Legal Updates

From The Highest Court: The United States Supreme Court Update

The United States Supreme Court recently concluded its 2007 term, during which it decided a number of significant labor and employment cases, four of which are summarized below and three of which reflect significant pro-employee shifts in the law.

The More The Merrier – “Me Too” Evidence Is In

In Sprint/United Management Company v. Mendelsohn, the Supreme Court held that “me too” evidence – namely, the testimony of non-party employees alleging discrimination by supervisors who did not participate in the adverse employment action at issue – is neither per se admissible nor per se inadmissible.  Instead, the admissibility of so-called “me too” evidence is to be determined pursuant to a “fact intensive, context specific inquiry.”  In short, courts now have the discretion to allow plaintiffs to present evidence about someone else’s discrimination claims.

In Sprint, Ellen Mendelsohn was employed in the Business Development Strategy Group at Sprint/United Management Company (“Sprint”) from 1989 through 2002, when she was terminated as part of a reduction-in-force (“RIF”).  Mendelsohn sued Sprint pursuant to the Age Discrimination in Employment Act of 1967 (“ADEA”), alleging disparate treatment based on her age.

In support of her discrimination claim, Mendelsohn sought to introduce the testimony of five (5) former Sprint employees who had also been terminated pursuant to the RIF, but who alleged that different supervisors had discriminated against them based on age.  None of these former employees worked in the Business Development Strategy Group with Mendelsohn, nor had any of them worked for Mendelsohn’s supervisor or any other supervisor in Mendelsohn’s chain of command.  Thus, Sprint moved in limine to exclude the “me too” evidence, arguing that the testimony was irrelevant to the issue of whether Mendelsohn’s supervisor terminated her because of her age.  In a two (2) sentence order granting Sprint’s motion, the District Court excluded evidence of discrimination against those not “similarly situated” to Mendelsohn.

After the District Court jury ruled in favor of Sprint, Mendelsohn appealed to the Court of Appeals for the Tenth Circuit (the “Tenth Circuit”).  The Tenth Circuit found, among other things, that: (1) the District Court had abused its discretion in applying a per se rule that evidence from employees with other supervisors is irrelevant to proving discrimination in an ADEA case; and (2) the testimony of the other five employees was admissible because it was relevant and not unduly prejudicial.

The Supreme Court rejected the Tenth Circuit’s decision, holding instead that since it is unclear whether the District Court applied a per se rule regarding the “me too” evidence, the Tenth Circuit should have remanded the case to the District Court to clarify the reason for excluding the “me too” evidence.  Significantly, the Court noted that it would have been an error for the District Court to apply a per se rule since “the question whether evidence of discrimination by other supervisors is relevant in an individual ADEA case is fact-based and depends on many factors, including how closely related the evidence is to the plaintiff’s circumstances and theory of the case.”

The Sprint decision will likely encourage plaintiffs to seek broader discovery in discrimination cases, including testimony and documents about claims of discrimination in other divisions of the company.  In turn, this may well result in an increase in disputes and motions about the discoverability and admissibility of “me too” evidence.

Taking The Cap Off, And Putting Small Employers On The Hook

In CBOCS West, Inc. v. Humphries, the Supreme Court held that employees may bring a private action for discriminatory retaliation under a provision of the Civil Rights Act of 1866, 42 U.S.C. §1981 (“Section 1981” or “§ 1981”).  Section 1981 applies to employers of all sizes and does not contain limitations on damage recoveries, unlike Title VII.  (Title VII applies only to employers with fifteen (15) or more employees and caps damages, depending on the size of the employer, between Fifty Thousand Dollars ($50,000) and Three Hundred Thousand Dollars ($300,000) for each complaining party.)

The Court’s decision exposes all employers, even those with fewer than fifteen (15) employees, to uncapped damages on race retaliation claims.  Significantly, this decision comes at a time when retaliation claims are common and increasingly the most difficult claims to defend – often, for example, because a plaintiff will complain of discrimination when he/she is put on a performance improvement plan.

Hedrick Humphries, an African-American and a former assistant manager for CBOCS West, Inc. (“Cracker Barrel”), contended that he was terminated because of (1) racial bias and (2) his complaint to management about the discriminatory treatment of a black co-worker.  Humphries filed suit against Cracker Barrel pursuant to Title VII and § 1981, which provides “all persons . . . the same right . . . to make and enforce contracts as is enjoyed by white citizens.”

The District Court dismissed the Title VII claims because Humphries failed to pay the requisite filing fee in a timely manner, and dismissed the Section 1981 claims pursuant to Cracker Barrel’s motion for summary judgment, which argued that Section 1981 does not include an implied right to sue.  The Seventh Circuit affirmed the District Court’s grant of summary judgment with respect to the direct discrimination claim; however, the Seventh Circuit ruled in favor of Humphries and remanded for a trial with respect to his § 1981 retaliation claim.

