Supreme Court Review:
During the 2003-2004 Term of Court, the United States Supreme Court decided seven employment law cases.
In Pennsylvania State Police v. Suders (06/14/2004) Suders sued under Title VII claiming sexually harassing conduct by her supervisors of such severity she was forced to resign. The trial court granted summary judgment for the employer on the ground that the employer could not be vicariously liable for the supervisors' conduct. The 3rd Circuit reversed, holding that "a constructive discharge, when proved, constitutes a tangible employment action," resulting in strict liability for the employer. The US Supreme Court vacated the 3rd Circuit's decision. The Supreme Court held that Title VII encompasses employer liability for constructive discharge, but that an employer is not always strictly liable in constructive discharge cases.
(1) The Court agreed with the lower courts and the EEOC that Title VII encompasses employer liability for a constructive discharge. To establish constructive discharge, a plaintiff must "show that the abusive working environment became so intolerable that [the employee's] resignation qualified as a fitting response."
(2) The Court held that the 3rd Circuit erred in declaring that an affirmative defense is never available to the employer in constructive discharge cases. When an "official act" does not underlie the constructive discharge, the employer will be allowed to assert an affirmative defense.
The Court said, "To establish hostile work environment, plaintiffs like Suders must show harassing behavior 'sufficiently severe or pervasive to alter the conditions of [their] employment.' Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 67 (1986) (internal quotation marks omitted); see Harris v. Forklift Systems, Inc., 510 U.S. 17, 22 (1993) ("[T]he very fact that the discriminatory conduct was so severe or pervasive that it created a work environment abusive to employees because of their … gender … offends Title VII's broad rule of workplace equality."). Beyond that, we hold, to establish 'constructive discharge,' the plaintiff must make a further showing: She must show that the abusive working environment became so intolerable that her resignation qualified as a fitting response. An employer may defend against such a claim by showing both (1) that it had installed a readily accessible and effective policy for reporting and resolving complaints of sexual harassment, and (2) that the plaintiff unreasonably failed to avail herself of that employer-provided preventive or remedial apparatus. This affirmative defense will not be available to the employer, however, if the plaintiff quits in reasonable response to an employer-sanctioned adverse action officially changing her employment status or situation, for example, a humiliating demotion, extreme cut in pay, or transfer to a position in which she would face unbearable working conditions. In so ruling today, we follow the path marked by our 1998 decisions in Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, and Faragher v. Boca Raton, 524 U.S. 77."
DISSENT: One Justice dissented on the ground that Suders "has not adduced sufficient evidence of an adverse employment action taken because of her sex, nor has she proffered any evidence that [the employer] knew or should have known of the alleged harassment."
In General Dynamics Land Systems v. Cline (02/24/2004) a collective-bargaining agreement between the company and union eliminated the company’s obligation to provide health benefits to subsequently retired employees, except as to then-current workers at least 50 years old. Employees - who were then at least 40 and thus protected by the Age Discrimination in Employment Act of 1967 (ADEA), but under 50 and so without promise of the benefits - claimed before the Equal Employment Opportunity Commission (EEOC) that the agreement violated the ADEA because it “discriminate[d against them] … because of [their] age,” 29 USC Section 623(a)(1). The EEOC agreed, and invited the company and the union to settle informally with Cline. When they failed, Cline brought this action under the ADEA and state law. The District Court dismissed, calling the federal claim one of “reverse age discrimination” upon which no court had ever granted relief under the ADEA, and relying on a Seventh Circuit decision holding that the ADEA does not protect younger workers against older workers. The Sixth Circuit reversed, reasoning that Section 623(a)(1)’s prohibition of discrimination is so clear on its face that if Congress had meant to limit its coverage to protect only the older worker against the younger, it would have said so. The court acknowledged that its ruling conflicted with earlier cases, but criticized those decisions for paying too much attention to the general language of Congress’s ADEA findings. The court also drew support from the EEOC’s position in an interpretive regulation.
The US Supreme Court reversed, holding that ADEA’s text, structure, purpose, history, and relationship to other federal statutes show that the statute does not mean to stop an employer from favoring an older employee over a younger one.
