Allyn & Fortuna LLP
By: Megan J. Muoio, March 6, 2017
The Supreme Court announced last week that it will hear the matter of Hamer v. Neighborhood Housing Services of Chicago during its October 2017 session. The case comes to the Supreme Court on appeal from the Seventh Circuit Court of Appeals which, plaintiff has argued, issued a decision contrary to the Supreme Court’s precedents when it dismissed her appeal despite an extension of time granted by U.S. District Court Judge Ruben Castillo.
Plaintiff Charmaine Hamer was formerly an intake specialist for Neighborhood Housing Services of Chicago, Inc. (NHS), a nonprofit neighborhood revitalization organization that works with Fannie Mae’s mortgage help center. Hamer alleged that she was forced to resign by NHS and Fannie Mae on account of her age (she is in her mid-60s) and sex. Hamer brought suit for violations of Title VII and the Age Discrimination in Employment Act in the United States District Court for the Northern District of Illinois.
NHS and Fannie Mae argued that it dismissed Hamer because of her persistent tardiness, a disrespectful communications style, and low production numbers. Judge Castillo of the District Court found in favor of NHS and Fannie Mae and held that the reasons they stated for Hamer’s dismissal were not pretexual. After the decision, Hamer’s attorney withdrew from the case. Thereafter, Judge Castillo granted Hamer’s request for a 60-day extension of time to file her appeal to the Seventh Circuit.
Upon receipt of Hamer’s appeal, which was filed within the extended time set by Judge Castillo, the Seventh Circuit ruled that it lacked jurisdiction over Hamer’s appeal because Federal Rule of Appellate Procedure 4(a)(5)(C) states that no extension can exceed 30 days or 14 days after the date the order granting the motion for an extension is entered. The Seventh Circuit held that the Rule’s requirement is “mandatory and jurisdictional” and that Judge Castillo was without authority to grant an extension of more than 30 days.
On appeal to the Supreme Court, Hamer has asked the Court to resolve a circuit court split in the interpretation of Rule (4)(a)(5)(C). While the Seventh Circuit has held that the Rule is a jurisdictional requirement that cannot be altered, the Ninth and D.C. Circuit Courts of Appeal have held the Rule is not a jurisdictional requirement. The Supreme Court accepted this appeal to hopefully resolve the circuit split.
Oral argument is expected next fall.
Nicholas Fortuna, February 24, 2017
The Supreme Court oral arguments in McLane v. Equal Employment Opportunity Commission (EEOC) on February 21, 2017 presented the justices with the chance to determine the role of federal district courts in monitoring EEOC subpoenas. The concern of the Court was how district courts should rein in agency investigations so they don’t turn into fishing expeditions.
The case started when McLane, a supplier of consumer products to convenience stores, required one of its employees, Damiana Ochoa, to pass a physical strength test before returning to work after maternity leave. Ochoa failed the test and McLane fired her. Ochoa filed an EEOC charge alleging sex discrimination.
The EEOC began an investigation and sought names, genders, social security numbers, contact information for each test-taker nationwide and the results of the tests. Further, the EEOC wanted the reason each test-taker had to take the tests. The EEOC issued a subpoena for this information and McLane objected. The dispute went to the United States District Court for the District of Arizona.
District courts apply a burden-shifting analysis in reviewing agency subpoenas. The courts look to whether Congress has granted the agency statutory authority to investigate and issue subpoenas. Then the agency must show that it followed the procedural requirements, and the evidence sought was relevant and material to the investigation. The employer (the subpoenaed party) then has an opportunity to show that the subpoena is overbroad or unduly burdensome.
The district court in McLane applied this test and found that the information sought by the EEOC was not relevant to Ochoa’s sex discrimination charge. The Court stated that the EEOC was “trolling for possible complainants.” The EEOC appealed to the Ninth Circuit Court of Appeals.
The Court of Appeals performed a de novo review of the district court’s decision, which is a wholesale appellate review of the lower court’s ruling from scratch on a question of law. The Ninth Circuit reversed the district court’s decision finding that the information sought was within the EEOC’s authority to obtain.
On appeal to the Supreme Court, McLane argued that The Ninth Circuit should not have performed a de novo review, but a more limited review of whether the lower court abused its discretion in concluding that the EEOC did not have the authority to conduct such a broad investigation.
In support of the Ninth Circuit’s decision, it was argued that whether a party must comply with a subpoena is a question of law subject to de novo review by the Court of Appeals because the test governing the enforcement of agency subpoenas is rooted in the fourth amendment and subpoenas are essentially constructive searches. Therefore, a decision on whether to enforce compliance with the subpoena is a reasonableness determination under the fourth amendment and is subject to a de novo review.
