2013 Year in Review - Employment Law

You have spent the year busy practicing law and taking care of clients. With everything on your plate, there just are not enough hours in the day to keep up with all the developments in your field. To make your lives a little easier as you wind up the year 2013 and start 2014, we have put together a summary of some of the highlights and developments from the land of employment law from the past year.

I. New Laws and Regulations

A. Affordable Care Act

The Affordable Care Act was front and center in the news in 2013. The contraceptive coverage provision of the healthcare law took effect in 2013, mandating that non-exempted group health plans provide coverage for women's preventative health services, including contraceptive methods. Employers who do not comply are subject to enforcement actions and substantial financial penalties.

This requirement was met with many challenges from for-profit companies that did not fall within any of the exemptions. According to the ACLU, there are over 40 cases currently pending around the country, in which for-profit corporations are challenging the contraceptive mandate based on the religious beliefs of their owners.

 Two cases are now currently before the U.S. Supreme Court on this issue. Hobby Lobby Stores v. Sebelius is a case where the 10th Circuit Court of Appeals found that corporations do in fact have religious rights under the Religious Freedom Restoration Act of 1993 (RFRA). In Conestoga Wood Specialties Corp. v. Sebelius, the 3rd Circuit Court of Appeals came to a very different conclusion. In that case, the Court concluded that a for-profit, secular corporation cannot engage in the exercise of religion and therefore cannot assert a claim under the RFRA, and the individual owners of the corporation do not have viable claims because the mandate is imposed on the corporation. Oral arguments in these cases are expected to take place in March 2014, with an opinion likely in June 2014.

Additionally, the employer mandate, or "shared employer responsibility" provisions of the Affordable Care Act, which require certain large businesses to offer affordable adequate health insurance coverage to their employees or pay a penalty, will now go into effect January 1, 2015. When the IRS announced the one-year extension on the effective date, the IRS also advised that further proposed rules and regulations will be published, and ultimately final rules will be implemented at some point.

B. Same-Sex Marriage

Following the U.S. Supreme Court's holding in US v. Windsor, which overturned the federal prohibition of same-sex marriage contained in the Defense of Marriage Act, the Department of Labor issued guidance on same sex marriage and employee benefit plans. Pursuant to the guidance, the terms "spouse" and "marriage" in Title I of ERISA and in related regulations, will be read to refer to any individuals who are lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages.

The Labor Department also updated its Family and Medical Leave Act policies such that the term "spouse" means a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including common law marriage and same-sex marriage.

C. Mental Health and Substance Abuse Disorder Benefits

On November 8, 2013, the Departments of Labor, Health and Human Services and the Treasury jointly issued a final rule to increase parity between mental health and substance use disorder benefits and medical and surgical benefits in group and individual health plans. That means that insurers will not be able to charge more for mental health/substance abuse treatment co-pays, deductibles and visit limits than they would for treatment for physical health issues.

The provisions of these final regulations apply to group health plans and health insurance issuers for plan years beginning on or after July 1, 2014. The regulations do not apply to Medicaid plans.

D. Federal Employment

With regard to federal employment, the U.S. Department of Labor announced two new final rules to improve the hiring and employment of veterans and people with disabilities. Both of these rules will apply to federal contractors and subcontractors. Despite current prohibitions on discriminating against qualified veterans and people with disabilities, and affirmative responsibilities to and recruit, hire, train and promote qualified veterans and people with disabilities, disparities still persist. The new rules will address these disparities, reduce barriers to equal employment opportunity, and strengthen the regulations that implement current law, according to the Office of Federal Contract Compliance Programs. An in-depth description of the new requirements can be found here.

The Office of Personnel Management issued a final regulation on hiring persons with disabilities, which took effect on March 25, 2013. The regulation purports to accomplish two goals -- simplify the hiring process for applicants with disabilities and modernize the language used in describing people with disabilities.


A. Posting NLRB Notices in the Workplace

In Chamber of Commerce v. NLRB, issued on June 14, 2013, the Fourth Circuit Court of Appeals held that the National Labor Relations Board exceeded its authority when it enacted a rule that would require employers to post an official NLRB notice informing employees of their rights under the Act. The D.C. Circuit Court of Appeals had also held that the rule was invalid in the case National Association of Manufacturers v. National Labor Relations Board. The NLRB has advised that the rule will not take effect until the legal issues are resolved.

