January 1999, Vol. 122, No. 1
The law at work
1999 Supreme Court labor docket
At-will employee protection
Preferential treatment and pregnancy
Early retirement and discretion
Affirmative action requirements
Charles J. Muhl
Office of Publications and Special Studies, Bureau of Labor Statistics
1999 Supreme Court labor docketThe Supreme Court has nine cases pending before it in 1999 related to labor and employment law. Four of the cases deal with employee benefits, three with public employees, and two with civil rights and discrimination. Decisions in these cases will be reported at a later time in this column.
Employee benefits. Cases relating to employee benefits range from questions concerning violations of the Employee Retirement Income Security Act (ERISA) to whether the Racketeer Influenced and Corrupt Organizations Act (RICO) permits claims against a health insurer that allegedly defrauded the beneficiaries of group health policies.
In American Manufacturers Mutual Insurance Co. v. Sullivan,1 the Court will hear arguments on whether a person receiving workers compensation benefits has a constitutional right to notice and a hearing prior to the suspension of payments for medical benefits by an employer or insurer while a utilization review is conducted. Such a review, conducted by a private organization appointed by the State, determines whether the medical treatment is reasonable. The U.S. Court of Appeals for the Third Circuit ruled that a suspension without notice or a hearing is a violation of the procedural due-process guarantees of the Constitution.
Recent ninth-circuit rulings on ERISA will be reviewed by the Court as well. In UNUM Life Insurance Co. of America v. Ward,2 the Justices will decide whether Californias common-law notice-prejudice rule is permitted under ERISA when a person submits a claim for long-term disability benefits. Under the rule, the insurer of an ERISA benefit plan may not deny benefits because of untimely notice or submission of a proof of claim, unless the insurer proves that it has suffered actual prejudice because of the delay. Appellee John Ward did not notify UNUM Life Insurance Co. of his long-term disability claim within 30 days of the onset of his disability, nor did he submit written proof of the claim within 180 days of the onset; the company denied his claim on the grounds that it was untimely. The main question posed to the Court is whether such a requirement relates to employee benefit plans, in which case ERISA would preempt any State conditions, such as the notice conditions relied on by UNUM to deny the claim. The corporations argument is that the California rule is an insurance regulation, which ERISA does not preempt. The ninth circuit upheld the notice-prejudice rule.
In Hughes Aircraft Co. v. Jacobson,3 the Supreme Court will clarify the distinction between terminating and amending a companys pension plan. Hughes Aircraft maintained a defined-benefit plan funded in part by employee contributions. The company decided to use a surplus of more than $1 billion for a new group of participants in the plan, except that the new participants were not required to make contributions to the plan. The Appellees claim that the surplus should have been distributed only to those employees who made contributions. The ninth circuit ruled that the current and former Hughes employees had an actionable claim under ERISA, because, assuming that Hughes action qualified as a termination of the plan, ERISA would require that the plans assets be distributed to contributing members and a new plan be established for new participants.
Finally, in Humana, Inc. v. Forsyth,4 the High Court will address whether Humana, a managed health care provider, can be sued under RICO for allegedly overcharging millions of dollars in co-payments to beneficiaries. The suit claims that Humana sold group health care policies to employers, but did not pass on negotiated discounts. The ninth circuit permitted the RICO claims, ruling that the McCarran-Ferguson Act did not preempt them. That act prohibits Federal law from invalidating, impairing, or superseding State laws regulating the insurance industry. Winning RICO claims can provide plaintiffs with triple damages.
Public employees. Both Federal and State issues are present on the Supreme Courts docket of employment cases dealing with public employees in 1999.
In National Federation of Federal Employees, Local 1309 v. U.S. Department of the Interior,5 the Court will decide whether Federal agencies are required to engage in collective bargaining over midcontract union proposals. The specific case arose after a proposal was made by Local 1309 while a certain labor agreement was in effect. The subject matter of the proposal was not covered by the labor agreement, and the union had not specifically waived its right to bargain over the issue. The law in question is the Civil Service Reform Act. The U.S. Court of Appeals for the Fourth Circuit ruled that Federal agencies do not have to engage in such midterm bargaining.
Another case involving union issues, National Aeronautics and Space Administration (NASA) v. Federal Labor Relations Authority (FLRA),6 presents the Court with the question of whether active union representation is available to a Federal employee during an interview by the inspector generals office. Such interviews generally are conducted by agents of the inspector general who are assigned to the Federal agency the employee works for. The Court also must decide whether such an agent is a representative of the agency and therefore responsible for any unfair labor practice (such as denying active representation) committed by the agent. The eleventh circuit found NASA responsible after its inspector general permitted a union representative to do nothing more than witness an employees interview. In that courts view, neither the Civil Service Reform Act nor the Inspector General Act prohibits active representation or exempts actions by investigators from the inspector generals office from falling under the responsibility of the agency they work for.
