By Max Mihelich
Oct. 14, 2013
Photo illustration by Travis Rothe
The U.S. Supreme Court is trying to figure out what clothes are. And when the nine justices finally make their fashion statement during the high court’s new term starting this month, the decision could bring about major compensatory changes for unionized workers in many industries.
On the surface, Sandifer v. U.S. Steel Corp. centers on what constitutes “changing clothes” within the meaning of Section 203(o) of the Fair Labor Standards Act. Under the FLSA, a worker is required to be paid for all hours worked, but Section 203(o) provides exclusion for any clothing changes that occur during those hours. Simply stated, an employer does not owe employees wages if they change clothes at the work site.
Before that issue can be settled, however, the court must determine a definition for clothes that would pertain to the workplace.
The Supreme Court is set to decide several high-profile cases that carry implications for employers during its 2013-14 term, which began Oct. 1 and continues to June 30, 2014.
In Sandifer, workers at U.S. Steel believe they should be compensated for the time they spend changing into and then out of their flame-retardant equipment, which is required to stay on U.S. Steel premises. One of the pieces of equipment the workers are required to wear, called a “snood,” is an aluminized hood similar to the flash hoods worn by Navy and Coast Guard gun crews and is designed to shield the head and neck from flames and molten metal, according to court documents. In the workers’ opinion, such garments are not clothes but protective equipment, as per a 2010 opinion by an administrator from the U.S. Labor Department that provides a narrow definition for clothes. U.S. Steel declined to comment on the case.
If the court sides with Sandifer, workers in industries such as steel or other heavy-industry manufacturers and even food processing could be compensated for the time they spend changing into and out of protective equipment on the work site.
But the case is also significant in a broader sense, as it is seen as a challenge to the legitimacy of some Labor Department policies.
Marc Zimmerman, who is a partner at New York law firm Phillips Nizer, said the most interesting part of the case is that the Labor Department has told the Supreme Court not to rely on the 2010 administrator opinion regarding what constitutes clothes.
The result of the case “will be the Supreme Court’s determination what, if any, deference should be given by courts to the Department of Labor’s administrative interpretations and their opinion letters,” Zimmerman said.
More Employment Cases on the Horizon
Lawson v. FMR LLC
Issue: Whether an employee of a privately held contractor or subcontractor of a public company is protected from retaliation by Section 806 of the Sarbanes-Oxley Act.
Significance: Courts have traditionally interpreted the language of Section 806 of Sarbanes-Oxley to exclude the employees of privately held contractors from whistle-blower protection under the act. The U.S. Supreme Court seeks to determine if that interpretation is correct and could decide whether those employees are due whistle-blower protection from retaliation under Sarbanes-Oxley.
The court could determine it would “be more effective, promote more confidence in public companies, if whistle-blowing was encouraged as broadly as possible. But the court may find that’s not what the statute says, and then it would be up to Congress to fix the statute if it disagreed,” said Bill Allen, a shareholder in the law firm Littler Mendelson in Washington, D.C.
Madigan v. Levin
Issue: Whether the 7th Circuit erred in holding, in an acknowledged departure from the rule in at least four other circuits, that state and local government employees may avoid the federal Age Discrimination in Employment Act’s comprehensive remedial regime by bringing age-discrimination claims directly under the Equal Protection Clause and U.S. Code.
Significance: State and local governments are immune to age discrimination claims under the act. Harvey Levin, a former assistant attorney general of Illinois, was terminated from his position in 2006. He sued the state, alleging age discrimination under the Equal Protection Clause of the 14th Amendment to the Constitution.
According to employment law experts, a decision in favor of Levin would allow state and local government employees to use the 14th Amendment to support claims of age discrimination.
Evaluating Things of Value
Another case on the court’s docket that could affect organized labor is Unite Here Local 355 v. Mulhall. In this lawsuit, the court essentially seeks to determine what constitutes a “thing of value” under the federal Labor Management Relations Act.