Agreeing with the Seventh Circuit, the Supreme Court held that § 1981 encompasses a complaint of retaliation against a person who has complained about a violation of another person’s contract-related “right.”  The Supreme Court reasoned that while § 1981 does not expressly prohibit retaliation, prior Supreme Court decisions recognizing implied rights to sue for retaliation under another provision of the Civil Rights Act, as well as under Title IX of the Education Amendments of 1972, require a similar result under § 1981.

Although Title VII bars retaliation against individuals complaining of racial discrimination, the significance of the Humphries decision is that under § 1981: (1) aggrieved individuals have four (4) years to file claims (as compared to Title VII’s requirement that a charge of retaliation be filed with the Equal Employment Opportunity Commission (“EEOC”) within three hundred (300) days of the alleged retaliation); (2) there are no damages caps (unlike under Title VII, pursuant to which compensatory and punitive damages are capped depending on the size of the employer); and (3) § 1981 applies to all employers, not just those with fifteen (15) or more employees that are covered by Title VII.  Accordingly, the Humphries decision is likely to increase the number of race retaliation claims, each of which may well be more costly to defend and/or resolve.

Employers’ Freedom of Speech

In Chamber of Commerce v. Brown, the Supreme Court held that the National Labor Relations Act (“NLRA”) pre-empts a 2000 California law (AB 1889) prohibiting employers that receive certain state grants from using those funds to “assist, promote or deter union organizing.”

The 1947 Taft-Hartley Act, which amended the NLRA, bars any regulation of speech by both unions and employers unless the speech contains a “threat of reprisal or force or promise of benefit.”  In Brown, the Supreme Court reasoned that AB 1889 interferes with the NLRA’s protection of employers’ right to communicate with employees regarding unionization.  Although the NLRA contains no express pre-emption provision, the Supreme Court held that AB 1889 is preempted because it “regulate[s] within ‘a zone protected and reserved for market freedom.’”

The Brown decision is welcome news to employers in California and other states where state and local governments have taken measures to silence employers in union organizing campaigns.  In this regard, Massachusetts has a similar law, and commentators have speculated that Brown is likely to result in invalidation of the Massachusetts law.  Although it is not clear how widely employers were impacted by the Massachusetts law, it certainly seems fair to say that Brown is likely to have a broader impact than simply overturning AB 1889.

The Employer’s Burden

The Supreme Court held in Meacham v. Knolls Atomic Power Laboratory that an employer defending a disparate-impact claim under the Age Discrimination in Employment Act of 1967 (“ADEA”) has the burden of proving the affirmative defense of “reasonable factors other than age” (“RFOA”).  Disparate impact claims generally are based on an employer’s policy, practice or other employment action that has a disparate impact on an individual or group of individuals in a protected class.  The ADEA sets forth several employer exemptions from the general prohibitions against age discrimination, including the RFOA exemption, which provides in relevant part that: “it shall not be unlawful for an employer . . . to take any action otherwise prohibited . . . where the differentiation is based on reasonable factors other than age.”

The Meacham case stemmed from layoffs at Knolls Atomic Power Laboratory (“Knolls”), a government contractor.  Knolls instructed its managers to select employees for lay off by: (1) scoring their subordinates in three (3) areas: performance, flexibility and critical skills; and (2) assigning a score for years of service.  Of the thirty one (31) employees selected by Knolls for lay off, thirty (30) of the employees were age forty (40) or older.  Twenty-eight (28) of the former employees sued Knolls, alleging that their employer “designed and implemented its workforce reduction process to eliminate older employees and that, regardless of intent, the process had a discriminatory impact on ADEA-protected employees.”

The Supreme Court held that an employer defending an ADEA disparate impact claim must not only introduce evidence of a RFOA, but also has the “burden of persuasion”: it must persuade the trier of fact of the reasonableness of the RFOA factors.

Given the ruling in Meacham, employers should re-evaluate their strategies and procedures for taking employment actions, including a reduction-in force, that may create the risk of an adverse impact based on age.  In a RIF, employers should engage counsel to oversee the preparation of statistical analyses to identify potential evidence that would support a disparate impact claim, and to give the employer an opportunity to protect against such claims before they are actually filed in court.  In addition, employers should review their policies and practices to identify any objective standards that may inadvertently be creating disparate impact issues, in consultation with counsel, and employers should train managers about how apparently neutral criteria can trigger disparate impact claims, in order to minimize the risks of disparate impact claims being filed in court.

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If you have any questions regarding any of the above cases or their practical implications for employers, please do not hesitate to contact us.