Outlook 2018: Supreme Court—What’s at Stake for the Workplace

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By Jay-Anne B. Casuga

The financial future of public sector unions and the fate of class action waivers in arbitration agreements are the two big-ticket labor and employment issues the U.S. Supreme Court will decide before the end of the 2017-2018 term.

The justices will also determine which employees qualify as financial whistle-blowers, whether car dealership service advisers are entitled to federal overtime pay, and the time frame in which employees can file state law claims in state court after losing federal claims.

Those three cases perhaps haven’t received the same amount of attention as the union fee and class arbitration cases, but they too can have ramifications on workplace law outside of the specific issues they address, attorneys and law professors told Bloomberg Law.

Some of the five cases have already been argued before the court, but observers cautioned against making predictions on final rulings.

“My default would be to say: You get into very dangerous territory trying to predict what the court will decide based on oral argument,” said Rae T. Vann, a partner with NT Lakis in Washington and general counsel of the Center for Workplace Compliance. The employers’ association, formerly known as the Equal Employment Advisory Council, has filed friend-of-the-court briefs in more than 100 employment cases that went before the high court in the past two decades.

Still, the justices’ questioning can shed light on how they interpret statutory texts and whether they would defer to federal government interpretations of the law.

The Government’s Shifting Stances in Labor Cases

In this term’s two highly controversial labor cases, government agencies have either taken opposing stances with each other or reversed positions they held in previous Supreme Court terms.

In the consolidated cases of NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young LLP v. Morris (No. 16-307), the National Labor Relations Board at oral argument defended its position that arbitration agreements that bar employees from pursuing employment-related claims in class or collective actions, either in court or arbitration, violate the National Labor Relations Act because they prohibit workers from banding together in “concerted” activity.

The Trump administration’s Justice Department, however, argued in favor of the employers, saying the Federal Arbitration Act and high court precedent strongly favor the validity and enforcement of arbitration agreements that include class waivers.

“Neither side sailed through argument in the Murphy Oil cases unscathed,” said Charlotte Garden, an associate professor at Seattle University School of Law and litigation director of the school’s Korematsu Center for Law & Equality. “The Justices had tough questions for all the lawyers involved.”

Justices John Roberts, Anthony Kennedy, Clarence Thomas, and Samuel Alito “have been exceedingly deferential to arbitration agreements in recent cases,” she said, but none of those previous cases involved the NLRA. “I expect this case will be a close one, with the outcome turning on how the court understands the rights that the NLRA protects,” Garden said.

Meanwhile, in Janus v. AFSCME Council 31 ( No. 16-1466), the DOJ and the Labor Department have taken the position that public sector unions should be banned from collecting mandatory fees from nonmembers. That’s a reversal from the government’s position in a similar case from the Supreme Court’s 2015-2016 term that deadlocked in a 4-4 split. Oral argument hasn’t yet been scheduled in Janus.

“When the government takes inconsistent positions like they are doing in Janus or where two arms of the government are taking opposite positions like in the Murphy case, the government’s credibility has to suffer,” said professor Michael Foreman, director of the Civil Rights Appellate Clinic at Penn State Law. “How much weight do you give that testimony?”

The court in Janus could end up overturning 40-year-old precedent in Abood v. Detroit Bd. of Education, which said requiring government workers to pay union fees even if they aren’t members is constitutional.

“With Justice Gorsuch joining the court, it’s very likely that the court will now have the fifth vote necessary to overturn Abood, which would significantly hurt union viability,” said Collin O’Connor Udell, of counsel at Jackson Lewis in Hartford, Conn. Udell’s practice focuses on Supreme Court litigation.

Agency Deference at Play in Whistleblower Case

The amount of weight given to the government’s interpretation of the law was raised at oral argument in Digital Realty Trust, Inc. v. Somers (No. 16-1276), a case that could affect publicly traded companies’ exposure to whistleblower lawsuits under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The law defines a whistleblower as an individual who reports alleged securities violations or fraud charges to the Securities and Exchange Commission. However, the SEC issued a final rule that broadened that definition to include employees who internally report violations within their companies. The agency’s proposed rule didn’t include the expanded definition but asked the public to weigh-in on the issue. It received three comments in favor of a broad definition.

