President.

The Supreme Court is expected to make a decision by June of 2014.





Nicholas Fortuna, October 3, 2013.

The U.S. Supreme Court of the United States will decide if severance payments made to terminated employees are taxable under the Federal Insurance Contributions Act (FICA). The Court of Appeals for the Sixth Circuit determined in U.S. v. Quality Stores, et al. that the severance payments made to terminated employees were not taxable. The Sixth Circuit found that the payments were supplemental employment benefits (SUB) and thereby not taxable under FICA.

FICA tax of employee wages funds the Social Security and Medicare programs. Both the employee and employer pay part of this tax. The employer collects the employee’s share by deducting the tax from wages as they are paid. Generally, FICA tax is paid on severance payments. If the Supreme Court upholds the decision of the Sixth Circuit and finds that the payments are SUBs, it will be a consequential reversal of employer tax liability and entitle employers to tax refunds.

The concept of SUB payments evolved from the demand by organized labor for a guaranteed annual wage. The unions sought employer supplementation of existing state unemployment compensation programs. A number of industries adopted SUB plans. SUB payments are not compensation for work performed, they are payments as a result of an employee getting thrown out of work. SUB payments and severance are similar in that they are both payments for the loss of jobs.

To determine if a payment is a SUB (and not subject to FICA), Congress has delineated five factors to be considered: (1) the amount paid to the employee; (2) whether it was paid pursuant to an employer’s plan; (3) whether it was paid because of an employee’s involuntary separation from employment, regardless if it was temporary or permanent; (4) whether it resulted directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions; and (5) whether it was included in the employee’s gross income.

The Sixth Circuit found that Quality Stores’ payments met this test and Quality was entitled to a refund of its share of FICA taxes paid on behalf of employees. The Solicitor General of the United States petitioned the Supreme Court to review the Sixth Circuit’s decision. The Supreme Court agreed. A decision is due by June 2014.

There is a lot at stake for the government because the exposure it has to other taxpayers could be enormous. The Obama administration warned that it could amount to $1 Billion in tax refund claims.

Nicholas Fortuna, September 30, 2013.

The barricade erected by the Supreme Court in 2011, when it threw out a class action sex discrimination lawsuit brought by female employees against Wal-Mart, is proving to be impenetrable. In August a U.S. District Court Judge in California, relying on the Supreme Court’s earlier decision, denied a motion for class certification for women working in Wal-Mart’s California offices. The women are claiming that they were underpaid and given fewer promotions compared to their male counterparts. The case filed against Wal-Mart was a reformulated lawsuit of the one the Supreme Court considered in 2011. The California suit was part of a broader strategy by Wal-Mart’s female employees to bring more narrowly tailored class actions to avoid the pitfalls of the earlier action.

The Supreme Court, in a split decision (5-4), shut down a class action lawsuit against Wal-Mart that could have affected as many as one million women. Each of those women, it appears, will have to file their own claim. Only workers who have a truly common legal claim may sue as a group. The Court’s majority stated that rigorous proof will be required showing every single worker suffered from exactly the same sort of bias. Sample statistics and anecdotes won’t do. The claim brought by female employees, according to the majority, is that Wal-Mart’s “corporate culture” institutionalized a bias. They are suing, the opinion said, “about literally millions of employment decisions at once.” The ruling was, in essence, an interpretation of Rule 23, a federal court rule governing class actions.

Rule 23 requires that the individual members of a class have a common legal claim. Rule 23’s commonality requirement has now appears to have migrated to mean that the claims must be more or less identical. Further, proving commonality has become more difficult because each class member must provide proof that she has a common legal claim.

The 2013 California case alleged specific discriminatory statements made by the district and regional managers instead of relying on nationwide statistical patterns and anecdotal evidence. U.S. District Court Judge Charles Brayer stated in his decision that the women could not bring their allegations as a class because they had not established that their claims regarding Wal-Mart’s employment practices were linked to a class-wide policy. Judge Brayer ordered the claims to proceed on an individual basis.

We anticipate an increase in decisions limiting the ability to bring employment discrimination class action cases. For large companies in general, the more varied and decentralized their job practices, the less likely a class action claim filed against them will survive.