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Justices Return to Slim Docket of Employment Cases

Sept. 27, 2016, 3:39 PM

By Kevin McGowan, Bloomberg BNA

The U.S. Supreme Court returns Oct. 3 for its new term with just one labor-related item among the 31 cases granted review so far.

“I’m struck by how quiet it is on the employment front,” said Rae Vann, general counsel of the Equal Employment Advisory Council, an employers’ association in Washington.

That could change, however, as the justices Sept. 26 began considering petitions for review that accumulated during the court’s summer break.

The justices are expected to grant review in more cases before the 2016-2017 term officially opens Oct. 3.

More than three dozen petitions are pending that seek review of appeals court rulings that interpret the Fair Labor Standards Act, the Employee Retirement Income Security Act, Title VII of the 1964 Civil Rights Act, the National Labor Relations Act, the Americans with Disabilities Act and other labor and employment laws.

Supreme Court practitioners, employment lawyers and academics said at least some of those petitions appear to be strong candidates for review.

NLRB Appointment Case Pending

The one labor case on the court’s docket involves a somewhat arcane issue about whether Lafe Solomon, a former National Labor Relations Board acting general counsel, lost his power to perform that role after President Barack Obama nominated him in January 2011 for a full term as the board’s general counsel.

At the NLRB’s request, the court agreed to review a U.S. Court of Appeals for the District of Columbia Circuit decision that Obama violated the Federal Vacancies Reform Act. The appeals court said Solomon therefore could no longer issue unfair labor practice complaints or take other official steps as acting general counsel once he was nominated for the permanent post (NLRB v. SW Gen., Inc., No. 15-1251).

The court will hear oral argument Nov. 7 and its ultimate decision may have more significance as a presidential appointment powers case than as a labor relations ruling.

D.R. Horton Ruling in Spotlight

Three petitions in cases addressing the NLRB’s position that class action waivers in arbitration agreements violate Section 7 of the NLRA are top candidates for review, practitioners said.

Employers seek review of a Ninth Circuit decision and Seventh Circuit decision that approved of the board’s D.R. Horton Inc. ruling, which said enforcement of class action waivers unlawfully restrict workers’ NLRA rights to engage in concerted activity for mutual aid and protection (Ernst & Young LLP v. Morris, No. 16-300; Epic Sys. Corp. v. Lewis, No. 16-285).

The NLRB has asked the court to review the Fifth Circuit’s rejection of the agency’s position (NLRB v. Murphy Oil USA, Inc., No. 16-307).

The Supreme Court previously has weighed in on class action waivers, most notably in a 5-4 decision holding the Federal Arbitration Act preempted a state from refusing to enforce such waivers in arbitration contracts (ATT Mobility LLC v. Concepcion, 563 U.S. 333 (2011)).

Employers put the waivers in arbitration agreements to avoid the risks of class or collective actions by employees alleging wage-and-hour violations, unlawful discrimination or other employment-related claims.

The NLRB in D.R. Hortonruled an employer forcing employees to sign a class action waiver commits an unfair labor practice because it violates covered workers’ Section 7 rights.

The Fifth, Eighth and Second circuits have rejected the NLRB’s position, but the Seventh and Ninth circuits this year endorsed the board’s reading of the NLRA.

Supreme Court intervention seems likely given that all sides seek review of a federal agency’s statutory interpretation affecting an important issue for employers and workers, said Hisham Mooppan, a partner with Jones Day in Washington. He’s a former clerk for Justice Antonin Scalia who specializes in appellate advocacy, including cases before the Supreme Court.

“There’s a square split” among the circuits, Mooppan said at a Sept. 19 media briefing held by the Georgetown University Law Center. It’s “pretty unlikely” the court would deny review, he said.

The NLRB’s petition increased the likelihood that the high court will agree to take up at least one of the cases, the EEAC’s Vann told Bloomberg BNA.

The board also has made clear it intends to keep enforcing its understanding that NLRA Section 7 bars class action waivers unless the Supreme Court rules otherwise, Vann said.

The petitions have only recently been filed and additional briefs must be submitted. So a Supreme Court decision on whether to grant review won’t occur until later in the term.

High Stakes in ERISA Cases

Three petitions from religiously affiliated hospitals appealing federal circuit decisions that ERISA’s “church plan” exemption doesn’t extend to them also are seen as compelling cases for Supreme Court review. The issue of whether underfunded hospital pension plans must comply with ERISA affects the retirement funds of hundreds of thousands of employees.

The religiously affiliated hospitals argue they fall within the church plan exemption, but each appeals court so far has said only pension plans started by churches are ERISA-exempt.

Justice Anthony Kennedy Sept. 21 granted Dignity Health’s request to stay a Ninth Circuit decision finding ERISA coverage until the Supreme Court decides whether to hear the case.

Kennedy’s action stirred speculation among ERISA practitioners that he believes the justices will vote to review the case.

The court also could grant review of a Third Circuit decision or Seventh Circuit decision denying a church plan exemption to a religiously affiliated hospital.

The stakes are high, as nearly three dozen lawsuits are pending in the federal courts challenging the way large hospitals fund their pension plans.

Those lawsuits allege that more than 247,000 hospital employees face a $3.5 billion shortfall in their pensions because the hospitals have inadequately funded the plans.

The enormous financial stakes and important statutory issue argue in favor of the justices granting review. But the lack of a clear federal appeals court split on the ERISA coverage issue, at least regarding pension plans, might be a factor that tilts against review.

