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Supreme Court Update: Employers Take All

Employers ended the October 2017 Supreme Court term with a clean sweep. In three 5-4 decisions split down perceived party lines and one unanimous opinion, the Court sided with employers’ interests in each significant labor and employment case. Perhaps most consequentially, at the conclusion of the term, Justice Kennedy retired from the bench, affording President Trump the opportunity to appoint another conservative justice who will likely be a reliable pro-employer vote for decades to come. 

Class Action Waivers: In Epic Systems Corp. v. Lewis, a 5-4 majority sided with employers holding that companies can use arbitration clauses in employment contracts to prevent their employees from filing class action lawsuits. This decision resolved the circuit split that followed the National Labor Relation Board’s 2012 ruling in D.R. Horton, which held that class action waivers violated §7 of the NLRA, a provision that protects employees’ rights to engage in “concerted activities.” Justice Gorsuch, writing for the majority, simplified the issue with the following quote: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?” Finding each argument for the latter position unpersuasive, Justice Gorsuch handed employers a major victory. Following this decision, employers can now include class action waivers in arbitration agreements without worrying about running afoul of the NLRA.
Public Union Right to Work: In Janus v. American Federation of State, County, and Municipal Employees, Council 31, a 5-4 majority overruled a prior Supreme Court decision and held that public unions cannot collect involuntary fees from the employees they represent. This case dealt with state employees who, under Illinois law, were not required to be union members or pay union dues, but were required to pay a “fair share” fee equal to the portion of union dues spent directly on collective bargaining. Unsurprisingly, some members of the bargaining unit did not support the positions taken by the union in negotiations and believed that payment of the “fair share” fees for positions they did not support constituted coerced speech in violation of the First Amendment. The Court agreed, and in doing so, it found that its prior concerns laid out in Abood v. Detroit Bd. of Ed., 431 U.S. 209 (1977) were no longer valid.
FLSA Auto Sales & Service Exemption: In Encino Motorcars, LLC v. Navarro, a group of service advisors sued Encino Motorcars for unpaid overtime under the Fair Labor Standards Act (FLSA). The FLSA, however, exempts from its requirements “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” Resolving a split between the circuits, the Court held that the service advisors were exempt from the FLSA’s overtime pay requirements as they were primarily engaged in servicing automobiles. In reaching its decision, the Court rejected the longstanding principle that FLSA exemptions should be “narrowly construed.” Instead, the Court held that the proper approach is that such exemptions should be given a “fair reading.” While the scope of this opinion is limited, going forward, employers will almost certainly use the Court’s new standard to advocate for broader applicability of other FLSA exemptions.
Dodd-Frank Anti-Retaliation: In Digital Realty Trust, Inc. v. Somers, Paul Somers was fired by Digital Realty shortly after he reported to senior management suspected securities law violations by the company. Somers then sued for whistleblower retaliation under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Under Dodd-Frank, a “whistleblower” is “any individual who provides . . . information relating to a violation of the securities law to the Commission, in a manner established, by rule or regulation, by the Commission.” Taking a narrow view, the Court ruled that Dodd-Frank’s anti-retaliation provision does not extend to an individual who, like Somers, has not reported a violation of the securities laws to the SEC. This is different than the Sarbanes-Oxley Act, which protects employees who report misconduct to the SEC, any other federal agency, or an internal supervisor.
Justice Kennedy Retires: On June 27, 2018, Justice Anthony Kennedy announced his retirement from the Supreme Court. This opened the door for President Trump to nominate his second Supreme Court Justice since winning the presidency. Following through on his promise to select an acceptable conservative “in the mold of Antonin Scalia,” President Trump nominated Judge Brett Kavanaugh of the United States Court of Appeals for the District of Columbia Circuit. Despite being the crucial swing vote on several high-profile opinions, Justice Kennedy was a reliable pro-employer vote during his time on the bench. Those familiar with the ideology of Judge Kavanaugh expect that he will take a similar approach to labor and employment cases, if confirmed.



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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
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Jason Lacey, the Employee Benefits Guy
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