Finally, in Alden v. Maine,7 the Supreme Court will determine whether individuals can sue State employers in State courts under the Fair Labor Standards Act. Maine State parole and probation officers were seeking overtime pay under the Act. The 11th amendment to the U.S. Constitution provides sovereign immunity to States, protecting them from suits unless certain statutory or common-law exceptions apply. In 1996, the High Court ruled that individuals cannot sue a nonconsenting State, unless Congress expresses a clear waiver of such immunity and does so using some valid form of constitutional authority.8 The Fair Labor Standards Act states that suits are permitted against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. The Maine Supreme Judicial Court held that claims filed under the Act were unavailable in State court because Congress does not have constitutional authority to subject States to the Fair Labor Standards Acts overtime provisions.
Civil rights and discrimination. Two cases pending before the Court in the area of civil rights and discrimination one dealing with the relationship between Social Security disability benefits and the Americans with Disabilities Act and the other with the availability of punitive damages for employment discrimination will resolve significant splits in circuit courts over these issues.
In Cleveland v. Policy Management Systems Corp.,9 the Court will address the question of whether people who apply for Social Security disability benefits can sue their former employers under the Americans with Disabilities Act. The question arises because individuals must make sworn statements on disability benefit applications about the extent of their disabilities and inability to work, an action that, on its face, is inconsistent with a claim brought under the Act that a discriminatory discharge occurred and that the person could work if he or she were provided with a reasonable accommodation for the disability. The fifth circuit ruled that protection under the Americans with Disabilities Act may still be available to some people who have filed for Social Security disability benefits, even though the sworn statements in Cleveland did not permit such protection.
In Kolstad v. American Dental Association,10 the Court will decide when courts and juries are permitted to award punitive damages for employment discrimination in violation of Title VII of the 1964 Civil Rights Act. The Circuit Court for the District of Columbia ruled that such damages may be awarded only when an employer engages in egregious conduct, although other circuit courts have rejected such an approach. The Civil Rights Act of 1991 expanded the use of punitive damages to any case in which an employer engages in a discriminatory practice . . . with malice or reckless indifference. The High Court will be called on to outline what the appropriate standard should be.
At-will employee protectionThe Supreme Court has ruled that, under section 1985(2) of the Civil Rights Act of 1871, an at-will employee may pursue a lawsuit for allegedly being fired in retaliation for obeying a Federal grand jury subpoena and being deterred from testifying in a criminal trial. In overturning the eleventh circuits opinion in Haddle v. Garrison,11 the Court rejected the notion that such an employee could not suffer an actual injury because an at-will employee has no constitutionally protected interest in continued employment. However, the Court did not rule that a constitutionally protected interest in continued employment actually exists; rather, it ruled only that such retaliation was sufficient under the statute in question to constitute an injury to person or property.
Michael Haddle cooperated in the investigation of alleged Medicare fraud against his employer, Healthmaster, and was subsequently fired by a trustee who had been appointed to run Healthmaster after the company president and other officials were indicted. Haddle claimed that the trustee fired him at the presidents direction. The eleventh circuit held that Haddle failed to state a claim, because at-will employees have no constitutionally protected interest in continued employment.12
Section 1985(2) of Title 42 in the United States Code prohibits any attempt to "deter, by force, intimidation, or threat, any . . . witness in any [Federal] court . . . from attending such court, or from testifying in any matter pending therein, . . . or to injure [the individual] in person or property on account of . . . having so attended or testified." The circuit court focused on the language concerning an injury to "person or property," finding that no such injury occurred in Haddle because at-will employment does not create a constitutionally protected property interest. However, the Supreme Court ruled that such a requirement is not implied by Section 1985(2). Instead, the protection the statute is intended to offer is against intimidation or retaliation for testifying. The Court reasoned that such harm has been sufficient to compensate plaintiffs under tort law, a tradition that should be extended to Haddle. Thus, a sufficient "injury" to recover under a section 1985(2) suit can be shown without finding that a constitutionally protected interest in at-will employment exists.
Mirtha Urbano worked for Continental, assisting customers in checking in for flights. Often, she lifted their heavy luggage. She became pregnant in 1994 and shortly thereafter suffered lower back pain. After her doctor recommended that she cease lifting anything that weighed more than 20 pounds, she requested a transfer to a "light-duty" position. Continental refused to grant her a mandatory transfer because she had not been injured on the job, as was required by their policy. Instead, Urbano had to bid on light-duty jobs as they became available, with such transfers awarded on the basis of seniority. She did not receive a transfer.
Under the standard outlined by the fifth circuit, Urbano was required to show that she was treated differently from other employees solely because of her pregnancy. The court found her actions to be a request for preferential treatment rather than discrimination based on pregnancy, because Continental applied the aforementioned policy to all of its employees, irrespective of whether they were pregnant. In 1978, Congress amended Title VII to expand the definition of discrimination to any act based on pregnancy, childbirth, or related medical conditions. Nothing in the language of the amendment indicates that employers also have an obligation to provide preferential treatment, according to the fifth circuit.