The pending petitions are: St. Peter’s Healthcare Sys. v. Kaplan, No. 16-86; Dignity Health v. Rollins, No. 16-258; and Advocate Health Care Network v. Stapleton, No. 16-74.

Shorthanded Court Cautious

The eight-member court’s caution about granting review of issues that could produce 4-4 deadlocks could be a factor counting against review both of the D.R. Horton issue and the ERISA exemption cases.

The court enters its new term still shorthanded after Scalia’s death in February and Senate Republicans’ refusal to consider Obama’s subsequent nomination of D.C. Circuit Judge Merrick Garland to fill the vacancy.

The court last term seemed intent on “mostly preserving the status quo” with its “narrow decisions” after Scalia’s death, said David Strauss, a University of Chicago law professor who specializes in constitutional law.

But it tied 4-4 in two high-profile employment cases. That meant public employee unions retained their right to collect agency fees from nonmembers but that Obama’s executive orders shielding some categories of undocumented immigrants from deportation remain blocked by a nationwide injunction.

The immigration result surprised Strauss because an injunction blocking a co-equal branch of government’s exercise of discretionary power isn’t a cautious result, he said during an American Bar Association webinar Sept. 19.

The justices had many “off ramps” they could have used to vacate the injunction without ruling on the underlying immigration issue, Strauss said.

The Obama administration filed a petition for rehearing in United States v. Texas, No. 15-674. The petition is on the justices’ list for consideration at their Sept. 26 conference.

Chief Justice John Roberts and the justices in general seem wary of granting review to any potential “game-changers” that could split the court evenly, said Michael Foreman, a Pennsylvania State University law professor who specializes in civil rights, employment law and appellate litigation.

Instead, the court seems focused on granting cases it thinks the current group of justices actually can decide, Foreman told Bloomberg BNA Sept. 20.

The court’s “obvious caution” is affecting both the justices’ choice of cases to review and their decisions, Marty Lederman, a Georgetown University Law Center professor and constitutional law specialist, said at the Sept. 19 media briefing.

Even if it doesn’t deny review of some high-profile petitions, the court could defer decisions on review until it knows if a Senate-confirmed ninth justice could join the court in 2017 for the term’s latter months.

Changes Coming

The chances of a ninth justice joining the court this term depend in part on the November elections.

If Hillary Clinton (D) wins the presidential election and the Democrats regain a Senate majority, then it’s “virtually certain” a ninth justice would join the court during its 2016-2017 term, said Michael Gottesman, a Georgetown University law professor specializing in constitutional law and labor and employment law.

But if neither of those events occurs, the court may well complete its term with eight justices, Gottesman said at the briefing.

Three justices currently are 78 or older, so it’s also probable that whoever is elected president will have an opportunity to make multiple Supreme Court nominations during his or her term, said Erwin Chemerinsky, a University of California-Irvine dean and law professor who specializes in constitutional law.

That will affect both the court’s selections of which issues to review and its decisions for years to come, Chemerinsky said during the ABA webinar.

Pending Discrimination Issues

Pending petitions for review also include challenges to the Equal Employment Opportunity Commission’s practices in investigating and conciliating, or attempting to settle, discrimination charges before the agency files a lawsuit.

Sterling Jewelers Inc. seeks review of a Second Circuit decision that allowed the EEOC to pursue a nationwide sex discrimination lawsuit on behalf of female retail store employees even though Sterling said the agency only investigated a few local bias claims (Sterling Jewelers Inc. v. NLRB, No. 15-1329).

The Second Circuit cited the Supreme Court’s decision in Mach Mining LLC v. EEOC, 135 S. Ct. 1645, 126 FEP Cases 1521 (2015), which held courts may conduct only very narrow review of the EEOC’s pre-suit conciliation efforts, to rule that a court can’t review the sufficiency of the agency’s investigation.

Rather, a court can only confirm the EEOC conducted an investigation, the Second Circuit said.

Geo Group Inc., a private company that operates prisons as a contractor, seeks review of a Ninth Circuit decision that the EEOC may litigate 19 sex discrimination claims even though the agency never identified the alleged victims until after the lawsuit was filed (The Geo Grp. v. EEOC, No. 16-302).

Geo Group argues that since the EEOC failed to investigate, issue reasonable cause determinations or try to conciliate any of those 19 sex claims, it can’t sue under Title VII because the agency completely failed to fulfill its mandatory pre-suit obligations.

The cases reflect that employers remain concerned about what they see as the EEOC’s failure to meet its pre-suit obligations in some cases, which undermines Title VII’s preference for voluntary resolution of bias charges, said Vann, the EEAC general counsel.

Employers believe the EEOC sometimes uses conciliation as a “bargaining chip” rather than as a serious effort to settle charges, particularly in class or systemic cases the agency is eager to litigate, Vann said.

It seems unlikely that so soon after their unanimous Mach Mining decision, which gave the EEOC considerable discretion in conciliation, that the justices would revisit issues involving the agency’s pre-lawsuit obligations, said Foreman, the Penn State law professor.

A morbidly obese worker seeks review of the Eighth Circuit’s ruling that obesity isn’t covered by the ADA unless it’s the product of an underlying physiological condition (Morriss v. BNSF Ry. Co., No. 16-233).

There’s no defined split among the federal appeals courts on the ADA issue, so it seems doubtful the court would grant review, Foreman said.

The Eighth Circuit got it “exactly right,” even citing the EEOC’s enforcement guidance on the topic, Vann said. If the Supreme Court grants review, the EEAC likely would file an amicus brief supporting the appeals court ruling, she said.

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