B. Bans On Recording in the Workplace

An administrative law judge with the NLRB upheld Whole Foods' rule banning employees from recording conversations with other employees. In the case, Whole Foods Market, Inc v. United Food and Commercial Workers, the administrative law judge concluded that the rule did not violate the National Labor Relations Act (NLRA). An earlier Advice Response Memo from the Office of the General Counsel of the NLRB had concluded that, among other violations, the portion of Giant Food, LLC's social media policy prohibiting employees from taking pictures or recording the employer's premises was unlawful. While the memo focuses on videos of the workplace and the Whole Foods opinion focuses on employee conversations, presumably videos of the workplace could include employee conversations, and thus the two appear to be at odds, so it remains to be seen what will happen with this issue.

C. NLRB v. Noel Canning

The D.C. Circuit held that appointments by the President to the National Labor Relations Board were invalid because the appointments were improper Recess appointments. As a result, the NLRB's orders were unenforceable. The case, NLRB v. Noel Canning, will be heard by the U.S. Supreme Court this term.

III. Pending Legislation

In November 2013, the U.S. Senate passed the Employment Non-Discrimination Act, which would make it unlawful for an employer to discriminate on the basis of sexual orientation or gender identity. It remains to be seen what the House of Representative will do.

IV. Cases

And whether you want to be up to date on the notable cases from the past year, or just have material for your next attorney cocktail party, below are summaries of some the most noteworthy employment law cases from 2013:

U.S. Supreme Court Cases

 American Express Co. v. Italian Colors Restaurant, 12-133 --The Federal Arbitration Act does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiffs' cost of individually arbitrating a federal statutory claim exceeds the potential recovery.

 Genesis Healthcare Corp. v. Symczyk, 11-1059 -- A collective action under the Fair Labor Standards Act of 1938 was appropriately dismissed for lack of subject-matter jurisdiction where, after plaintiff ignored petitioners' offer of judgment under Federal Rule of Civil Procedure 68 that fully satisfied her individual claim, plaintiff had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.

 Heimeshoff v. Hartford Life & Accident Insurance Co., 12-729 -- An ERISA plan's limitations provision is enforceable because absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.

 University of Texas Southwestern Medical Center v. Nassar, 12-484 -- Title VII retaliation claims must be proved according to traditional principles of but-for causation, not the lessened causation test of the motivating-factor test.

 US Airways, Inc. v. McCutchen, 11-1285 -- In an ERISA reimbursement action based on an equitable lien by agreement, the ERISA plan's terms govern. Neither general unjust enrichment principles nor specific doctrines reflecting those principles, such as the double-recovery or common-fund rules, can override the applicable contract.

 Vance v. Ball State University, 11-556 -- An employee is a "supervisor" for purposes of vicarious liability under Title VII only if he or she is empowered by the employer to take tangible employment actions against the victim.

1st Circuit

 Corporate Technologies, Inc. v. Harnett, 13-1706 -- A blast email from defendant, a former employee of plaintiff, regarding his new job with a competitor was sufficient to support the determination that defendant likely violated the non-solicitation agreement with plaintiff, where, although the customers contacted him, his email piqued the customers' curiosity and incited them to make the initial contact with the employee's new firm.

 Diaz v. Jiten Hotel Management, Inc., 13-1444 -- In an employment discrimination action, an award of $104,626.34 in attorney's fees and costs, for a suit obtaining a damages award of $7,650, is not so disproportionate as to constitute an abuse of discretion.

 Gross v. Sun Life Assurance Company of Canada, 12-1175 – A denial of disability benefits under an ERISA plan was subject to de novo review because the language requiring proof of disability "satisfactory to us" is inadequate to confer the discretionary authority that would trigger deferential review.

2nd Circuit

 McMillan v. City of New York, 11-3932 -- In this case, it is not evident that a timely arrival at work is an essential function of plaintiff's job, provided that he is able to offset the time missed due to tardiness with additional hours worked to complete the actual essential functions of his job.

 Sutherland v. Ernst & Young LLP, 12-304 -- The Fair Labor Standards Act does not include a "contrary congressional command" that prevents a class-action waiver provision in an arbitration agreement from being enforced by its terms; and in light of the Supreme Court's recent decision in American Express Co. v. Italian Colors Restaurant, plaintiff's argument that proceeding individually in arbitration would be "prohibitively expensive" is not a sufficient basis to invalidate the class-action waiver provision at issue here under the "effective vindication doctrine."

3rd Circuit

 Conestoga Wood Specialties Corporation v. Secretary of the US Department of Health and Human Services, 13-1144 -- In an action challenging the requirement to provide coverage for contraceptives, a for-profit, secular corporation cannot assert a claim under the Free Exercise Clause, a for-profit, secular corporation cannot engage in the exercise of religion and therefore cannot it cannot assert a claim under the Religious Freedom Restoration Act, and the individual owners of plaintiff do not have viable claims because the mandate is imposed on the corporation.

