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U.S. Supreme Court's 2002 Docket Emphasized Workplace Legal Issues

December 31, 2002

The U.S. Supreme Court issued several important employment and labor decisions in 2002. It was a particularly big year for the Americans with Disabilities Act ("ADA"), with the Court deciding three major cases under the employment provisions of the ADA. The Court ruled against the plaintiffs in all three cases -- narrowly defining the term "disability," ruling that the Act's "reasonable accommodation" requirement ordinarily does not trump a seniority system, and ruling that an employer can refuse to employ a disabled individual who constitutes a "direct threat" to himself.

In other significant decisions, the Court ruled that arbitration agreements between an employer and an employee do not preclude the EEOC from filing suit and seeking "victim specific" relief on behalf of the employee, that an employer's failure to notify an employee that leave was going to be counted as FMLA leave does not extend the employee's entitlement to FMLA leave, and that an employer's unsuccessful retaliatory lawsuit against a union will not constitute an unfair labor practice absent a finding that the suit was "objectively baseless."

Court Restricts Application Of The ADA By Adopting Narrow Interpretation Of The Term "Disability"

The ADA defines a "disability" as (1) a physical or mental impairment that substantially limits one or more major life activities; or (2) a record of such impairment; or (3) being regarded as having such an impairment. In Toyota Motor Mfg., Kentucky, Inc. v. Williams, 534 U.S. 184 (2002), the Supreme Court adopted a narrow definition of "disability" under the ADA and, in so doing, limited the class of persons who will be able to invoke the protections of the statute.

The plaintiff in Toyota worked at an auto manufacturing plant and suffered from several musculoskeletal disorders, including carpal tunnel syndrome and tendonitis. The U.S. Court of Appeals for the Sixth Circuit ruled that she was disabled under the ADA because her ailments substantially limited her ability to perform "manual tasks," a function defined by the EEOC's regulations as a major life activity. Specifically, the Court of Appeals found that the plaintiff's ailments prevented her from performing manual tasks associated with certain types of assembly line jobs.

In a unanimous opinion, the Supreme Court reversed the Sixth Circuit, ruling that the lower court had applied an overly expansive definition of the term "disability." Specifically, the Supreme Court decided that under the ADA, a disability is an impairment that "prevents or severely restricts the individual from doing activities that are of central importance to most people's daily lives" and is "permanent and long lasting." The Court stated that the Sixth Circuit had focused too narrowly on the plaintiff's inability to perform manual tasks that were associated with her specific job at Toyota; this was erroneous, the Court reasoned, because those tasks were "not an important part of most people's daily lives." The Court also found that the Sixth Circuit erred by disregarding the fact that the plaintiff could still perform manual tasks required for another position that she had held at Toyota, and also improperly ignored the fact that she could continue to "brush her teeth, wash her face, bathe, tend her flower garden, fix breakfast, do laundry and pick up around the house."

By requiring ADA plaintiffs to demonstrate considerable and long-lasting restrictions on activities that are of central importance to most people's daily lives, the Supreme Court substantially reduced the number of persons who will qualify for protection under the statute.

The ADA's "Reasonable Accommodation" Requirement Does Not Ordinarily Trump A Seniority System

In US Airways, Inc. v. Barnett, 535 U.S. 391 (2002), a bare majority of the Supreme Court ruled that the ADA does not pre-empt employers' seniority systems. Thus, an employer is not ordinarily required to accommodate a disabled employee by reassigning that employee to a vacant position if such reassignment would conflict with the employer's seniority system.

The ADA requires employers to grant a "reasonable accommodation" to disabled employees unless such an accommodation would cause the employer "undue hardship." US Airways maintains a seniority system for some 14,000 non-union customer service employees. Under this system, seniority dictates the assignment of duties, shifts, transfers and holidays. The employee in US Airways had transferred from a cargo handler position to a mail room position after he injured his back. When he learned that more senior employees planned to transfer to the mail room, thereby "bumping him out" to a cargo job he was medically unable to perform, he asked the airline if he could remain in the mail room as a reasonable accommodation of his disability. US Airways denied his request and he sued, claiming that the airline should have reasonably accommodated his disability by making an exception to its seniority system that would have permitted him to continue working in the mail room.

In a 5-4 decision, the Supreme Court ruled that an otherwise reasonable accommodation under the ADA (such as reassignment to a vacant position) is generally not reasonable if it requires the employer to set aside its seniority system for the benefit of a disabled employee. In the majority opinion, Justice Breyer wrote that "to show that a requested accommodation conflicts with the rules of a seniority system is ordinarily to show that the accommodation is not 'reasonable'." The Court did acknowledge, however, that a disabled employee remains free to present evidence of "special circumstances" (e.g., evidence that the employer regularly carves out exceptions to its seniority system) which may indicate that an exception to the employer's seniority system is a reasonable accommodation under the ADA.

