The Working World From the Supreme Court’s Perspective
 
July 21, 2006
 
Todd D. Steenson- Chicago

As the current term of the United States Supreme Court ends, it is helpful to consider the impact of its recent rulings on employers.

In general, this was a rather uneventful term for employers. The Supreme Court issued fewer employment-related decisions than usual, and several of the decisions it did issue have limited relevance to employers’ day-to-day activities. Notably, the Court decided no cases involving traditional labor relations, the National Labor Relations Act, or the Age Discrimination in Employment Act.

We have discussed a number of the Court’s decisions in prior issues of this newsletter. However, the most important decision of the term for employers, Burlington Northern & the National Labor Relations Act, which expanded the scope of Title VII’s retaliation protections, was decided near the end of the term. We will discuss that decision and also review the Court’s remaining decisions, preview a case set for decision next year and look briefly at some of the issues the Supreme Court decided not to decide.

 

Burlington Northern: Watch Out for Retaliation Claims
In Burlington Northern,¹ the Supreme Court ruled that Title VII’s anti-retaliation provision is not limited to retaliatory actions that affect an employee’s terms and conditions of employment or even to actions that occur in the workplace. Rather, it makes unlawful any retaliatory act that is sufficiently harmful that it “could well dissuade a reasonable worker from making or supporting a charge of discrimination.” Reassignment to a less attractive job or a temporary suspension without pay can constitute retaliation, the Court ruled. This decision will make it easier for employees to prove retaliation and create greater risks for employers.

 

The Law
Title VII provides both direct prohibitions against discrimination and protection against retaliation for individuals who seek protection under Title VII. The anti-discrimination provisions make it unlawful for an employer “to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin” or to engage in acts “which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.” In other words, the discrimination provisions are specifically limited to acts that affect an employee’s status in the workplace.

The anti-retaliation provision, however, is not specifically limited to acts relating to employment status. Rather, it states that it is unlawful for an employer “to discriminate” against any employee or applicant “because he has opposed any” of the kinds of discrimination listed above, or “because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing” under Title VII, without any limitation on the kinds of discrimination prohibited.

The issue of what kinds of employer acts can constitute illegal retaliation has divided the federal appellate courts for years. Some courts had ruled that an employee who engages in protected activity essentially has to be fired or demoted before he or she can successfully sue for retaliation. Other courts of appeals had decided, however, that any adverse employment action reasonably likely to deter an employee from asserting or supporting a claim under Title VII is sufficient to support a retaliation claim. This is the issue the Supreme Court faced and decided in the White case.

 

The Facts
Sheila White was the only woman working in the Burlington Northern & Santa Fe Railway Co.’s maintenance department in Memphis, Tennessee. She was hired as a “track laborer,” a job that involves removing and replacing track components, transporting track material, cutting brush, and clearing litter and cargo spillage from the right-of-way. Beginning shortly after she started working, she spent most of her time operating a forklift and did not perform the more difficult manual tasks of the job. After she complained to company officials about gender discrimination and harassment, however, her forklift duties were taken away and she was reassigned to manual track laborer duties. Then, after she filed a charge with the EEOC alleging gender discrimination and retaliation, she was charged with insubordination and suspended without pay for 37 days. After she filed a grievance, the company found that she had not been insubordinate, reinstated her and awarded her full back pay.

White sued Burlington Northern for retaliation based on the change of duties and the suspension. After a one-week jury trial, she won $43,500 in damages plus medical expenses and attorney fees.

 

Were the Actions Against White Sufficiently Severe to Qualify as Retaliation?
White’s case made its way to the Supreme Court, which addressed two issues: (1) whether Title VII’s anti-retaliation provision is limited to formal decisions that impact an employee’s job status; and (2) how harmful must the act be to constitute retaliation.

The Supreme Court adopted a much easier standard for proving retaliation than many courts had previously used. It ruled that retaliatory actions not only do not have to involve a formal employment decision, they also do not even have to occur in the workplace. Rather, any action that materially injures or harms an employee who has engaged in protected activity and could dissuade a reasonable worker from making or supporting a charge of discrimination can constitute actionable retaliation, the Court concluded.