Raytheon Co v. Hernandez (12/02/2003). After Hernandez tested positive for cocaine and admitted that his behavior violated the employer’s workplace conduct rules, he was forced to resign. More than two years later, he applied to be rehired, stating on his application that the employer had previously employed him, and attaching letters both from his pastor about his active church participation and from member of Alcoholics Anonymous about his regular attendance at meetings and his recovery. The employee who reviewed and rejected Hernandez’s application testified that the employer has a policy against rehiring employees who are terminated for workplace misconduct and that she did not know that Hernandez was a former drug addict when she rejected his application. Hernandez filed this ADA action, arguing that the employer rejected his application because of his record of drug addition and/or because he was regarded as being a drug addict. In response to the employer’s summary judgment motion, Hernandez for the first time argued in the alternative that if the employer applied a neutral no-rehire policy in his case, it still violated the ADA because of that policy’s disparate impact. The District Court granted the employer’s motion for summary judgment on the disparate-treatment claim and found that the disparate-impact claim had not been timely pleaded or raised. The Ninth Circuit agreed as to the disparate-impact claim, but held as to the disparate-treatment claim that, under the burden-shifting approach of McDonnell Douglas Corp. v. Green, 411 U.S. 792, Hernandez had proffered a prima facie case of discrimination, and the employer had not met its burden to provide a legitimate, nondiscriminatory reason for its employment action because its no-rehire policy, though lawful on its face, was unlawful as applied to employees who were lawfully forced to resign for illegal drug use but have since been rehabilitated.
The US Supreme Court held that the Ninth Circuit improperly applied a disparate-impact analysis to Hernandez’s disparate-treatment claim. The Supreme Court has consistently distinguished between disparate-treatment and disparate-impact claims. The former arise when an employer treats some people less favorably than others because of a protected characteristic. Liability depends on whether the protected trait actually motivated the employer’s action. The latter involve facially neutral employment practices that fall more harshly on one group than another and cannot be justified by business necessity. Such practices may be deemed illegally discriminatory without evidence of the employer’s subjective discrimination. Both claims are cognizable under the ADA, but courts must be careful to distinguish between the theories. Here, Hernandez was limited to the disparate-treatment theory that the employer refused to rehire him because it regarded him as disabled and/or because of his record of disability. The employer’s proffer of its neutral no-rehire policy plainly satisfied its obligation under McDonnell Douglas to provide a legitimate, nondiscriminatory reason for refusing to rehire Hernandez. Thus, the only remaining question before the Ninth Circuit was whether there was sufficient evidence from which a jury could conclude that the employer did make its employment decision based on Hernandez’s status as disabled despite its proffered explanation. Instead, that court concluded that, as a matter of law, the policy was not a legitimate, nondiscriminatory reason sufficient to defeat a prima facie case of discrimination. In doing so, the Ninth Circuit improperly focused on factors that pertain only to disparate-impact claims, and thus ignored the fact that the employer’s no-hire policy is a quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules.
In Jones v. R.R. Donnelley & Sons (05/03/2004) Jones brought a class action under 42 USC Section 1981(b) claiming wrongful termination, refusal to transfer, and hostile work environment, all allegedly due to race discrimination. Jones filed suit more than two years, but less than four years, after the date of termination. The trial court held that the suit was governed by the four year statute of limitations contained in 28 USC Section 1658, the so-called "catch all" statute. The 7th Circuit reversed, holding that the applicable statute of limitations was the Illinois statute, which is two years. The US Supreme Court unanimously reversed, holding that the claims are governed by Section 1658, and thus subject to a four year statute of limitations.
Prior to 1991, Section 1981 did not cover claims involving discharge, failure to transfer, or hostile work environment. That was the holding of Patterson v. McClean Credit Union, 491 US 164 (1989). The 1991 Civil Rights Act amended Section 1981 by adding Section 1981(b) and, in effect, overruled the Patterson case. Section 1981 does not have its own statute of limitations, and courts traditionally used the analogous state statute of limitations (two years in Illinois). In 1990 Congress enacted 28 USC Section 1658 which provided a four-year statute of limitations for "a civil action arising under an Act of Congress enacted after [December 1, 1990]."
The Supreme Court found Section 1658 to be ambiguous, so the Court examined the legislative history. Congress' purpose was to eliminate the uncertainty and consequent litigation caused by borrowing state statutes of limitations, and that purpose would not be served by interpreting Section 1658 to reach only entirely new sections of the United States Code. An amendment to an existing statute (as Section 1981(a) was) is no less an Act of Congress than a new, stand-alone statute. Thus, these claims "ar[ose] under" the 1991 Civil Rights Act in the sense that Jones' claims were made possible by that Act. The claims did not allege a violation of the pre-1990 version of Section 1981, but did allege violations of the amended statute.
