• 2009/2010 U.S. Supreme Court Roundup
  • November 8, 2010 | Author: David J. Freedman
  • Law Firm: Barley Snyder LLC - Lancaster Office
  • For those of us hoping for stability—in the wake of several tumultuous years of change—the United States Supreme Court’s recently-completed term thankfully brought about few major changes for employers. Summaries of the Court’s labor and employment decisions from the 2009-2010 term can be found below.
    Quon v. City of Ontario: Billed by many as the term’s blockbuster employee privacy case, this case did not turn out as ground-breaking as some might have hoped. Quon worked as a police sergeant with the City of Ontario, California’s SWAT team. To assit with their police duties, the City provided SWAT team members with text-messaging enabled pagers. Despite previously telling Quon that he was not interested in reading his personal messages, Quon’s supervisor later audited transcripts of Quon’s messages when Quon twice exceeded the City-imposed maximum monthly character limit. The supervisor apparently wanted to determine if the character limit was set too low. In any event, the audit revealed that Quon was sending sexually-explicit text messages and had used his City-issued pager to facilitate an extra-marital affair. The City disciplined Quon, who sued claiming that, as a government employee, the audit violated his Constitutional right to privacy. Many commentators hoped the Court would clarify whether employees have a reasonable expectation of privacy regarding personal communications sent on employer-owned equipment. The Court, however, refused to address that issue, noting that “it is uncertain how workplace norms, and the law’s treatment of them, will evolve.” Instead, the Court presumed that Quon had a reasonable expectation of privacy in the text messages, but nevertheless found the City’s search reasonable because it was motivated by a legitimate work-related purpose and was not excessively intrusive. The Court noted that the City had a written policy indicating that electronic communications sent using City equipment could be monitored, and Quon was warned that his text messages were subject to that policy. Moreover, as a police officer, Quon should have known that his on-the-job communications could be the subject of disclosure during legal proceedings. As a result, the Court upheld the City’s search and dismissed Quon’s claim. The case is a major victory for public employers, but should have little effect in the private sector.
    New Process Steel v. National Labor Relations Board:  This case will have far-reaching effects in the traditional labor area. In New Process Steel, the Court addressed the power of the National Labor Relations Board (“the Board”) to issue decisions with less than three members. The statute empowering the Board states that the Board must have three members to act. In late 2007, the Board was down to three members, with the third member’s term about to expire. To continue operations, the three-member Board delegated all Board authority to the two remaining Board members. Congress, however, did not fill any of the Board vacancies for a period of over two years, during which the two-member Board continued issuing decisions. The Supreme Court held that the Board had no authority to act absent the statutorily-required three members. Although the precise effect on decisions issued by the two-member Board is not exactly clear, the over 600 decisions issued by the two-member Board during the period from 2008 through early 2010 are now of very questionable precedential value. As a result, employers who have been relying upon those cases to guide their operations should re-evaluate those decisions.
    In Granite Rock Co. v. International Brotherhood of Teamsters, the Court held that the Labor-Management Relations Act does not create a tort claim for tortious interference with contractual relations against an international labor union that interferes with a collective bargaining agreement between an employer and a local union.
    In Perdue v. Kenny A., the Supreme Court overturned a $4.5 million enhancement award of attorneys’ fees in a civil rights case, finding no enhancement necessary, despite the impressive result achieved by the plaintiffs’ attorneys. Although the Court stated that enhancements of attorneys’ fees awards are permitted under federal fee-shifting statutes, such enhancements should be given rarely, perhaps never. As the Court made clear, civil rights cases are not intended to produce windfalls for attorneys. This case is good news for employers defending suits with significant attorneys’ fees exposure, such as class or collective actions.
    The Court in Hardt v. Reliance Standard Life Insurance Company held that a plaintiff does not have to be a prevailing party to recover attorney’s fees in a claim brought under § 502(g)(1) of the Employee Retirement Income Security Act (“ERISA”). In that case, the insurance company denied Hardt’s claim for disability benefits. After exhausting her administrative remedies, Hardt brought suit in federal court, claiming that the insurance company failed to perform a complete claim review. The trial court stated that it found “compelling evidence” that Hardt was entitled to benefits. Instead of granting judgment to Hardt, however, the trial court remanded the case back to the plan administrator to undertake a full review. During that process, the insurance company found Hardt eligible. Hardt then petitioned for attorneys’ fees and costs, which the trial court granted. The Court of Appeals, however, reversed, holding that because Hardt never obtained a court judgment in her favor, she could not be considered a prevailing party entitled to attorney’s fees. The Supreme Court, though, reversed, re-instating the trial court’s award of attorney’s fees. According to the Supreme Court, unlike other employment law statutes, an ERISA plaintiff claiming wrongful denial of insurance benefits need not be a prevailing party to obtain an award of attorneys’ fees. Instead, § 502(g)(1) of ERISA only requires that the party achieve “some success, even if not major success” to recover fees and costs. Because Hardt’s filing of the lawsuit compelled the insurance company to provide benefits, she was entitled to an attorneys’ fee award, despite not actually obtaining a court judgment.

    Lewis v. City of Chicago
    : Federal anti-discrimination statutes prohibit not only intentional discrimination, but also facially-neutral policies that have a discriminatory effect. This second class of discrimination cases are referred to as “disparate impact” claims. The Lewis case addressed when the statute of limitations for such claims starts to run.  In that case, the City of Chicago argued that claims against it for disparate impact race discrimination arising from a 1995 firefighters exam were time-barred. According to the City, the plaintiffs failed to file a challenge with the United States Equal Employment Opportunity Commission (“EEOC”) within 300 days of the City’s announcement of the exam results. The Supreme Court disagreed, holding that the statute of limitations on a disparate impact claim does not start until the employer uses the criteria that causes the disparate impact, not when it identifies that criteria.
    In Rent-a-Center West v. Jackson, the Court upheld an employment contract containing a clause stating that an arbitrator, not a court, must determine the enforceability of the contract’s arbitration requirement. While at first blush, this appears to be a victory for employers who use similar provisions, the Court’s opinion left open the possibility that courts, not arbitrators, will still have the authority to decide certain threshold issues regarding arbitration—like limitations on discovery and fee-splitting provisions—even if an employment contract’s terms prohibit a court from addressing those issues.
    All in all, 2009-10 was a pretty dull term, at least regarding labor and employment matters. But don’t count on more tranquility during the 2010-11 term. Already the Supreme Court has agreed to hear cases involving hot-button issues like whether an employee’s oral complaints are protected from retaliation under the Fair Labor Standards Act (“FLSA”) and when a supervisor’s anti-military bias is relevant in a claim for violation of the Uniformed Services Employment and Reemployment Rights Act (“USERRA”).