When Unite Here Local 355 tried to organize the workers of Mardi Gras Gaming, the owner of a casino and dog-racing track in Hallandale Beach, Florida, the company promised the union it would remain neutral in the labor-organizing campaign. Likewise, the union promised it would not disturb the company’s labor peace during the campaign by refraining from inciting strikes, for example.
Martin Mulhall, a Mardi Gras Gaming employee, did not want to be represented by the union, so he sued to stop the organizing process. He claims his employer’s promise to remain neutral in the organizing campaign and the union’s promise to Mardi Gras Gaming violated Section 302 of the LMRA, which makes it illegal for an employer to give a thing of value to a union and also for a union to receive a thing of value. The court is seeking to determine if such promises should be considered a thing of value. Mardi Gras Gaming declined to speak on the record about this case.
If the court decides a promise is a thing of value, that decision could have a chilling effect on labor and management relations, said Regina Faul, a partner at Phillips Nizer. Neutrality agreements allow employers who are confident their employees will not unionize the ability to run their operations smoothly while an organizing campaign is voted down by a secret-ballot vote. If neutrality agreements are determined to be in violation of the LMRA, labor strife could become more common during organizing campaigns.
“Sometimes employers will fight tooth and nail to not have a union be recognized as their representatives, and they don’t care about the labor strife,” Faul said. “But there are some employers that don’t want their company disrupted by a union organizing campaign.”
Canning the NLRB
A third case, The National Labor Relations Board v. Noel Canning, could ultimately reverse two years’ worth of NLRB decisions if the court rules in favor of Noel Canning, a cannery subsidiary of Yakima, Washington-based Noel Corp.
The legal battles started after the NLRB found Noel Canning violated the National Labor Relations Act when it refused to execute a collective bargaining agreement reached with Teamsters Local 760. Noel Canning, however, challenged the NLRB’s ruling on the grounds that the board lacked the authority to act on the matter, because three of its five members were appointed invalidly. Those three members took office under recess appointments made by President Barack Obama while the Senate was on intrasession breaks. Some lower courts have ruled those appointments were invalid. The NLRB declined to comment on the case.
If the Supreme Court rules the appointments were invalid, all NLRB rulings executed during the period in question may consequently be rendered worthless. However, most of those cases would ultimately be re-evaluated by the newly appointed NLRB and concluded with results likely to be similar to those reached by the invalid NLRB, as both boards share a similar political ideology, said Phil Rosen, a New York-based partner at Jackson Lewis who heads up the law firm’s labor practice. Essentially, a ruling in favor of Noel Canning would initiate a temporary headache for employers during the time period when the decisions are reversed and eventually reaffirmed.
Judging Statute of Limitations
The court could cause another shake-up for employers depending on its ruling in Heimeshoff v. Hartford Life and Accident Insurance Co. and Wal-Mart Stores Inc.
The question presented in this case seeks to establish when a statute of limitations for judicial review of an Employment Retirement Income Security Act, or ERISA, disability adverse benefit determination can begin to accrue.
After Julie Heimeshoff, a Wal-Mart senior public relations manager, was first denied disability benefits through Wal-Mart’s benefits supplier Hartford Insurance in December 2005, she appealed the decision through the insurance company’s internal administrative process. She received a final denial of benefits in November 2007. Then, in November 2010 she attempted to sue under ERISA, only to learn the three-year statute of limitations had expired.
“The trial and appellate courts found that The Hartford’s plan language was reasonable and enforceable. Indeed, most federal courts have enforced provisions like ours. The Supreme Court will now determine whether the unambiguous terms of the disability plan govern,” according to a written statement from Hartford Insurance lawyers.
Five federal circuit courts ruled in favor of Heimeshoff while two ruled in favor of Hartford Insurance and Wal-Mart. The court seeks to correct this circuit split to ensure all individuals, regardless of geography, are subject to the same benefits determination process and therefore eligible to receive the disability benefits owed to them under ERISA.
The significance of this case rests on the fact that “lots of plans have these internal limitations periods, and if the plaintiff here is right, then all those would probably be invalidated,” said Bill Allen, a shareholder in the law firm Littler Mendelson.
Regardless of the decisions reached in these cases, each ruling will have an important effect on the business world.
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