In Aetna Health v. Davila (06/21/2004) (consolidated with CIGNA Healthcare of Texas v. Calad) the Court decided that ERISA completely preempts state law when an HMO patient claims negligence in making decisions on medical necessity. In each of these cases the plaintiffs sued in state court alleging that their health maintenance organizations (HMOs), had refused to cover certain medical services in violation of an HMO's duty "to exercise ordinary care" under the Texas Health Care Liability Act (THCLA), and that those refusals "proximately caused" their injuries. The HMOs removed the cases to federal court arguing that the claims arose under ERISA because each plaintiff received HMO coverage through an employer's ERISA plan. The US Supreme Court unanimously held that plaintiffs' state causes of action fall within ERISA Section 502(a)(1)(B), and are therefore completely pre-empted by ERISA Section 502 and removable to federal court.
If an individual, at some point in time, could have brought his claim under ERISA Section 502(a)(1)(B), and where no other independent legal duty is implicated by a defendant's actions, then the individual's cause of action is completely pre-empted by ERISA Section 502(a)(1)(B). Respondents (Davila) brought suit only to rectify wrongful benefits denials, and their only relationship with petitioners (HMOs) is petitioners' partial administration of their ERISA-regulated benefit plans; respondents therefore could have brought Section 502(a)(1)(B) claims to recover the allegedly wrongfully denied benefits. Both respondents allege violations of the THCLA's duty of ordinary care, which they claim is entirely independent of any ERISA duty or the employee benefits plans at issue. However, respondents' claims do not arise independently of ERISA or the plan terms. If a managed care entity correctly concluded that, under the relevant plan's terms, a particular treatment was not covered, the plan's failure to cover the requested treatment would be the proximate cause of any injury arising from the denial. More significantly, the THCLA provides that a managed care entity is not subject to THCLA liability if it denies coverage for a treatment not covered by the plan it administers.
The Fifth Circuit's reasons for reaching its contrary conclusion are all erroneous. First, it found significant that respondents asserted tort, rather than contract, claims and that they were not seeking reimbursement for benefits denied. However, distinguishing between pre-empted and non-pre-empted claims based on the particular label affixed to them would allow parties to evade ERISA's pre-emptive scope simply by relabeling contract claims as claims for tortious breach of contracts. And the fact that a state cause of action attempts to authorize remedies beyond those that ERISA Section 502(a) authorizes does not put it outside the scope of ERISA's civil enforcement mechanism. Second, the court believed the plans' wording immaterial because the claims invoked an external ordinary care duty, but the wording is material to the state causes of action and the THCLA creates a duty that is not external to respondents' rights under their respective plans. Finally, nowhere in Rush Prudential did this Court suggest that ERISA Section 502(a)'s pre-emptive force is limited to state causes of action that precisely duplicate an ERISA §502(a) cause. Nor would it be consistent with this Court's precedent to do so.
In Central Laborers' Pension Fund v. Heinz (06/07/2004) the Court unanimously held that ERISA Section 204(g) prohibits a plan amendment expanding the categories of postretirement employment that triggers suspension of the payment of early retirement benefits already accrued. When Heinz retired at age 39, his pension plan provided that his monthly payments were subject to suspension during such time that he worked in certain "disqualifying employment." When he retired, the disqualifying employment did not include working as a supervisor. After retirement, the plan was amended to make employment as a supervisor a disqualifying employment. Heinz was working as a supervisor, the Fund suspended his benefits, and he sued. The Supreme Court held that the Fund violated the anti-cutback rule in Section 204(g), which prohibits any pension plan amendment that would reduce a participant’s "accrued benefit."
In Raymond B. Yates, M. D., P. C. Profit Sharing Plan. v. Hendon, Trustee (03/02/2004) Yates was sole shareholder and president of a professional corporation that maintained an ERISA-qualified profit sharing plan, which contained an anti-alienation ("spendthrift") provision. Yates borrowed money from the Plan, but failed to make required monthly payments. Three weeks after Yates repaid the loan in full, he went into bankruptcy. The Trustee in Bankruptcy asked the Bankruptcy Court to set aside the loan repayment. The Bankruptcy Court held that the Plan and Yates, as Plan trustee, could not rely on the Plan’s anti-alienation provision to prevent the Bankruptcy Trustee from recovering the loan repayment for the bankruptcy estate. The District Court and the 6th Circuit affirmed. The US Supreme Court reversed.
The Supreme Court held that the working owner of a business (here, the sole shareholder and president of a professional corporation) may qualify as a "participant" in a pension plan covered by ERISA. If the plan covers one or more employees other than the business owner and his or her spouse, the working owner may participate on equal terms with other plan participants. Such a working owner, in common with other employees, qualifies for the protections ERISA affords plan participants and is governed by the rights and remedies ERISA specifies.
The Supreme Court reversed on the ERISA issue and remanded for consideration of other issues.