Supreme Court 2017–18: Employment law cases on the docket

Supreme CourtThe U.S. Supreme Court will hear several cases this term on a range of issues affecting the employer-employee relationship.

WHAT’S NEW What’s new is Justice Neil Gorsuch. After his nomination and confirmation earlier this year, the Supreme Court is back to its full complement of justices. All those 4-4 splits should be behind us.

Gorsuch is generally considered a conservative, much like the justice he replaces, the late Antonin Scalia.

THE CASES This year’s Supreme Court docket covers several timely employment law issues. As the last word on important legal issues, Supreme Court decisions usually offer important compliance lessons.

Epic Systems Corp. v. Lewis
Mandatory arbitration

In a case argued on this session’s opening day, the court heard opposing views on the intersection of the Federal Arbitration Act and the National Labor Relations Act. The employers in Epic Systems Corp. v. Lewis required employees to waive their class-action rights and arbitrate all employment disputes individually. The employees allege that violates their right to collective action under the NLRA.

Compliance advice: If you require employees to sign an agreement waiving their class-action rights, this case could affect you.

Arbitration agreements are not do-it-yourself projects. Always ask for your attorney’s help when drafting them. While the Supreme Court has generally favored arbitration, arbitration agreements that are too one-sided may run afoul of both state and federal law.

Ideally, your arbitration agreement should have a severability clause that states that any court decision invalidating part of the agreement does not invalidate the entire agreement.

Janus v. AFSCME, Council 31
‘Fair share’ union fees

Janus v. American Federation of State, County, and Municipal Employees, Council 31 alleges an Illinois law permitting “fair share” fees violates nonunion employees’ First Amendment rights because it compels them to pay money to a union to which they do not belong. The law requires government employees who decline to join the union to pay a fee in lieu of member dues because they benefit from the union’s collective bargaining activities.

The case marks the second year in a row that the Supreme Court has addressed fair share fees. Last year, the court appeared to be on the verge of ruling the fees unconstitutional in a case involving a California teachers’ union. Scalia was presumed to have been preparing to concur with a 5-4 ruling against the fees, but he died before an opinion could be rendered. The resulting deadlock let stand a 9th Circuit decision that allowed the fees.

A ruling in favor of the plaintiff in this year’s case would overturn a 1977 Supreme Court decision, Abood v. Detroit Board of Education, which held that state laws requiring such fees were constitutional.

Compliance advice: Fair share fees only apply to unions representing government employees. Government agencies should be prepared to change their payroll deduction processes if the court rules fair share fees unconstitutional.

Digital Realty Trust, Inc. v. Somers
Dodd-Frank whistleblowers

The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 in the wake of the financial crisis that caused the Great Recession. The law’s whistleblower provisions are at the center of Digital Realty Trust, Inc. v. Somers.

Digital Realty Trust fired a vice-president who had sent several reports to company management detailing what he believed to be securities law violations. He sued, alleging his termination violated Dodd-Frank provisions designed to protect whistleblowers from retaliation. Digital Realty countered that Dodd-Frank only protects whistleblowers who report violations directly to the Securities and Exchange Commission.

Two circuit courts have come to different conclusions on the matter and the Supreme Court will now resolve that split.

Compliance advice: Any time a whistleblower is terminated, you can expect litigation. Consult your attorney before firing anyone who can make a whistleblower claim.

Encino Motorcars v. Navarro
FLSA classification

Also making a return trip to the Supreme Court this session is the arcane question of whether service advisors at car dealerships are exempt employees under the Fair Labor Standards Act. The case in both 2016 and 2017: Encino Motorcars, LLC v. Navarro.

Last year, the Supreme Court found that Department of Labor guidance stating that automotive service advisors were exempt was so “sloppy” that it was not binding. It sent the case back to the 9th Circuit, which—using its own rationale—determined that service advisors are nonexempt. The car dealership appealed and now the Supreme Court will review the 9th Circuit’s decision.

Compliance advice: Don’t work for a car dealership? Don’t worry too much about this case … unless. If the Supreme Court upholds the 9th Circuit’s reasoning, creative plaintiff’s lawyers may try to argue it applies to similar positions in other industries.

Be prepared to ask your attorney whether this case affects how you classify employees.