The law of the land

In 2011, the Supreme Court seized the opportunity to weigh in on several novel and pressing employment issues—all of which affect roofing contractors. Heeding the Supreme Court's recent rulings will ensure your workplace is well-positioned to survive any resulting legal claims.

Expanded protection

Before 2011, Title VII of the Civil Rights Act only protected from retaliation an employee who opposed his or her employer's discriminatory employment practice; filed a charge of discrimination; or participated in an investigation, proceeding or hearing relating to a discrimination charge. In Thompson v. North American Stainless LP, the Supreme Court expanded the scope of an employer's liability for retaliation claims under Title VII to include claims by a third party who has not personally engaged in protected activity but is closely connected to an employee who has.

Eric Thompson and his fiancée, Miriam Regalado, both worked for North American Stainless (NAS). Regalado previously had filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC) against NAS. Three weeks after NAS received notice of Regalado's EEOC charge, Thompson was fired. Thompson sued NAS under Title VII, alleging NAS fired him in retaliation for Regalado's charge of discrimination.

The district court held Title VII does not permit third-party retaliation claims and granted summary judgment to NAS. The Sixth Circuit affirmed, concluding Thompson could not claim to be victim of a retaliation cause of action because he did not engage in any protected activity.

The Supreme Court reversed the decision, holding Title VII's anti-retaliation provision granted Thompson a cause of action. The court applied the standard from Burlington Northern & Santa Fe Railway v. White, which held Title VII's anti-retaliation provision covers a broad range of employer conduct and prohibits any employer action that could dissuade a reasonable worker from making or supporting a discrimination charge.

The Supreme Court reasoned a reasonable worker clearly could be dissuaded from engaging in protected activity if he or she knew a person closely related to him or her, such as a fiancé, could be fired. The court acknowledged an employer could be at risk any time an employee who is connected to another employee who has filed an EEOC charge is fired. However, the court refused to identify a fixed class of relationships for which third-party reprisals are unlawful. Instead, the court explained firing a close family member of an employee who engaged in protected activity probably would meet the Burlington standard while simply issuing a milder form of discipline to a mere acquaintance of such an employee would not be sufficient under Burlington.

The Thompson case is significant for expanding the class of individuals who are protected by Title VII's anti-retaliation provision. To evaluate your risk of liability, consider the familial and social relationships that exist between employees before making adverse employment decisions. You are well-advised to carefully document the legitimate reasons for your decision to discipline an employee closely connected to another employee who has engaged in protected activity. This will help ensure you are fully prepared to defend against a possible third-party retaliation claim.

Oral complaints are valid

In Kasten v. Saint-Gobain Performance Plastics Corp., the Supreme Court again expanded the scope of an employer's liability for retaliation claims. It is well-settled that the Fair Labor Standards Act's (FLSA's) anti-retaliation provision protects employees who file written complaints. The issue in the Kasten case was whether employees who orally complain about an employer's FLSA violation also are protected.

Kevin Kasten repeatedly complained about the location of time clocks at Saint-Gobain Performance Plastics, where he worked. Kasten argued the location resulted in workers not receiving credit for the time they spent changing into and out of their work clothes (known as "donning and doffing" time). In accordance with the company's internal grievance-resolution procedure, Kasten orally complained about the time clocks' location. Kasten was disciplined and ultimately terminated.

Kasten sued Saint-Gobain Performance Plastics for unlawful retaliation under FLSA, claiming the company terminated him because of his oral complaints. Saint-Gobain Performance Plastics argued only written complaints are protected from retaliation under FLSA. The district court agreed with Saint-Gobain Performance Plastics, and the Seventh Circuit affirmed.

The Supreme Court reversed the decision, holding FLSA's anti-retaliation provision protected oral complaints. FLSA provides an employer may not "discharge or in any manner discriminate against any employee because such employee has filed any complaint" alleging an FLSA violation. The court concluded it was unable to determine whether FLSA protects oral complaints from the text of the statute alone. However, the court reasoned several other factors suggested Congress intended FLSA to cover oral complaints.