The SEC’s definition of a whistleblower is unlikely to receive Chevron deference, said Dallas Hammer, of counsel at Zuckerman Law in Tysons Corner, Va., which represents employees in whistleblower cases. Under Chevron, the highest level of deference, courts defer to an agency’s interpretation if a law’s language is ambiguous, the agency has congressional authority to issue regulations interpreting the law, and the interpretation is reasonable.

“It will be interesting to see whether Justice Gorsuch, who has long questioned the fundamental propriety of Chevron, will try to lay the groundwork for a broader attack on the doctrine,” Hammer said. “But for this case, the Supreme Court will likely render a substantive interpretation of the statute that will leave less room for the SEC to influence the statute’s application prospectively.”

Vann of the CWC similarly said conservative and liberal justices during oral argument seemed to be skeptical of the agency’s rulemaking and appeared to lean toward the position that the plain language of Dodd-Frank should control. The CWC filed a friend-of-the-court brief in favor of Digital Realty Trust.

Foreman agreed that the liberal justices seemed to struggle with going beyond the textual analysis, and also focused on the existence of the Sarbanes-Oxley Act, which would protect employees who internally blow the whistle. Unlike Dodd-Frank, however, the SOX Act has a shorter time frame for bringing claims and requires employees to file a complaint with the DOL before they can proceed with a private lawsuit.

“It’s not a perfect remedy, but at least there’s a remedy,” Foreman said.

Textualism and the FLSA

Encino Motorcars v. Navarro (No. 16-1362) continues the theme of statutory interpretation. The case, which came before the justices in 2016, asks whether car dealership service advisers are exempt from overtime pay under the Fair Labor Standards Act. Oral argument is scheduled for Jan. 17.

Depending on how the justices rule, the case may have ramifications on how courts interpret statutory exemptions under laws like the FLSA. Generally, federal wage and hour exemptions have been narrowly construed in favor of employees. A broader reading of the exemptions potentially could reduce the number of workers allowed to bring wage claims against their employers.

Udell said she would expect Justices Thomas and Alito, joined by Justice Gorsuch, to “take the lead on an opinion based on the textualism argument” that service providers are salesmen primarily engaged in servicing automobiles and thus should be exempt from overtime pay.

Foreman, who authored a friend-of-the-court brief in the case, provided a different take. There’s a “strong textual argument” that service advisers aren’t covered by the exemption, he said.

“If the textualists carry the day in the Dodd-Frank case, I would hope they would be consistent” in their reading of the FLSA, he said.

Could Procedural Case End Up in 5-4 Split?

Finally, the high court will decide in Artis v. D.C. (No. 16-460) how long workers can wait to file a state court lawsuit alleging discrimination or retaliation after a federal trial court has dismissed their federal bias clams and declined to rule on the state law claims.

For state and local governments and other employers, the case addresses problems associated with defending state claims that have become stale after being held in federal court for a long time, said Lisa Soronen, executive director of the State & Local Legal Center in Washington. The center filed a friend-of-the-court brief in the case on behalf of the city, which argued that employees must file their state court bias lawsuits within 30 days of a federal court dismissal, regardless of how long a state deadline might be.

Unlike some of the other cases on the court’s docket, Artis isn’t considered highly controversial or politically sensitive, Soronen said. But based on oral argument, Artis still could be a 5-4 case based on the justices’ ideological lines, she said.

The court’s ruling in the case can have implications in other areas of employment law outside of the discrimination context, such as in wage and hour, where workers can file similar state and federal law claims in federal court, she said.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bloomberglaw.com

To contact the editor responsible for this story: Terence Hyland at thyland@bloomberglaw.com

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