The Court reasoned that Title VII’s anti-retaliation provision is broader than its anti-discrimination provisions because Congress recognized that “an employer can effectively retaliate against an employee by taking actions not directly related to his employment or by causing him harm outside the workplace.” The Court gave as an example the case of an FBI agent who claimed that, in retaliation for Title VII protected activity, he was not warned when the FBI learned about threats to his life from an inmate. According to the Court, “[a] provision limited to employment-related actions would not deter the many forms that effective retaliation can take.”

The Court did provide several limitations in its opinion. First, it ruled that only significant actions can constitute illegal retaliation. Employees cannot sue for retaliation based merely on “petty slights” or “minor annoyances” that may occur after an employee makes or supports a discrimination claim, the Court said.

Second, the Court ruled that the retaliation standard is objective. To be retaliatory, it said, an act must be likely to deter a “reasonable employee” from filing a retaliation charge. Nonetheless, the Court stated that whether a particular act is likely to dissuade an employee from filing a discrimination charge depends on its context. For example, a schedule change might not matter to many employees, but could “matter enormously” to a young mother with school-age children. In another example, the justices noted that a supervisor’s refusal to invite an employee to lunch would normally be trivial, but exclusion from a weekly training lunch that would impact the employee’s job opportunities could qualify as retaliatory.

Applying its new standard, the Court unanimously held that both the reassignment of White to manual labor and the 37-day unpaid suspension could support White’s retaliation claim. “Many reasonable employees would find a month without a paycheck to be a serious hardship,” the Court wrote, adding that “an indefinite suspension without pay could well act as a deterrent, even if the suspended employee eventually received back pay.”

 

What It Means for You
The Burlington Northern decision certainly will make it easier for employees to claim retaliation. The Court’s new standard – that an act is retaliatory if it “could well dissuade a reasonable worker from making or supporting a charge of discrimination” – creates two significant risks. First, because retaliation does not have to be based on specific formal job actions, it will be more difficult to police potentially retaliatory actions by lower-level supervisors. Second, the new standard is itself vague and will require court decisions to flesh out what it really means in practice. In particular, the Court’s statement that whether conduct is retaliatory may depend on context, such as the impact of a schedule change on a working mother, suggests that the same act may constitute illegal retaliation against one employee but not against another.

In light of the Burlington Northern decision, employers must be even more vigilant to protect employees from retaliation and more careful before taking adverse action against an employee who has complained about alleged discrimination or been involved in an EEOC charge. The following are some tips to help prevent retaliation claims.

• Train supervisors. Ensure that first-level supervisors are aware of the legal prohibition against retaliation and the kinds of conduct that could constitute retaliation, especially conduct other than specific changes to job status. Train them to contact their own supervisors as well as human resources before taking any action toward an employee who has complained about discrimination.

• Enforce policies consistently. Enforcing a policy or taking action concerning preexisting performance issues only after a discrimination complaint occurs is almost certain to bring on a retaliation claim. If you enforce your policies consistently, you may still be able to take appropriate discipline even after a discrimination complaint is made.

• Document performance issues. Careful documentation of performance issues will assist you in defending against retaliation claims when you have a legitimate basis to take adverse action.

• Keep employee complaints and investigations confidential. To prove retaliation, an employee must show that the decision maker knew about the protected activity. If a decision maker can truthfully testify that he/she never knew about the protected activity, it is extremely difficult for the affected employee to prove a causal connection. Thus, limit information about discrimination complaints and investigations to those employees who truly have a need to know.

• Monitor employees who have complained. If you know that an employee has engaged in protected activity, monitor the situation to ensure that subtle forms of retaliation are not occurring.

• Respond to potential retaliation. Take timely investigatory (and remedial if appropriate) action if you believe that any adverse treatment or employment decision may be motivated in any way by an employee’s participation in protected activity.

• If in doubt, seek help. If a tough call arises, such as where it appears the conduct of an employee who has engaged in protected activity legitimately warrants corrective action or termination, reach out for advice from an upper-level human resource professional or legal counsel.