General Motors Corporate Window Program for Salaried Employees, an early-retirement program adopted in 1992, was designed to reduce the companys salaried workforce without the use of layoffs. Employees who met the age and service requirements of the plan were not automatically permitted to participate in the program; rather, a management committee had the authority to determine whether it was in the companys "best interests" to permit an employee to retire early. At a General Motors plant in Indianapolis, a number of employees were denied participation in the plan because the committee determined that they were too "valuable" to the company. The plant subsequently was sold, and the workers lost their employee status with the company.
The seventh circuit noted that ERISA permits discretionary retirement plans and that, under this permission, companies are free to implement "standards" rather than "rules." Thus, General Motors standard the "best interests" of the company was permissible. The court noted that, given the large size of General Motors, different interpretations of "best interests" were bound to occur at different plants, but that such differences were proper under ERISAs discretionary authority. Thus, General Motors management was free to deny participation in the companys early retirement plan to employees it deemed valuable.
Current Supreme Court doctrine on affirmative action holds that government programs cannot justify racial classifications by citing general societal discrimination; rather, a demonstrated, specific need to remedy past discrimination must be present.15 Furthermore, the program that is adopted must be narrowly tailored to serve a compelling governmental interest. These requirements are supplemented in California by Proposition 209, passed by voters in 1996 to end racial and gender preferences in State employment, education, and contracting.
The programs that the superior court upheld were intended to remedy identified discrimination and were implemented without regard to race- or gender-based preferences, according to the court. One of those programs required State agencies to identify areas of State employment in which women and minorities were not being fully utilized and to specify goals for increasing their utilization. By identifying such underutilization, the program met the requirement that a remedy be for a "specific act" of discrimination. The court also ruled that the States method of establishing goals to assess progress in equalizing employment opportunities was a narrowly tailored means devised to serve a compelling government interest. Beyond that, Proposition 209 did not act as an impediment, because, according to the court, it does not prohibit using racial or gender-based criteria applied without discriminatory or preferential intent.
The two other programs upheld by the court on the basis of similar reasoning included one that requires State community colleges to recruit, employ, and promote people who are underrepresented in a community college districts labor force and a State lottery program that requires all bidders or contractors to include specific plans for subcontracting with socially or economically disadvantaged small businesses when the bidders or contractors advertise or award contracts in excess of $500,000.
The court rejected State laws that required 15 percent of State contracts to be set aside for businesses owned by minorities, women, or disabled veterans. Similar requirements previously were held unconstitutional by the U.S. Court of Appeals for the Ninth Circuit.16
1 Docket No. 972000. Third-circuit decision in Sullivan v. Barnett is on the Internet at http://laws.findlaw.com/3rd/981810p.html (visited Jan. 19, 1999).
2 Docket No. 971868. Ninth-circuit decision in Ward v. Management Analysis Co. is on the Internet at http://laws.findlaw.com/9th/9556269.html (visited Jan. 19, 1999).
3 Docket No. 971287. Ninth-circuit decision in Jacobson v. Hughes Aircraft is on the Internet at http://laws.findlaw.com/9th/9355392ol.html (visited Jan. 19, 1999).
4 Docket No. 97303. Ninth-circuit decision in Forsyth v. Humana is on the Internet at http://laws.findlaw.com/9th/9416548.html (visited Jan. 19, 1999).
5 Docket Nos. 971184 and 971243. Fourth-circuit decision in U.S. Department of Interior v. Federal Labor Relations Authority is on the Internet at http://laws.findlaw.com/4th/962855p.html (visited Jan. 19, 1999).
6 Docket No. 98369. Eleventh-circuit decision in Federal Labor Relations Authority v. National Aeronautics and Space Administration is on the Internet at http://laws.findlaw.com/11th/956630opa.html (visited Jan. 19, 1999).
7 Docket No. 98436. Maine Supreme Judicial Court decision 1998 ME 200.
8 Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996).
9 Docket No. 971008. Fifth-circuit decision 120 F.3d 513 (5th Cir. 1997).
10 Docket No. 98208. DC circuit decision in Kolstad v. American Dental Association is on the Internet at http://laws.findlaw.com/DC/967030a.html (visited Jan. 19, 1999).
11 Decision available on the Internet at http://laws.findlaw.com/US/000/971472.html (visited Jan. 19, 1999).
12 See this column, Monthly Labor Review, October 1998, p. 32.
13 Decision available on the Internet at http://laws.findlaw.com/5th/9621115cv0.html (visited Jan. 19, 1999).
14 Decision available on the Internet at http://laws.findlaw.com/7th/981041.html (visited Jan. 19, 1999).
15 Wygant v. Jackson Board of Education, 476 U.S. 267 (1986).
16 Monterey Mechanical Co. v. Wilson, on the Internet at http://laws.findlaw.com/uscircs/9th/9616729o.html (visited Jan. 19, 1999 - no longer available).
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