Wyatt Employment Law Report

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Sixth Circuit Reversed in Union Benefits Health Case: Supreme Court Rules Against Retired Workers

By Amanda Warford Edge

On Monday, in M&G Polymers USA, LLC v. Tackett, No. 13-1010, the U.S. Supreme Court ruled that ambiguous provisions in union contracts should not be automatically interpreted in favor of a company’s retired workers. The case concerned a union contract from the 1990s that provided free health care benefits to the retirees of a chemical plant in Apple Grove, West Virginia who received pensions. In 2000, M&G bought the plant, and in 2006, it sought to make its retirees contribute to the health care costs. The retirees sued, alleging that they had been promised free benefits for life. The contract, of course, did not directly state whether the parties intended lifetime investiture.

Medical Records & StethoscopeThe district court found for M&G—but according to the Sixth Circuit, the retirees’ benefits had, in fact, vested for life. The Sixth Circuit relied on a long line of precedent, dating back to 1983, in support of this holding. Essentially, this precedent presumed the existence of lifetime benefits, even when the contracts at issue did not specify them. In Tackett, the Sixth Circuit expanded upon this presumption, holding that Continue reading

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Supreme Court Rules Drug Company Sales Employees Are Not Entitled to Overtime Pay

By Edwin S. Hopson

In Christopher et al. v. SmithKline Beecham Corp., d/b/a Glasxosmithkline, 567 U.S. ___ (2012), No. 11-204, decided June 18, 2012, the U.S. Supreme Court, in a 5-4 decision, ruled that certain drug sales employees are to be treated as “outside salesmen” under the Fair Labor Standards Act (FLSA) and therefore are exempt from the overtime requirements of the law.  The drug sales employees had filed a private action against their employer under the FLSA seeking unpaid overtime pay.  The U.S. Department of Labor had filed an amicus brief supporting the employees’ claims.

The court’s opinion was authored by Justice Alito, who was joined by Chief Justice Roberts, and Justices Scalia, Kennedy and Thomas.  Justice Breyer wrote a dissenting opinion that was joined in by Justices Ginsburg, Sotomayor and Kagan.

The majority, after rejecting any deference to the Department of Labor’s interpretation, reviewed the FLSA and its regulations and concluded that the drug sales employees were exempt even though they only obtained non-binding commitments from doctors to prescribe their drugs to their patients (who actually were the purchasers in most cases).  The statutory provision in question, 29 U. S. C. §203(k), states that “‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” [Emphasis added].  The majority seized upon the “or other disposition” phrase and ruled for the drug company defendant, pointing out, “Petitioners—each of whom earned an average of more than $70,000 per year and spent between 10 and 20 hours outside normal business hours each week performing work related to his assigned portfolio of drugs in his assigned sales territory—are hardly the kind of employees that the FLSA was intended to protect.” Slip Opinion Page 22.

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Supreme Court Issues Its Long-Awaited Class Action Decision in Dukes v. Wal-Mart Stores, Inc.

By George J. Miller

On June 20, 2011, in addressing what Justice Antonin Scaliacalled, “one of the most expansive class actions ever,” the U.S. Supreme Court issued its much anticipated decision in Wal-Mart Stores, Inc. v. Dukes. The Court held that the lower federal courts had improperly certified the case–filed by just three current or former female Wal-Mart employees in California–as a nationwide class action of some 1.5 million women. 

The three female plaintiffs alleged that the company discriminated against them on the basis of their sex by denying them equal pay or promotions, in violation of Title VII of the Civil Rights Act of 1964.  Each of the three made different allegations about how their male managers had treated them, such as being demoted or being yelled at.  However, they alleged that the discrimination to which they were subjected was common to all of Wal-Mart’s female employees, and they sought to have the case certified as a class action on behalf of, “‘[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” 

The plaintiffs did not allege that Wal-Mart has an express corporate policy against the advancement of women.  Rather, they claimed that their local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.  According to the Court, the plaintiffs’ main theory of the case was that “a strong and uniform ‘corporate culture’ permits bias against women to infect, perhaps subconsciously, the discretionary decision making of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.”

The plaintiffs sought injunctive and declaratory relief, punitive damages, and back pay. 

According to the Court, “[t]he crux of this case is commonality—the rule requiring a plaintiff to show that ‘there are questions of law or fact common to the class.'”  “Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the same injury.'”  The Court ultimately concluded that “[b]ecause [the plaintiffs] provide no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question.” 

In something of an endorsement for de-centralized human resources management, Justice Scaliawrote: “The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters.  On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices. It is also a very common and presumptively reasonable way of doing business—one that we have said “should itself raise no inference of discriminatory conduct.”

This part of the Court’s opinion was rendered by a vote of 5 to 4, with Justices Kennedy, Thomas and Alito, and Chief Justice Roberts, joining Justice Scalia in the majority, and Justices Ginsburg, Sotomayor, Kagan, and Breyer in the minority.  Justice Ginsburg wrote a dissenting opinion. 

However, in another part of the opinion, the Court was unanimous in holding that the plaintiffs’ claims for back pay could not be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure–which provides for certification when non-monetary injunctive or declaratory relief is appropriate respecting the class as a whole–because claims for back pay are necessarily individual in nature, and in this case they were not merely incidental to the request for injunctive and declaratory relief.  The Court said that it is important for, “plaintiffs with individual  monetary claims to decide for themselves whether to tie their fates to the class representatives or go it alone,” and that, “Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay.” 

For these reason, the Court held that such claims for back pay must be brought under Rule 23(b)(3), which provides greater procedural protections for parties, including, importantly, the right of class members to receive notice of the action and to opt out of the action.