 Connelly v. Steel Valley School District, 11-4206 -- It does not violate the Constitution for defendant to base its teacher salaries, in part, on prior in-state teaching experience.

 Lozano v. City of Hazleton, 07-3531 -- Defendant's ordinances, which prohibit employment of unauthorized aliens and preclude them from renting housing within the city, are pre-empted by federal immigration law.

4th Circuit

 Bland v. Roberts, 12-1671 -- An employee could proceed with his claim against the Sheriff that he was unlawfully discharged in retaliation for engaging in political speech, where liking something on Facebook constituted protected speech under the 1st Amendment.

 Chamber of Commerce v. NLRB, 12-1757 -- In promulgating a rule that would require employers subject to the National Labor Relations Act (Act) to post an official National Labor Relations Board notice informing employees of their rights under the Act, the Board exceeded its authority.

 NLRB v. Enterprise Leasing Company, 12-1514 -- The President's three January 4, 2012 appointments to the National Labor Relations Board (NLRB) are constitutionally infirm, because the appointments were not made during "the Recess of the Senate," which is limited to intersession recesses, and accordingly, the NLRB's applications for enforcement of its orders are denied.

9th Circuit

 Dzakula v. McHugh, 11-16404 -- Plaintiff's employment discrimination action was properly dismissed where she failed to list this employment discrimination action on her bankruptcy schedules, plaintiff’s omission on her bankruptcy schedule was neither inadvertent mistaken, and therefore, judicial estoppel barred this action.

 Hagen v. City of Eugene, 12-35492 – When a public employee reports departmental-safety concerns to his or her supervisors pursuant to a duty to do so, that employee does not speak as a private citizen and is not entitled to First Amendment protection.

 In re: Wal-Mart Wage and Hour Employment Practices Litigation, 11-17718 -- A non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under section 10 of the Federal Arbitration Act, which sets forth the statutory grounds for vacatur, is not enforceable.

 M.J. v. US, 11-35625 -- The government employer was not liable for injuries caused by the negligence of a tribal police officer, where: 1) under Alaska state law, an employee's immunity from tort liability precludes an employer from being held vicariously liable for the employee's negligence; 2) the tribal officer was immune from individual liability for plaintiffs' tort claims, both under the Federal Tort Claims Act and the tribe's sovereign immunity; and thus, 3) because plaintiffs sought to hold defendant vicariously liable on a non-delegable duty theory for the negligent conduct of an immune independent contractor, plaintiffs’ claims against defendant failed.

 Muniz v. United Parcel Service, Inc., 11-17282 -- In an action under California's Fair Employment and Housing Act, the district court did not abuse its discretion in awarding the prevailing plaintiff $697,971.80 in attorneys' fees where the jury awarded her only $27,280 in damages.

 State of Arizona v. Asarco, 11-17484 -- A punitive damages award of $300,000 in a Title VII sexual harassment suit where the jury awarded no compensatory damages and only one dollar in nominal damages, was constitutionally excessive.

 Valle Del Sol Inc. v. State of Arizona, 12-15688 – The provisions in Arizona's Senate Bill 1070, which make it unlawful for a motor vehicle occupant to hire or attempt to hire a person for work at another location from a stopped car that impedes traffic, or for a person to be hired in such a manner, are content-based restrictions on commercial speech that are more extensive than necessary to serve Arizona's interest in promoting traffic safety.

Federal Circuit

 Kaplan v. Conyers, 11-3207 -- The Merit Systems Protection Board cannot review the merits of Department of Defense national security determinations concerning eligibility of an employee to occupy a sensitive position that implicates national security.

 Nguyen v. Department of Homeland Security, 2013-3024 -- The Merit Systems Protection Board properly determined that the Department of Homeland Security (DHS) did not impermissibly subject petitioner to double punishment or violate his due process rights, when it disciplined him for making false statements during a police investigation, and then demoted him when it was determined that his disciplinary history impaired his credibility as a witness, and thus could no longer fully perform his duties as a Deportation Officer.

New York

 Cunningham v. New York State Department of Labor, 123 -- The State's action of placing a global positioning system (GPS) device on the care of a government employee, who was being investigated for submitting false time reports, was a search within the meaning of the State and Federal Constitutions, which did not require a warrant, but on the facts of this case it was unreasonable in its scope.

