Wyatt Employment Law Report

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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.

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Supreme Court Confirms Company’s Right to Prohibit Class Action Claims Being Litigated Under an Arbitration Agreement

By Edwin S. Hopson

On April 27, 2011, in a 5 – 4 decision, authored by Justice Scalia and joined in by Chief Justice Roberts, and Justices Kennedy, Thomas and Alito, the U.S. Supreme Court in AT&T Mobility LLC v. Concepcion, 563 U.S. ____ (2011), held that the Federal Arbitration Act (“FAA”) preempted California law holding that an arbitration provision that disallowed class action proceedings was unconscionable and unenforceable.  Justices Breyer, Ginsburg, Sotomayor and Kagan dissented.  Although the underlying case was commercial in nature, this decision has significant ramifications in the employment law arena in light of the fact that many employers require employees to sign on to arbitration agreements or programs that limit the types of disputes that can be litigated in court or before administrative agencies.  Indeed, Justice Scalia relied in part on and cited Gilmer v. Interstate/Johnson Lane Corp., 500 U. S. 20, 33 (1991) which allowed age discrimination claims to be arbitrated.   Also, this case could have application to collective bargaining agreement arbitration provisions as well.

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Supreme Court Decides FLSA Anti-Retaliation Provision Includes Oral Complaints

By Edwin S. Hopson

The U.S. Supreme Court on March 22, 2011,  issued its decision in Kasten v. Saint Gobain Performance Plastics Corp., 563 U.S. ____, No. 09-834 (2011) holding, in a 6 to 2 decision authored by Justice Breyer, that under the Fair Labor Standards Act (FLSA) anti-retaliation provision an oral complaint to a supervisor comes within the scope of 29 U. S. C. §215(a)(3), which forbids employers from discharging “any employee because such employee has filed any complaint” claiming a violation of the FLSA.  Kasten had lost in the district and appellate courts which had found that the term “filed” required a written complaint.  Justice Breyer, in a decision joined in by Chief Justice Roberts, and Justices Kennedy, Ginsburg, Alito and Sotomayor (Justice Kagan took not part in the case), noted that the statutory language must be viewed in context and with the purpose of the law in mind.  He also pointed out that a number of agencies allow oral “filings” and that the U.S. Department of Labor’s consistent interpretation of the provision included oral complaints as well as written ones.   The issue of whether the complaint must be filed with the government in order to come within the anti-retaliation provision was expressly not decided by the court.

In dissent, Justice Scalia, joined by Justice Thomas, argued, among other things, that the complaint must be in writing to be consistence with the term “complaint” as used elsewhere in the FLSA.  He also contends that it made no sense to decide the “oral versus written” question while side-stepping the question of who the addressee of the complaint should be, stating:  “[i]t presumably does not include a complaint to Judge Judy.” Slip opinion, page 8.

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Supreme Court Decides “Cat’s Paw” Case Brought Under USERRA

By Edwin S. Hopson

On March 1, 2011, the U.S. Supreme Court issued its decision in Staub v. Proctor Hospital, 562 U.S. ____, No. 09-400 (March 1, 2011).  While employed by Proctor Hospital, Vincent Staub was also in the U. S. Army Reserves. Staub’s immediate supervisor  and her boss were openly hostile to Stuab’s obligations as an Army Reservist. Staub received a corrective action from his supervisor and, after receiving a report that Staub had violated the corrective action, the hospital’s human resources manager fired Staub. Staub complained that his discharge was on account of his being a Reservist but the HR manager refused to change the decision. Staub filed suit against the hospital under the Uniformed Services Employment and Reemployment Rights Act (USERRA), claiming his discharge was on account of his status as an Army Reservist.  Specifically, Staub claimed that his membership in the U.S. Army Reserves was a motivating factor in his discharge and that the supervisors were motivated by hostility to his military obligations and they influenced the HR manager to take the adverse action.  A jury found for Staub and awarded damages against the hospital.  However, the U.S. Court of Appeals for the Seventh Circuit reversed, holding that the hospital was entitled to judgment as a matter of law because the HR manager had relied on more than the supervisors’ recommendation in making the decision to discharge Staub.  Applying the so-called “cat’s paw” theory first espoused by Judge Posner in 1990, the Seventh Circuit reasoned that it was enough that the decision maker was not wholly dependent on a single source of information and had conducted her own investigation into the facts surrounding the events leading to Staub’s discharge.