First, the court recognized that to limit the anti-retaliation provision to written complaints would be impractical and contrary to FLSA's objectives. The court explained FLSA is enforced exclusively through the receipt of complaints from employees. Accordingly, the anti-retaliation provision was designed to facilitate enforcement of FLSA by encouraging employees to complain without fear of reprisals.

The court pointed out it would be difficult for workers, particularly those who are illiterate, less educated or overworked, to file written complaints. In addition, the court reasoned limiting protection under FLSA to written complaints would hinder enforcement efforts by preventing the receipt of such complaints through practical means such as hotlines, interviews and other methods of data collection.

The court also specifically considered the viewpoint expressed by the Department of Labor (DOL) because Congress tasked DOL with enforcing FLSA. The court found DOL repeatedly had held the words "filed any complaint" included written and oral complaints. Furthermore, the court noted DOL recently had created a hotline to receive oral complaints under various laws, including FLSA. The court agreed DOL's view was reasonable and consistent with FLSA.

Although the Kasten decision is a victory for employees, the Supreme Court did caution FLSA requires fair notice of a complaint. Specifically, a complaint (oral or otherwise) must be sufficiently clear and detailed for a reasonable employer to understand it as an assertion of FLSA rights and a call for protection. Notably, the Supreme Court did not address whether a complaint made to a private employer, rather than a government agency, will be considered sufficient under FLSA.

To minimize liability, you should train human resources and management personnel to recognize and respond to employee complaints in any form, thoroughly and promptly investigate such complaints, and take appropriate remedial action.

Cat's paw redefined

The Supreme Court evaluated the "cat's paw" theory of liability in Staub v. Proctor Hospital. The term "cat's paw" refers to when a direct supervisor, who has discriminatory feelings against an employee regarding a protected characteristic such as race, religion, gender, age, disability or military status, influences the ultimate decision maker to discipline or terminate that employee under legitimate pretenses.

Depending on the facts of a given "cat's paw" case, the ultimate decision maker, who is unaware of the intermediary supervisor's discriminatory motive, may either readily approve the termination recommendation or agree to termination after conducting an evaluation of the pertinent facts.

In the Staub case, the Supreme Court considered the circumstances under which an employer may be liable for discrimination based on the discriminatory animus of a supervisory employee who influenced but did not make the ultimate employment decision.

While Vincent Staub was working as a technician for Proctor Hospital, Peoria, Ill., he also was a member of the U.S. Army Reserve. This military obligation required Staub to attend readiness drills one weekend per month and train full time for two to three weeks per year. Staub believed his immediate supervisor, Janice Mulally, and Mulally's supervisor, Michael Korenchuk, disapproved of his military involvement.

Mulally gave Staub a disciplinary warning for violating a company rule that required him to remain in his designated work area whenever he was not working with a patient. As part of his disciplinary warning, Staub was required to report to Mulally or Korenchuk when he did not have any patients or when he had completed his cases. A few months later, Korenchuk notified Linda Buck, vice president of human resources, that Staub had violated his disciplinary warning. Buck relied on Korenchuk's notification and her review of Staub's personnel file when making her decision to fire Staub.

Staub sued Proctor Hospital under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), alleging his termination was motivated by anti-military hostility. Staub argued Mulally's and Korenchuk's military animus had influenced Buck's ultimate termination decision even though Buck did not have any military animus against Staub. The jury agreed and awarded Staub $57,640.

The Seventh Circuit reversed the decision, holding that to succeed in a "cat's paw" case, the nondecision maker had to have exercised a "singular influence" over the decision maker. Because Buck did not wholly depend on Korenchuk's and Mulally's advice in deciding to terminate Staub, the Seventh Circuit held Proctor Hospital was not liable.

The Supreme Court reversed the decision again, reasoning that an employer's authority to terminate an em-ployee usually is spread out among several agents and the person who makes the ultimate decision to terminate an employee relies on performance assessments by other supervisors. The court rejected Proctor Hospital's argument that the employer is not liable unless the ultimate decision maker is motivated by discriminatory animus.