Notwithstanding that McLane turns on technical legal principles of review of agency action, it will have a practical impact for employers. The Supreme Court will set the standard for judicial oversight of the agency and when to curtail investigations. A decision is expected by June of this year.
Paula Lopez, February 10, 2017.
The Age Discrimination in Employment Act (ADEA) protects employees, age 40 and older, against age discrimination. The Third Circuit, in Karlo v. Pittsburgh Glass Works, 129 Fair Empl.Prac.Cas (BNA) 1461, split from the Second, Sixth and Eight Circuits by holding that employees over the age of 40 can make out a disparate impact claim under the ADEA by showing that an employer’s actions disproportionately impacted a subgroup of employees over 40, within a larger group of employees over 40 years of age, but younger than those in the subgroup. The Third Circuit’s decision, which has precedential effect over district courts in New Jersey, Pennsylvania, Delaware and the Virgin Islands, reversed a Pennsylvania District Court’s order dismissing the plaintiffs’ disparate impact claims under the ADEA through summary judgment.
The plaintiffs in Karlo are comprised of a subgroup of older workers age 50 and older who claimed that they were disproportionately impacted by the employer’s reduction in force plan as compared to younger co-workers, who were also over 40. Defendant, PGW, sought to dismiss the disparate impact claim by arguing that “subgroup” disparate impact claims are not cognizable under the ADEA, and that employees “older than forty were, as a class, favored to keep their jobs’ under the employer RIF.”
The Third Circuit relied on the language of the ADEA’s disparate-impact provision, which makes it unlawful for an employer “to adversely affect [an employee’s] status . . . because of such individual’s age.” 29 U.S.C. § 623(a)(2), and the reasoning behind the U.S. Supreme Court’s decisions in the cases O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996) and Connecticut v. Teal, 457 U.S. 440 (1982).
In O’Connor, a 56-year old plaintiff was terminated and replaced by a younger worker who happened to be over the age of 40. The Fourth Circuit held that to make out a prima facie claim under the ADEA, the plaintiff was required to show that he was replaced with employees under the age of 40. The Supreme Court reversed the Fourth Circuit’s holding, finding that while the “ADEA protects a class of individuals at least forty years old, it ‘prohibits discrimination on the basis of age and not class membership . . . .” O’Connor at 313. Relying on the Court’s reasoning in O’Connor, the Third Circuit held that “[a] specific, facially neutral policy that significantly disfavors employees over fifty years old supports a claim of disparate impact under the plain text of § 623(a)(2). Although the employer’s policy might favor younger members of the forty-and-over cohort, that is an ‘utterly irrelevant factor,’ (internal citation omitted), in evaluating whether a company’s oldest employees were disproportionately affected because of their age.”
The Third Circuit also relied on the Supreme Court’s decision in Teal, a case involving a Title VII disparate impact claim. In Teal, the plaintiffs challenged a two-step process used by a Connecticut state agency to determine eligibility for promotions. The first step required applicants to take a written test, and only applicants that passed the test were selected for a promotion. The plaintiffs consisted of black applicants who failed the test who alleged that black applicants failed the test at a significantly higher rate than white applicants. The State of Connecticut argued that because black applicants who passed the test were given preferential treatment at the second step of the process and were promoted at a higher rate than white employees, any discriminatory effect of the written test was canceled out. The Supreme Court rejected this argument, stating that “Title VII does not permit the victim of a facially discriminatory policy to be told that he has not been wronged because other persons of his or her race or sex were hired. That answer is no more satisfactory when it is given to victims of a policy that is facially neutral but practically discriminatory. Every individual employee is protected against both discriminatory treatment and practices that are fair in form, but discriminatory in operation.”
The Third Circuit relied on Teal, in rejecting PGW’s “bottom-line” defense that sought to focus the court’s attention on the impact of its RIF on the overall class of workers over 40 years of age and not on how it affected the sub-group of workers 50 and older. The Third Circuit stated that the “ADEA, like Title VII, protects individuals who are members of a protected class, not a class itself… Such protection under the statute does not disappear when a plaintiff advances a disparate-impact claim. Teal prohibits the use of a bottom-line statistic to justify ignoring a disproportionate impact against individuals that would otherwise be actionable under the plain text of the statute”.
The Third Circuit’s decision in Karlo splits from the Second (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989)), Sixth (Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991) (table opinion)), and Eighth (EEOC v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999) Circuits, who have all held that disparate impact claims under the ADEA did not include subgroups and were limited to comparing the effect of a policy or decision on the class of employees 40 and older to employees outside the protected class. The Court justified its decision to deviate from the other Circuits because it believed those decisions predate and are “contradicted by O’Connor and Teal, confuse evidentiary concerns with statutory interpretation, and incorrectly assume that recognizing subgroups will proliferate liability for reasonable employment practices.”