Supreme Court of California

 Harris v. City of Santa Monica, S181004 -- Judgment overturning a damages verdict is affirmed, where: 1) under the California Fair Employment and Housing Act, when a plaintiff has shown by a preponderance of the evidence that discrimination was a substantial factor motivating his or her termination, the employer is entitled to demonstrate that legitimate, nondiscriminatory reasons would have led it to make the same decision at the time; 2) if the employer proves by a preponderance of the evidence that it would have made the same decision for lawful reasons, then the plaintiff cannot be awarded damages, back-pay, or reinstatement; but 3) plaintiff may be entitled to declaratory or injunctive relief to stop discriminatory practices, or reasonable attorney's fees and costs; and 4) the jury must be instructed the same.

 Sonic-Calabasas A, Inc. v. Moreno, S174475 -- The Federal Arbitration Agreement (FAA) preempts California's state-law rule categorically prohibiting waiver of a Berman hearing (a dispute resolution forum established by the Legislature to assist employees in recovering wages owed) in a pre-dispute arbitration agreement imposed on an employee as a condition of employment, but state courts may continue to enforce unconscionability rules that do not interfere with fundamental attributes of arbitration.

California Court of Appeal

 Cornejo v. Lightbourne, C070704 -- The California Whistleblower Protection Act (WPA) is not subject to the Government Claims Act because it has a comprehensive administrative procedure that satisfies the purposes of the presentation procedure in the Claims Act.

 Estrada v. City of Los Angeles, B242202 – Defendant-city's extension of workers' compensation benefits to volunteers does not transform the volunteers' status to that of "employee" for purposes of California Fair Employment and Housing Act.

 Horne v. International Union of Painters, A135470 -- In an employment discrimination action, the after-acquired evidence doctrine does not apply to bar consideration of plaintiff's criminal record and the federal law rendering him ineligible for the organizer position because it is relevant to the prima facie inquiry, not the employer's motive here.

 Mendez v. Mid-Wilshire Health Care Center, B243144 -- The arbitration provision in the collective bargaining agreement governing plaintiff's employment does not apply to plaintiff's statutory discrimination claims.

 Moradi v. Marsh USA, Inc., B239858 -- Defendant-employer was not entitled to summary judgment in an action brought by plaintiff for personal injuries when defendant-employee collided with plaintiff while driving her car, where: 1) because the employer required the employee to use her personal vehicle to travel to and from the office and make other work-related trips during the day, defendant-employee was acting within the scope of her employment when she was commuting to and from work; 2) defendant-employee's planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations; and thus, 3) under the required vehicle exception to the going and coming rule, defendant-employee was acting within the scope of her employment at the time of the accident.

 Purton v. Marriott International, Inc., D060475 -- In a personal injury action in which plaintiff alleged that defendant-employee consumed alcoholic beverages at an employer hosted party, became intoxicated, arrived home safely, but when he left to drive a co-worker home, the defendant-employee struck another car and killed its driver, summary judgment for defendant-employer is reversed and remanded, where: 1) an employer may be found liable for its employee's torts as long as the proximate cause of the injury (here, alcohol consumption) occurred within the scope of employment; 2) a reasonable trier of fact could conclude that the employee was acting within the scope of his employment while ingesting alcoholic beverages at the party; and 3) no legal justification exists for terminating the employer's liability as a matter of law simply because the employee arrived home safely from the employer hosted party.

 Sanchez v. Swissport, Inc., B237761 -- The plain language of the Pregnancy Disability Leave Law makes clear that its remedies augment, rather than supplant, those set forth elsewhere in the California Fair Employment and Housing Act.

 Volpei v. County of Ventura, B243954 -- A provision in a collective bargaining agreement that the union may submit a grievance to arbitration does not preclude an employee in that union with a statutory grievance against his employer from filing a judicial action, where, as here, the agreement does not provide for a clear and unmistakable waiver of plaintiff-employee's right to a judicial forum for his statutory discrimination claims.

 Yanez v. Plummer, C070726 -- In an action against defendant-former employer for wrongful discharge, and its in-house counsel for legal malpractice, breach of fiduciary duty, and fraud arising out of plaintiff's firing for dishonesty for a discrepancy between a witness statement that plaintiff wrote and a deposition answer he gave concerning a co-employee's on-the-job injury, summary judgment for defendant-attorney is reversed and remanded, where plaintiff has raised a triable issue of material fact that but for defendant-attorney's conduct, defendant-former employer would not have fired plaintiff.

For additional discussion of the risks of malpractice facing in-house counsel for representing an employee, see here.