Contributed by Megan Muoio, June 23, 2020

On Monday, June 15, 2020, the Supreme Court of the United States, in a 6-3 decision, handed down one of the most significant employment discrimination cases in recent history, holding that Title VII of the Civil Rights Act of 1964, which prohibits discrimination in employment on the basis of sex extends Title VII protection to gay and transgender employees. The decision was made in the case Bostock v. Clayton County, Georgia, an appeal from a decision of the U.S. Court of Appeals for the Eleventh Circuit.

Gerald Bostock was a child-welfare-services coordinator for Clayton County, Georgia who had been terminated for conduct “unbecoming” of a county employee after he began participating in a gay recreational softball league. The Eleventh Circuit found that Title VII did not bar Bostock’s termination because of his sexual orientation. On appeal to the Supreme Court, Bostock was consolidated with two other Title VII cases – Altitude Express, Inc. et al. v. Zarda et. al. on appeal from the U.S. Court of Appeals for the Second Circuit, and R.G. & G.R. Harris Funeral Homes Inc. v. Equal Opportunity Employment Commission et al. on appeal from the U.S. Court of Appeals for the Sixth Circuit. In Zarda, the Second Circuit found that Altitude Express, a skydiving company, had violated Title VII when it had terminated employee Donald Zarda after he mentioned to a client that he was gay. In Harris, the Sixth Circuit permitted the EEOC to proceed with a Title VII claim by Aimee Stephens, a trans woman, who had been terminated by her employer on the basis of her gender identity.

In the majority opinion, Justice Neil Gorsuch wrote that Title VII’s prohibition against discrimination “on the basis of sex” necessarily precluded discrimination against gay and transgender individuals. In each of the cases before the Court, the employee was terminated “for traits or actions it would not have questioned in members of a different sex.” Stated another way, Justice Gorsuch reasoned that if an employer terminates a male employee because he is attracted to men but would not have terminated a female employee who was attracted to men, the employer has made a determination on the basis of the male employee’s sex in violation of Title VII.

Justice Gorsuch, along with the five Justices who concurred with the majority opinion, disregarded employers’ arguments that the legislative intent of Congress in passing Title VII was not to address discrimination against the LGBTQ community. Because the plain language of Title VII was unambiguous, there was no need to address the historical basis for the enactment of Title VII or dissect its legislative history. He concluded that, despite the fact that few people in 1964 may have expected Title VII to apply to discrimination on the basis of sexual orientation or gender identity, “we should not dare to admit that it follows ineluctably from the statutory text.”

Finally, Justice Gorsuch dismissed the concerns raised by the dissenting Justices of the Supreme Court – Justice Samuel Alito, Justice Clarence Thomas, and Justice Brett Kavanaugh – that the Court’s ruling would open a pandora’s box of related employment issues, such as work dress codes or employee bathrooms, and implicate similar provisions in other federal statutes, because those issues were not before the Court. He likewise disregarded arguments about employers’ contentions that the ruling would infringe on the free exercise of their religious beliefs, pointing out that none of the employers in the three cases before the Court raised claims based on U.S. Constitution’s First Amendment free exercise of religion clause or Religious Freedom Restoration Act. The Court’s unwillingness to engage on these issues sets up future clashes before the Court, as it will inevitably address religious employers’ claims in future cases.

For employers in New York, who are currently barred from making employment decisions based on employees’ sexual orientation or gender identity due to the New York Human Rights Law, the application of Title VII to LGBTQ employees will not require a change in any employment policies. However, for those employers in the 22 states that did not provide full employment protection to LGBTQ employees, they will be required to immediately revise their employment practices to comply with the Supreme Court’s ruling.

Also last week at the Supreme Court, President Donald Trump’s attempt to end the Deferred Action for Childhood Arrivals (DACA) program was thwarted in Department of Homeland Security v. Regents of the University of California. In a 5-4 decision written by Chief Justice John Roberts, the Court held that the Department of Homeland Security failed to comply with the Administrative Procedure Act when it attempted to end the DACA program in 2017. The federal government will have another opportunity to end the program, although it is unlikely that any such action will be successfully carried about before the election in November.

In the conclusion of a busy week at the Court, the Justices declined to grant petitions for certiorari in two hot-button areas. First, the Court declined to take up any of the three cases involving police officer’s qualified immunity against civil suits. In light of the ongoing protests related to the killing of George Floyd, those interested in limiting police officer immunity were hopeful that the Court would reexamine its precedent in Pearson v. Callaghan. However, the Court, hesitant to wade into any ongoing controversy, denied all three petitions.Second, the Court declined to take up any of the ten petitions involving the Second Amendment right to bear arms. Each of the petitions involved state law that limited gun rights and, in light of the denials, each law will remain on the books.