The court noted: "Proctor's view would have the improbable consequence that if an employer isolates a personnel official from an employee's supervisors, vests the decision to take adverse employment actions in that official, and asks that official to review the employee's personnel file before taking the adverse action, then the employer will be effectively shielded from discriminatory acts and recommendations of supervisors that were designed and intended to produce the adverse action."

The court then established the proper standard for a "cat's paw" case, namely, an employer is liable under USERRA if a supervisor performs an act that is motivated by anti-military animus, intended to cause an adverse employment action and is a proximate cause of the ultimate employment action.

The Staub case instructs employers to ensure the ultimate decision maker does not simply rubber-stamp a supervisor's recommendation. Instead, to the extent possible, the ultimate decision maker should independently investigate the supervisor's recommendation to verify it is legitimate and nondiscriminatory. Taking such steps can help minimize liability.

Class actions

Class action litigation returned to the spotlight with Wal-Mart Stores Inc. v. Dukes. The issue before the Supreme Court was whether a class of plaintiffs could show there were questions of law or fact common to the class as required by Federal Rule of Civil Procedure 23 (Rule 23). In a significant victory for employers, the Supreme Court refused to certify the class, holding certification of the class was not consistent with Rule 23.

In the case, a group of current and former female Wal-Mart employees sued the company on behalf of themselves and a nationwide class of about 1.5 million female employees. The employees argued Wal-Mart discriminated against women by denying them equal pay or promotions in violation of Title VII. Specifically, the employees claimed Wal-Mart's managers exercised discretion over pay and promotions, which led to an unlawful disparate effect on women, and Wal-Mart's corporate culture permitted bias against women to infect all the managers' discretionary decision making in favor of men. The employees also alleged the discrimination was common to all female employees working at Wal-Mart. The district court granted the employees' motion for class certification, and the Ninth Circuit affirmed.

The Supreme Court reversed the decision, holding the class of employees failed to meet Rule 23's commonality requirement. The court explained that, under Rule 23, employees' claims must depend on a common contention that could be resolved on a class-wide basis.

The employees could bridge the conceptual gap between an individual's claims and existence of a class of persons who have suffered the same injury by showing Wal-Mart used a biased testing procedure to evaluate applicants and employees or offering significant proof Wal-Mart operated under a general policy of discrimination. The employees chose the second method and presented a sociological expert who testified Wal-Mart has a strong corporate culture that makes it vulnerable to gender bias. However, the expert did not offer an opinion about how stereotypes affected Wal-Mart's employment decisions.

As a result, the court found the employees failed to offer significant proof Wal-Mart had a general policy of discrimination.

Additionally, the court reasoned that Wal-Mart's policy of allowing local managers to exercise discretion over employment decisions does not provide the commonality needed for a class action under Rule 23. Instead, the court explained such a policy actually supports the argument that Wal-Mart does not have uniform employment practices. In sum, the employees could not show Wal-Mart operated under a general policy of discrimination.

Be careful not to interpret the Wal-Mart decision as signaling the end of employment class actions. Although the case makes it more difficult for a large class of employees to demonstrate commonality and argue they have been discriminated against by a common policy, such employees can still bring class actions if they are able to point to an employer's general policy or practice of discrimination.

To reduce liability for costly and protracted class action litigation, ensure your anti-discrimination and compensation policies and practices are up to date and actively enforced and management is well-trained to implement such policies and practices.

E-Verify upheld

In Chamber of Commerce of the United States v. Whiting, the Supreme Court evaluated conflicting tensions between the federal government's power to regulate immigration and a state government's power to regulate the employment relationship.

The Legal Arizona Workers Act of 2007 (LAWA) permits courts to suspend or revoke the Arizona business license of an employer who knowingly or intentionally employs an unauthorized alien. LAWA also requires employers to use E-Verify, a federal Internet-based system, to electronically verify an employee's work eligibility. Various business and civil rights organizations filed a pre-enforcement suit in federal court against the Arizona individuals responsible for administering LAWA. The chamber challenged LAWA's validity, arguing it was pre-empted by federal immigration law. The district court held LAWA was not pre-empted, and the Ninth Circuit affirmed.

