Last year was filled with important employment decisions that will have an effect on future litigation of employment claims on both the state and federal level. In the first entry of our two-part series, we discuss some of the most significant United States Supreme Court cases impacting employment law during 2018. Part two will explore changes in employment laws in Texas.

Major U.S. Supreme Court Decisions

Upholding class action waivers

In its decision in Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 200 L. Ed. 2d 889 (2018), the Supreme Court held that the National Labor Relations Act’s (NLRA) protection of employees’ right to engage in concerted activities does not guarantee employees a right to participate in class or collective action lawsuits. Therefore, employers may require employees to sign class- and collective-action waivers housed in employment arbitration agreements as a condition of employment without running afoul of the NLRA, and such agreements will be enforceable under the Federal Arbitration Act.

This big “win” for employers means they can now prevent workers from pursing costly class-action lawsuits against the company for claims arising out of the employment relationship – forcing employees to litigate any and all employment claims individually.

Punting the religious freedom vs. anti-discrimination conflict

Contrary to what many believe was a “win” for religious objectors seeking to overcome the reach of anti-discrimination laws, the Court’s ruling in Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Comm’n, 138 S. Ct. 1719, 201 L. Ed. 2d 35 (2018) does not authorize businesses to discriminate against customers because of their sexual orientation. The Court reaffirmed that while religious and philosophical objections to gay marriage are protected views, “it is a general rule that such objections do not allow business owners and other actors in the economy and in society to deny protected persons equal access to goods and services under a neutral and generally applicable public accommodations law.”

Although the Court did rule in favor of the cake shop owner, it did so on very narrow grounds – focusing on the fact that the owner did not receive “neutral and respectful consideration” of his claims to which he was entitled. The Court noted that certain comments made by the commissioner were hostile and “cast doubt on the fairness and impartiality of the Commission’s adjudication” of the case. Thus, because the Commission’s actions were in violation of the state’s obligation to religious neutrality, the Court held the Commission’s order requiring the owner to cease and desist from discriminating against same-sex couples be set aside.

Because the case was decided on very fact-specific grounds, its holding lends little precedential value going forward. However, it does lay out the framework for arguments we will likely see in the future if business owners claim their religious freedom should not yield to the government’s interest in protecting rights of individuals to be free from discrimination.

Expanding the class of workers exempt from overtime pay requirements

Under the Fair Labor Standards Act (FLSA), certain categories of workers are exempt from being paid time-and-a-half for all overtime hours worked each week. Those exempt categories include “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” 29 U.S.C. § 213(b)(10)(A).

In its decision in Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2018), the Court announced that employees who work as service advisors at car dealerships are covered by the language of the exemption, and thus not entitled to receive overtime pay. In arriving at this conclusion, the Court rejected the traditional rule that “exemptions to the FLSA should be construed narrowly,” and instead created a new “fair reading” standard for future court interpretations of the FLSA. The Court’s expansive stance on statutory interpretation marks a significant departure from previous precedent, signaling that the Court may be inclined to broadly construe other FLSA exemptions in the future.

Declaring mandatory union fees unconstitutional

In Janus v. Am. Fed’n of State, Cty., & Mun. Employees, Council 31, 138 S. Ct. 2448, 201 L. Ed. 2d 924 (2018), the Court overturned 41-year old precedent by concluding state laws that require public sector employees to pay mandatory union fees are unconstitutional because they violate individuals’ First Amendment rights to freedom of speech and freedom of association.

The Court reasoned that because public sector unions frequently use member fees to support and advocate for certain political views, requiring individuals to pay mandatory union fees effectively forces them to support and associate with political views, even if they disagree with such views. The court noted that “[c]ompelling individuals to mouth support for views they find objectionable violates that cardinal constitutional command” to the rights of free speech and free association.

Clarifying who is a “whistleblower” under Dodd-Frank

In a unanimous decision, the Court held that the Dodd-Frank Act’s anti-retaliation provision protecting “whistleblowers” only extends to employees who report alleged violations of the statute directly to the Securities and Exchange Commission. This conclusion was based on the explicit definition of a “whistleblower” in the Act as one who provides relevant information “to the Commission.” Therefore, employees who report suspected securities law violations internally at their company are not protected from retaliation by their employer under the Dodd-Frank Act. Digital Realty Trust, Inc. v. Somers, 138 S. Ct. 767 (2018).

Applying ADEA to all state and local government employers, regardless of size

With its decision in Mount Lemmon Fire Dist. v. Guido, 139 S. Ct. 22 (2018), the Court resolved the federal circuit split on the issue of whether state and local governments are considered covered “employers” under the Age Discrimination in Employment Act (ADEA), without regard to their total number of employees. The ADEA prohibits employment discrimination by certain employers against individuals who are 40 years of age or older. Under the ADEA, covered “employers” include any business “engaged in an industry affecting commerce who has twenty or more employees,” as well as any “State or political subdivision of a State.” 29 U.S.C. § 630(b).

The Court ultimately concluded that the 20-employee threshold does not apply to state and political subdivisions, meaning only private employers must meet or exceed the 20-employee requirement to be covered by the ADEA, while all state and local governments are covered, regardless of total number of employees. As a result of this decision, every state and local government employer should take steps to ensure that any future employment actions taken against individuals and employees who are 40 years of age or older do not run afoul of the ADEA’s prohibitions.

Opening the door to sports gambling outside of Nevada

In its decision in Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 200 L. Ed. 2d 854 (2018), the Court held the Professional and Amateur Sports Protection Act (PASPA), which prohibited states from authorizing sports gambling, was unconstitutional because it violates the U.S. Constitution’s anti-commandeering rule. Under the Tenth Amendment, all powers not expressly granted to the federal government by the Constitution are reserved to the states – in this case, the power for each state to regulate its own gambling industry.

Even with the Court’s new ruling, sports wagering still remains illegal in many states under state laws. Therefore, as those states that have no legislation on this issue begin to enact their own laws governing sports wagering, the applicable regulations and definitions controlling businesses and gamblers will likely vary widely from state to state.

While some of the Court’s employment law decisions, such as Dodd-Frank, provided clarity, others are more ambiguous and are open to interpretation as new cases arise.

Check back on the blog in two weeks to learn more about labor and employment cases argued in state and federal courts in Texas.

For assistance with employment and workplace disputes, contact Clouse Brown PLLC. Our attorneys are available to assist employers and business owners in solving problems dealing with trade secret disputes, covenants not to compete, and breach of fiduciary duty. We also negotiate, draft, litigate, and arbitrate employment contracts for senior-level and C-suite executives.

Keith Clouse

About Keith Clouse

Keith Clouse is an employment law specialist with over 25 years of experience representing senior-level and C-suite executives, business owners, physicians, and corporations in complex employment litigation, arbitration, and negotiations. High-level business executives, physicians, and other professionals consistently rely on Mr. Clouse for employment law expertise and advice on employment contracts, covenants not to compete, severance agreements, equity awards, trade secret disputes, and breach of fiduciary duty claims. He is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. He can be reached at keith@clousebrown.com.

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