 The High Court reversed the Seventh Circuit in an opinion by Justice Scalia, joined in by all but Justice Kagan who took no part in the case, and held:

 “… that if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action,  and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA. Slip Opinion, page 10 (footnotes omitted).” Continue reading

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Supreme Court Validates Third Party Retaliation Claim

By Edwin S. Hopson

Eric Thompson and Miriam Regalado met while they both worked for North American Stainless (“NAS”) in Carroll County, Kentucky, and they became engaged to be married.  Regalado filed a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) against NAS claiming discrimination on account of sex.  Some three weeks after NAS was notified of Regalado’s Charge, NAS fired her fiancée.  Thompson filed a Charge with the EEOC alleging retaliation and later sued in federal court. 

Thompson lost in both the U.S. District Court for the Eastern District of Kentucky and the U.S. Court of Appeals for the Sixth Circuit, which ruled en banc that Thompson was not entitled to sue for retaliation because he had not been the person who engaged in the protected activity under the statute.

On January 24, 2011, in Thompson v. North American Stainless, 562 US ____ (2011), No. 09-291, the U.S. Supreme Court, in a unanimous decision authored by Justice Antonin Scalia, ruled that the discharge of Thompson because his fiancée had filed a charge of discrimination under Title VII of the Civil Rights Act entitled Thompson to file his own retaliation charge under that statute.  Thus, a so-called “third-party retaliation” claim has now been validated under Title VII.

Justice Scalia, writing for a unanimous court, except for Justice Kagan, who took no part in consideration of the case, reasoned that the anti-retaliation provision of Title VII must be construed to cover a broad range of employer conduct citing Burlington N. & S. F. R. Co. v. White, 548 U. S. 53 (2006). According to the Court, that provision prohibits any employer action that “ ‘well might have “dissuaded a reasonable worker from making or supporting a [discrimination] charge,” ’” id., at 68. Still citing Burlington, the Court stated that the test must be applied in an objective fashion, to “avoi[d] the uncertainties and unfair discrepancies that can plague a judicial effort to determine a plaintiff’s unusual subjective feelings.” Id., at 68–69. Applying this objective test, the Court found that a reasonable employee would clearly be dissuaded from engaging in protected activity if she knew that her fiancé who was also an employee would be fired.

The Court sympathized with the argument that employers must now attempt to identify if someone about to be discharged has a close relationship with someone else in the workforce who has engaged in protected activity before taking adverse action that could expose it to a third party retaliation claim.  After rejecting that argument, it stated:

“We must also decline to identify a fixed class of relationships for which third-party reprisals are unlawful. We expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize.”  Slip Opinion, page 4.

The Court, in analyzing Thompson’s Title VII standing, ruled that the term “person aggrieved” must be construed more narrowly than the outer boundaries of Article III of the Constitution, notwithstanding dictum to the contrary in Trafficante v. Metropolitan Life Ins. Co., 409 U. S. 205 (1972).  However, the Court went on to hold that at the other extreme, limiting “person aggrieved” to the person who was the subject of unlawful retaliation is too narrow a reading.  Thus, the Court decided upon a common usage of the term “person aggrieved” so as to avoid both of extremes.

Citing the Administrative Procedure Act, which authorizes suit to challenge a federal agency by any “person. . . adversely affected or aggrieved . . . within the meaning of a relevant statute,” 5 U. S. C. §702, the Court found this established a regime under which a plaintiff may not sue unless he “falls within the ‘zone of interests’ sought to be protected by the statutory provision whose violation forms the legal basis for his complaint,” Lujan v. National Wildlife Federation, 497 U. S. 871, 883 (1990).  The Court concluded:

“We have described the “zone of interests” test as denying a right of review “if the plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress intended to permit the suit.” Clarke v. Securities Industry Assn., 479 U. S. 388, 399–400 (1987). We hold that the term “aggrieved” in Title VII incorporates this test, enabling suit by any plaintiff with an interest “arguably [sought] to be protected by the statutes,” National Credit Union Admin. v. First Nat. Bank & Trust Co., 522 U. S. 479, 495 (1998) (internal quotation marks omitted), while excluding plaintiffs who might technically be injured in an Article III sense but whose interests are unrelated to the statutory prohibitions in Title VII.”  Slip Opinion, page 7.

Applying that test to Thompson, the Court found that he fell within the zone of interests protected by Title VII and that hurting him was the unlawful conduct by which the employer had punished his fiancée who had engaged in the protected activity of filing the Title VII Charge of Discrimination.

 Justices Ginsburg and Breyer concurred, and simply added that, “[t]oday’s decision accords with the longstanding views of the Equal Employment Opportunity Commission (EEOC), the federal agency that administers Title VII.”  Concurring Opinion, page 1.