Contributed by Paula Lopez, April 20, 2020

Congress passed the Families First Coronavirus Response Act (FFCRA) on March 18, 2020, which contains two key provisions touted by the government as providing workers dealing with COVID-19 financial and employment protections so that they can care for themselves and their families. On April 1, 2020, the U.S. Department of Labor (DOL) issued a rule intended to provide guidance for the implementation of the FFCRA’s emergency paid sick leave act (EPSLA) and emergency family and medical leave expansion act (EFMLEA) provisions of the FFCRA (DOL Rule). However, the DOL Rule significantly narrows the number of employees eligible to receive benefits under the law by, inter alia, permitting employers to disallow paid sick leave if the employer decides no work is available, expanding the definition of “health care provider,” a category of workers exempted from coverage under the FFCRA, and allowing employers to deny leave if an employee fails to provide documentation required under two federal agencies before taking leave. As a result, on April 14, 2020, New York’s Attorney General, Letitia James, filed a lawsuit against the DOL in the Southern District of New York, challenging the parts of the DOL Rule that impose eligibility restrictions on the basis that the the DOL has exceeded the authority granted to it by Congress by promulgating a rule that violates the statutory language and the intent of the FFCRA. Simultaneously with the filing of the lawsuit, the Attorney General is moving for summary judgment, seeking to the have the court sever and vacate the challenged portions of the DOL Rule.

The Complaint alleges that the DOL Rule unlawfully modifies the EFMLEA and EPSLA, as follows:

• Under the FFCRA, “the EPSLA requires an employer to provide paid sick time to an employee who is unable to work or telework if the employee meets one of six qualifying conditions, including that the employee (1) “is subject to a Federal, State, or local quarantine or isolation order related to COVID-19”; (2) “has been advised by a health care professional to self-quarantine due to concerns related to COVID-19”; (3) “is experiencing symptoms of COVID-19 and seeking a medical diagnosis”; (4) is caring for an individual subject to a quarantine or isolation order by the government or a health care professional; (5) is caring for a son or daughter whose school or place of care is closed, or whose child care provider is unavailable because of COVID-19; or (6) “is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.” However the DOL Rule allows an employer, in its sole discretion, to deny paid leave benefits to an otherwise eligible employee, under three of the six qualifying conditions because the employer does not have work for the employee. The three qualifying conditions where this exclusion is available to an employer are (i) where the employee seeks leave because he is subject to a governmental quarantine or isolation order, (2) the employee seeks leave because he is caring for an individual subject to a governmental or medical quarantine order, or (3) the employee seeks leave to care for a son or daughter whose school or place of care has closed. The Complaint argues that this work availability requirement affords employers a right to deny leave, which is not supported by the language of the FFCRA.

• Under the FFCRA, “the EFMLEA provides that an employer of “an employee who is a health care provider or emergency responder may elect to exclude such employee” from the emergency family leave benefits provided by the Act.” The FFCRA states that the term “health care provider” has the same meaning given under the Family Medical Leave Act, which defines “health care provider” as “(A) a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices; or (B) any other person determined by the Secretary to be capable of providing health care services.” The Complaint alleges that the DOL Rule improperly adopts a much broader and expansive definition of “health care provider” to include the following employees:
  1. “anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, Employer, or entity[,] [including] any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions,” 85 Fed. Reg. at 19,351 (§ 826.30(c)(1)(i));
  2. “any individual employed by an entity that contracts with any of these institutions described above to provide services or to maintain the operation of the facility where that individual’s services support the operation of the facility,” id. (§ 826.30(c)(1)(ii)); and
  3. “anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, r treatments,” id. (§ 826.30(c)(1)(ii)).

The Complaint alleges that by providing such an expansive definition of “health care provider”, the DOL Rule unlawfully expands the definition so as to exclude tangential workers, never intended to be excluded from coverage under the health care provider exception. The examples of potentially excluded workers noted in the Complaint include “teaching assistant or librarian at a university; employees who manage the dining hall or information technology services at a medical school; the cashier at a hospital gift shop; and anyone employed by any contractor to any entity listed in the Final Rule, including all employees of a payroll processing firm or vending-machine resupplier.”

• The Complaint also alleges that the DOL Rule imposing restrictions on an employee from taking paid sick leave or emergency family leave intermittently is not supported by the language of the FFCRA. Specifically, the Complaint challenges the parts of the rule that “allows intermittent leave only for employees who are taking emergency family leave or who are taking paid sick leave to care for a child whose school is closed” and only “with the approval of their employer”(§ 826.50(b)(1)). The DOL Rule also prohibits intermittent leave for employees reporting to a work-site and taking paid sick leave or emergency family leave for any reason other than to care for a child whose school is closed. The Complaint argues that these restrictions on intermittent leave are not supported by the text of the FFCRA, which contemplates that employees may take leave intermittently in establishing that employers can claim the tax credits to cover the leave on a quarterly basis.

• According to the Complaint, “[t]he Final Rule provides that before any employee may take emergency family leave or paid sick leave, the employee “is required to provide the Employer documentation containing the following information . . . (1) Employee’s name; (2) Date(s) for which leave is requested; (3) Qualifying reason for the leave; and (4) Oral or written statement that the Employee is unable to work because of the qualified reason for leave.” 85 Fed. Reg. at 19,355 (§ 826.100(a)); see also id. at 19,339 (signed statement from employee required). The Complaint alleges that there is no statutory basis for the documentation requirements imposed by the DOL Rule since the FFCRA recognizes the emergency nature of the leave, and further argues that the requirements are contrary to Congress’s intent because they will result in many eligible employees being denied leave.