 

Court Makes It Easier for Health Plans to Recover Medical Benefits
Employer-sponsored health plans often pay benefits to employees or beneficiaries who are injured due to the fault of a third party. If the plan participant receives compensation from the party at fault through litigation, the health plan often seeks to recover the medical benefits it paid out of the compensation the insured received from the third party. In a decision issued toward the end of the term, Sereboff v. Mid Atl. Med. Servs. Inc., No. 05-260 (5/15/06), the Supreme Court made it easier for health plans to recover benefits in this situation. It ruled that a health plan administrator could sue a plan participant under ERISA to recover from an automobile accident settlement the amount the plan had paid for the participant’s medical expenses in connection with the accident. The Court reasoned that because the health plan at issue contained a provision requiring a plan participant who is injured as a result of an act or omission of a third party to reimburse the plan for benefits it pays on account of those injuries if the beneficiary recovers for those injuries from the third party (a subrogation clause), the plan could sue under ERISA to recover those specific monies.

The Sereboff decision is beneficial for health plans because it allows them access to federal court and ERISA’s procedures to sue for reimbursement of benefits paid to insureds who receive other compensation. Otherwise, plans would be required to sue in state court. The Court made clear, however, that health plans may bring such suits under ERISA only if the plan contains a subrogation clause. Plan administrators should have their subrogation clauses reviewed to ensure they are able to take full advantage of the Sereboff decision.

Court Limits First Amendment Rights of Government Employees Another recent Supreme Court decision, Garcetti v. Ceballos, involved only governmental employers, but had a significant impact on First Amendment protections in employment.² A deputy district attorney claimed that he suffered retaliation for writing a memorandum in which he recommended dismissal of a case being handled by his supervisors. He was later transferred. He then sued, claiming that he was transferred because of his speech (the memorandum), in violation of the First Amendment. The Supreme Court held that when public employees make statements in the course of their official duties, they do not have First Amendment protection against employer discipline, as they would have if the statements were made in their capacities as citizens addressing a matter of public concern. As an employer, a government has a broader right to restrict speech if the restrictions are directed at speech that can potentially affect its operations, the Court said. It also ruled that the speech in question was not a matter of public concern, which would have normally been protected under the First Amendment. The case is also of interest because it was reargued after Justice Samuel Alito was appointed to the Supreme Court to replace Sandra Day O’Connor – and because it appears that Justice Alito may have changed the outcome. This case underscores the importance of separating duty-related speech by governmental employees from speech related to public concerns, such as taking a position on a public issue.

 

A Review of Previous Decisions
Several Supreme Court cases decided earlier in the term merit review. In the Court’s first labor and employment case of the term, IBP, Inc. v. Alvarez, it clarified the scope of the compensable work day for purposes of the Fair Labor Standards Act. The Court ruled that during a continuous work day, any walking time that occurs after the beginning of an employee’s first principal activity, such as the donning of protective gear, and before the ending of the employee’s last principal activity (such as doffing that gear), is compensable under the FLSA. The Court further ruled, however, that time spent waiting before the first principal activity, such as time spent waiting to don protective gear, is not compensable time. This decision is likely to sensitize plaintiffs’ attorneys to issues relating to when compensable time starts and the compensability of certain activities at the beginning and end of the work day. In light of this decision, and the anticipated increase in collective and class action lawsuits in this area, employers should consult with counsel to determine whether the activities their employees perform at the beginning and end of the day, and their compensation practices in general, comply with the FLSA and this decision.

We discussed Ash v. Tyson Foods,³ Domino’s Pizza, Inc. v. McDonald⁴ and Arbaugh v. Y&H Corporation,⁵ in earlier issues of this newsletter. In Ash, the Court held that calling an employee “boy” could be evidence of racial discrimination and made it easier for a plaintiff to establish pretext (that an employer’s stated reason for a termination was false and discrimination was the real reason) than under the earlier decisions of some federal appeals courts. In the Domino’s Pizza case, the Court limited the reach of the Civil War era race discrimination statute, 42 U.S.C. § 1981, by ruling that a plaintiff may sue only if he claims that an employer refused to make or breached a contract directly with him. It ruled that the sole shareholder of a corporation could not sue under Section 1981 by claiming that the defendant breached a contract with the corporation because of racial prejudice against him. In the Arbaugh case, the Court held that the number of employees required to bring the plaintiff’s claim within Title VII (15 for 20 or more weeks during the current or preceding year) was an element of her claim for relief rather than a jurisdictional requirement. This means that an employer that believes it has fewer than 15 employees, and is thus not covered by Title VII, must raise that issue before trial. Failure to do so will result in waiving the issue.