The Supreme Court agreed. The court held LAWA's provision authorizing state courts to suspend or revoke an employer's business license if the employer knowingly or intentionally employs an unauthorized alien. The court said the law essentially imposes sanctions through "licensing laws," which explicitly is permitted by the Immigration Reform and Control Act (IRCA), the federal law that makes it unlawful to hire or recruit an unauthorized alien for employment.

Accordingly, the court held such a provision was not expressly pre-empted by federal law. The court also held that because LAWA merely implemented the sanctions expressly authorized by IRCA, the law was not pre-empted.

Finally, the court held LAWA's E-Verify requirement was not pre-empted by the Illegal Immigrant Reform and Immigrant Responsibility Act, which created the E-Verify program, because LAWA's requirement was consistent with the federal government's encouragement to use E-Verify.

This decision serves as a reminder that you must stay informed of your obligations under federal and state laws. Moreover, the decision signals you must continue to monitor your compliance with existing and future immigration and employment verification laws.

Right to notice of union fees

The case Knox v. Service Employees International Union currently is pending on the Supreme Court's 2012 docket. In this case, the Supreme Court will consider whether a union is required to send a notice to employees when it adopts a temporary, midterm fee increase. In addition to requiring union members to pay dues, a union also may require nonunion employees to pay a fair share of the union's costs. However, because of First Amendment concerns and basic fairness, a union must send a Hudson notice to employees, which explains the basis for the fee and provides an opportunity to object.

In the Knox case, the union issued a Hudson notice to all nonunion employees every June. The notice included information about the union's annual expenditures and was used to calculate the nonunion employees' fee. The notice also provided an opportunity for nonunion employees to object to the full fee, which allowed the non-member to pay a reduced fee for certain expenses unrelated to the union's representation. In June 2005, the union issued its annual Hudson notice.

However, during the summer of 2005, the union approved a temporary assessment (also called a dues and fees increase) to fund political expenses incurred from September 2005 to December 2006. The increase was not included in the June 2005 Hudson notice. The union sent a letter regarding the new increase, but the letter did not include the requisite information for nonmembers to use when deciding whether to object to the increase. As a result, the letter did not qualify as a Hudson notice.

The plaintiffs, two classes of state nonunion employees, filed a lawsuit against the union, arguing the dues and fees increase violated their First, Fifth and Fourteenth Amendment rights by applying their money to fund political causes without providing the requisite Hudson notice. The district court agreed with the plaintiffs, holding the union was required to issue a second adequate Hudson notice. The Ninth Circuit reversed the decision, holding the union's notice essentially complied with the Hudson requirements.

On appeal, the Supreme Court will consider whether a state, consistent with the First and Fourteenth Amendments, may condition employment on the payment of a special union assessment that is intended solely for political and ideological expenditures without first providing a Hudson notice.

The union filed a motion to dismiss the case because it offered to pay the entire fee increase for all plaintiffs. The Supreme Court will consider the union's motion during the hearing of the case on the merits. Oral arguments were heard in January.

Keep an eye on the Supreme Court's ruling in the Knox case as it likely will affect nonunion employees' ability to challenge union action (particularly with respect to fees). As always, continue to communicate to employees your stance on unions, including reinforcing employees' rights not to form or support a union.

Key lessons

The Supreme Court recently has ruled on various employment matters, and the complexity of employment law makes it clear you must stay informed of relevant court decisions, routinely update your employment policies and procedures, and consistently train human resources and management personnel about enforcing your policies and procedures. Ultimately, the Supreme Court has proved the employment arena continues to be ever-changing and, accordingly, you must have the proper tools and mechanisms in place to prepare your workplace for such changes.

Jason C. Kim is a partner and Gray I. Mateo-Harris is an associate in the Labor and Employment practice group of Chicago-based law firm Neal, Gerber & Eisenberg LLP.

Did you know?

The National Roofing Legal Resource Center (NRLRC) offers free legal advice, contract provisions and important legal resources to NRLRC members. Its annual seminar Roofing Issues: Decks to Dockets will be held Sept. 13-15 in Bretton Woods, N.H. To learn more, log on to www.nrlrc.net.