The DOL has not yet responded to the allegations in the Complaint. However, given the remedial nature of the FFCRA and the congressional intent in passing the law, there is a basis to the New York Attorney General’s challenges to the DOL Rule, particularly those portions of the rule related to the “work available” component created by the rule, the expansive definition of “health care provider,” and the limitations on the availability of intermittent leave. The documentation requirements imposed by the DOL Rule, however, can be reconciled with the language of the FFCRA since there needs to be a method for employers to support their claim for a tax credit to cover the costs of the leave, and is therefore more likely to survive scrutiny.

Employers should follow this case closely to ensure that any policies they implement for EFMLEA and EPSLA leave are consistent with any changes to the DOL Rule.

Contributed by Paula Lopez, March 24, 2020

A New Orleans restaurant, operating under the name Oceana Grill, filed the first of its kind lawsuit against its insurer, Lloyd’s London, for an order declaring that the civil authority provision contained in its insurance policy affords coverage for physical losses caused by Covid-19 (“coronavirus”) contamination and business income coverage in the event the insured premises is contaminated by the coronavirus. 

Oceana Grill normally operates 365 days of the year, from 8 a.m. to 1:00 a.m, and has a seating capacity of 500 guests. At the time of filing the lawsuit, the Governor of Louisiana had issued a state-wide Civil Authority Order banning gatherings of 250 people or more and the Mayor of New Orleans had imposed restrictions on full-service restaurants directing them to operate at 50% seating capacity and to close by 9:00 p.m. Oceana Grill relied on the significant losses it would likely suffer as a result of these restrictions in bringing the action prior to filing a claim with its insurer. Since the filing of the lawsuit, New Orleans passed restrictions similar to New York, requiring restaurants to limit operations to take-out or delivery services.

Oceana Grill has an all-risk policy. Commercial all-risk policies cover risk of loss or damage to the insured’s property including related losses like business interruption losses, lost profits, and other costs, unless expressly excluded.  Of note, Oceana Grill’s policy does not contain an exclusion for losses due to viruses or a  global pandemic.  The issue for the court to decide in the Oceana Grill case will be whether an all-risk policy extends to losses related to a business closure by order of a Civil Authority. Insurance policies typically define a “covered loss” as a direct physical loss or damage to property.  Oceana Grill alleges in its complaint that the coronavirus is physically impacting public and private property and physical spaces because the virus lasts on the surface of objects and materials for varying periods of time and that contamination by the virus would require extensive remediation. While the current coronavirus pandemic and its long-term impact on businesses across all industries is unprecedented, the court’s decision in the Oceana Grill case will have a significant impact on the torrent of coverage cases likely to be filed around the country.

Cases involving coverage disputes related to civil authority orders were prevalent following 9/11 and the Ebola outbreak in 2014. While the coverage decisions were determined by the policy language and the specific facts of each case, civil authority orders issued as precautionary measures to prevent property damage or injury that has not yet occurred, generally failed to trigger civil authority coverage. In the context of the current coronavirus pandemic, insurers will likely try to avoid civil authority coverage by claiming that local, state and federal directives ordering businesses to close or to significantly reduce operations in order curtail the spread of the virus does not trigger the “physical loss” coverage requirement under general policies because such orders are intended to prevent the spread of the virus and an overburdening of the healthcare system; not because of an identifiable physical loss or damage to the property. However, if a coronavirus infected person enters the premises, resulting in contamination to the property which, in turn, results in a forced shut down, an insured may be able to establish the “direct physical loss” requirement for triggering coverage.   

Generally, insureds may have difficulty establishing the existence of a “physical loss” due to the absence of a scientific consensus on the manner of transmission, and on how long the virus can survive on different surfaces and materials.  However, this may change as a result of further research and testing of the virus and its transmission.  While the Oceana Grill coverage dispute is focused on losses caused by civil authority orders and coverage under its civil authority policy provision, an all-risk insurance policy may afford businesses with other policy provisions on which they can base a claim for financial losses caused by coronavirus-related business closures.  These include coverage provisions related to business interruptions if an insured is forced to close, or contingent business interruptions if a supplier or vendor of parts  or materials necessary for the continuation of the insured’s business is forced to close.  Additionally, an insured can argue that the coronavirus affected the functionality of the business property by forcing a shutdown. For instance, courts have found that insureds’ have suffered a direct physical loss or damage to property in instances where the release of dangerous gases or bacteria render an insured’s premises uninhabitable in the absence of structural damage[1].

Therefore, it is important for businesses to review their insurance policies to assess whether some or all of the business losses suffered as a result of the coronavirus can be curtailed.

[1] Gregory Packaging, Inc. v Travelers Prop. Cas. Co. of Am., 2014 WL 6675934, at *6 (DNJ Nov. 25, 2014).