 

Upcoming Decisions
In its next term, the Supreme Court will review how far back in time an employee alleging sex discrimination in pay may go to challenge her employer’s actions affecting her pay.⁶ The court below held that the “operative act of discrimination” was not issuing paychecks but “making the underlying decision about what the plaintiff should be paid.” The plaintiff therefore was entitled to extend his suit back no further than the “last such decision immediately preceding the start of the limitations period.” Other appellate courts have held that each allegedly discriminatory paycheck is itself a discriminatory act, and that employees can challenge the entire string of discriminatorily lower paychecks as long as one paycheck falls within the limitations period (the 300-day period within which a charge of discrimination must be filed with the EEOC or state or local deferral agency). The Supreme Court’s decision could have a significant impact on how much employees can recover in pay discrimination lawsuits.

 

What Won’t Be Addressed Next Term
The cases the Supreme Court declines to review, while not as important as the cases the Court hears and decides, are also of interest. This term, these cases involved a variety of matters, including certification of a class, dismissal of a claim on motion for summary judgment by the employer, proper application of the standard of proof, whether a claim was time-barred, and other purely procedural issues.

Especially noteworthy is the Court’s declining to review a decision of the Court of Appeals for the Eleventh Circuit holding that Title VII’s protection of those who “participate in” a proceeding under of Title VII does not apply to an employee who participates in an internal investigation by the employer that is conducted separate from any EEOC charge.⁷ The circuit court ruled that because the employee in the case had left her job before she filed an EEOC charge, she could not have not have engaged in protected activity under the participation clause. This decision and the Supreme Court’s refusal to review it mean that in the Eleventh Circuit, an employee who participates in, for example, a sexual harassment investigation that occurs before any EEOC charge has been filed is not protected by Title VII’s anti-retaliation provision. If the internal investigation is related to an EEOC charge, however, the employee is protected from retaliation.

 

Summing Up the Term
Although some of the Court’s decisions during this term were employee-friendly, employers are helped every time the Court clarifies an area of uncertainty. While it expanded the kinds of conduct an employee can challenge as retaliatory, Burlington Northern held that the standard is objective rather than subjective. Ash v. Tyson Foods made establishing pretext easier in some appellate courts, but at least the Court has set a more definite standard. Arbaugh shows that bad lawyering (failing to raise a defense in a timely manner) can harm a good claim and demonstrates the necessity of selecting an experienced attorney to litigate cases filed against employers.

The law in the employment arena will continue to develop. These changes show that every employer must implement strong policies against both discrimination and retaliation, must train management to recognize and deal with any problems as soon as they occur, must mount prompt and effective investigations of claims made internally, must maintain accurate and up-to-date job descriptions and evaluate employees fairly and accurately, must document each and every counseling session or warning and provide the employee with a copy, and must assure that there is always a perception of fairness among employees in the workforce. No employee should be discharged without knowing the reason why, and the reason should not be a surprise. Even if there is no actual discrimination, if the case goes to a jury, fairness will be the key. The ultimate question is: will a neutral fact finder consider your decisions to be fair and reasonable?

For more information, e-mail Todd Steenson at todd.steenson@hklaw.com, or call toll-free, 1-888-688-8500.

¹ ___ S.Ct.____ (June 22, 2006).

² Garcetti v. Ceballos, 126 S.Ct. 1951 (May 30, 2006).

³ 126 S.Ct. 1195 (Feb. 21, 2006).

⁴ 126 S. Ct. 1246 (Feb. 22, 2006).

⁵ 126 S.Ct. 1235 (Feb. 22, 2006).

⁶ Ledbetter v. Goodyear Tire & Rubber Co., 421 F.3d 1169 (11th Cir. 2005), cert. granted 6/26/06.

⁷ Anduze v. Florida Atlantic University, cert. denied 6/13/06.