The split created by the Third Circuit in deciding Karlo will likely need to be resolved by the Supreme Court. In the meantime, employers considering implementing neutral policies that may have an impact on workers over the age of 40, should not only evaluate the impact of such policies on workers ages older or younger than 40 but also, on subgroups of workers within the protected class of workers.
Nicholas Fortuna, February 9, 2017
The U.S. Supreme Court reportedly told the lawyers for the three cases testing the validity of class action and collection action waivers in employment arbitration agreements that they will be heard next term instead of this one. The Court granted petitions to hear the cases last month. The term will begin on October 2, 2017 and there will likely be a ninth justice sitting on the Court by then. There has been a vacancy on the court since the death of Justice Antonin Scalia in February 2016.
These cases are being closely watched because the outcome will have a significant impact on employers’ exposure to workplace lawsuits. Employers use class action waivers to keep labor disputes in arbitration on an individual basis rather than being subject to the cumulative effect of claims by multiple parties in a class action. A previous blog post described the cases and the issues at stake.
There is a circuit split regarding whether class action waivers in employment arbitration agreements are valid. The differing views are reflected on how the courts see the interplay between the Federal Arbitration Act (FAA) and the National Labor Relations Act (NLRA).
On one side, some courts and the National Labor Relations Board (NLRB) hold that the class action waivers interfere with the “right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” On the other side, courts are relying on Supreme Court precedent of giving deference to arbitration over judicial action under the FAA. These courts have held that the FAA has a preemptive effect and that state and federal laws must bow to the enforcement of arbitration agreements in accordance with their terms.
Many were worried that the cases were headed for a 4-4 tie vote which would leave the lower court decisions in place and fail to resolve the split in the circuits. Deciding the case next term with a ninth justice on the court will avoid a tie. Judge Neil Gorsuch of the tenth Circuit Court of Appeals is the pending nominee on the Supreme Court, and is viewed as likely to favor class action waivers.
The Supreme Court To Determine Validity of Class Action Waivers In Employment Arbitration Agreements
Nicholas Fortuna, January 27, 2017
The U.S. Supreme Court will decide whether class and collective action waivers in employment arbitration agreements violate the National Labor Relations Act (NLRA). The Court agreed to hear three cases relating to this issue:
National Labor Relations Board v. Murphy Oil USA (No. 16-307). A collective action against Murphy Oil USA Inc., which operates more than 1000 retail gas stations in several states, alleging the company violated the Fair Labor Standards Act (FLSA). The district court dismissed the collective action and compelled arbitration. The Fifth Circuit affirmed.
Epic Systems Corp. v. Lewis (No. 16-285). A wage and hour collective action against Epic Systems, a health care software company, alleging that it misclassified technical writers as exempt in violation of FLSA. The district court denied the employer’s motion to compel arbitration and the Seventh Circuit affirmed.
Ernst & Young LLP v. Morris (No. 16-300). A collective action claiming Ernst & Young misclassified employees to deny overtime wages in violation of the FLSA. The Ninth Circuit held that the employer violated the NLRA by requiring employees to sign an arbitration agreement preventing them from bringing class and collective actions.
The NLRB has issued numerous decisions invalidating arbitration agreements because they contain class and collective action waivers. The Board’s position is that such waivers limit employees’ right under the NLRA to engage in “concerted activities” in pursuit of their “mutual aid or protection” and are unenforceable under the Federal Arbitration Act (FAA).
The Supreme Court has consistently held that class action waivers contained in arbitration agreements are enforceable under the FAA. The question of how to reconcile the FAA and the NLRA has been circling the appellate courts. A circuit split developed between the Fifth, Second, and Eighth Circuits upholding the waivers and the Seventh and Ninth Circuits invalidating them.
The NLRA provides that “employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The NLRA declares it an unfair labor practice to “interfere with, restrain or coerce employees in the exercise of the rights guaranteed” under the statute.
On one side, some courts and the NLRB find that forcing employees to waive collective and class actions in an arbitration agreement violates the right to “concerted activity” under the NLRA. This side permits arbitration of employee disputes under the FAA, but asserts that such arbitrations must allow for collective or class actions. On the other side, courts are relying on the Supreme Court’s precedent of giving deference to arbitration over judicial action under the FAA. These courts have held that the FAA has a preemptive effect and that all state and federal laws interfering with the enforcement of arbitration agreements in accordance with their terms must give way.
The outcome of these cases could depend on the appointment of a ninth justice to the court. Historically, arbitration enforcement cases have been decided by a closely divided court. This is not an easy one to predict. How the Court resolves the clash between the right to “concerted activity” and the deference given to the FAA will be closely watched. Employers must take another look at their arbitration agreements to ensure that they comply with the Supreme Court’s ruling in these cases.