"Threat To Self" Constitutes A Defense Under The ADA

In Chevron U.S.A. Inc. v. Echazabal, 122 S. Ct. 2045 (2002), the Supreme Court ruled unanimously that an employer does not violate the ADA by refusing to place an employee in a position that poses a direct threat to the employee's own health and safety.

The ADA prohibits employers from discriminating against disabled employees and job applicants. At the same time, however, the statute permits employers to set qualification standards, which may include a requirement "that an individual . . . not pose a direct threat to the health or safety of other individuals in the workplace." 42 U.S.C. § 12113. At issue in Chevron was the employer's decision not to hire an individual with a disability -- a liver disease -- because exposure to chemicals at the employer's plant would have exacerbated the disease.

The U.S. Court of Appeals for the Ninth Circuit ruled that an employer's refusal to hire a person with a disability on the ground that the person would pose a danger to his own health and safety (as opposed to the health and safety of others) was the type of paternalistic policy that the ADA was designed to eliminate, and was therefore unlawful. The court reasoned that, by its plain terms, the ADA does not permit employers to refuse to hire an individual based on the employee's own health and safety, and that because of the clarity of the statutory language, the EEOC's regulations to the contrary were not entitled to deference.

The Supreme Court reversed the Ninth Circuit's decision, noting that nothing in the language of the ADA preludes a "direct threat to self" defense. The Court concluded that "the EEOC was certainly acting within the reasonable zone when it saw a difference between rejecting workplace paternalism and ignoring specific and documented risks to the employee himself, even if the employee would take his chances for the sake of getting a job." However, the Court also noted that employer rules precluding a person from performing a particular job based on "indirect threats" of "insignificant harm" would not pass muster under the direct threat defense.

EEOC May Sue And Seek "Victim Specific Relief" Even When An Employee Has Agreed To Arbitrate

In EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), the Supreme Court ruled that the EEOC may sue an employer on behalf of an employee, even if the employee has entered into an agreement to resolve all disputes with the employer solely through arbitration.

The employee in Waffle House had signed an application for employment which included a provision requiring that any employment-related dispute be submitted to final and binding arbitration. Notwithstanding the arbitration agreement, the employee filed a charge of discrimination with the EEOC, alleging that the employer had violated the ADA. When conciliation attempts failed, the EEOC filed suit on behalf of the employee. Waffle House then sought to dismiss the case, arguing that the suit was foreclosed by virtue of the arbitration agreement.

The U.S. Court of Appeals for the Fourth Circuit ruled that because the EEOC was not a party to the arbitration agreement, the agreement could not completely foreclose a suit by the EEOC. However, the court also ruled that because the employee had waived the right to seek relief in court, the EEOC was not permitted to seek "victim specific relief" -- such as back pay and reinstatement -- on his behalf. Rather, according to the Court of Appeals, the EEOC could only seek injunctive relief -- such as an order prohibiting Waffle House from engaging in further acts of discrimination.

In a 7-2 decision, the Supreme Court agreed with the Fourth Circuit's ruling that the EEOC could sue on behalf of the employee, but disagreed with its conclusion that the EEOC was barred from seeking "victim specific relief." With respect to the former point, the Court concluded that the existence of an arbitration agreement between private parties cannot diminish the EEOC's authority. In particular, the Court noted that the EEOC, in the exercise of its statutory authority, may prosecute a lawsuit even if the employee disavows the claim. The EEOC, the Court observed, is the "master of its own case" and is free to determine whether a lawsuit is in the public's interest.

Employer's Failure To Advise Employee That Leave Was Being Counted As FMLA Leave Does Not Extend Employee's Entitlement To FMLA Leave

In Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81 (2002), the Supreme Court struck down a Department of Labor ("DOL") regulation providing that time off from work may not be counted as leave under the FMLA until the employer actually notifies the employee in writing that the time off will be designated as FMLA leave.

The case involved an employee who had taken seven months of medical leave for cancer treatment, and whose employer had neglected to inform her that this time off would be counted as FMLA leave. When she requested additional time off for medical treatment, the employer denied the request on the ground that she had already exhausted her 12 weeks of FMLA leave.

In arguing that the employer had violated the FMLA, the employee relied on a DOL regulation providing that, "[i]f an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against an employee's FMLA entitlement." 29 C.F.R. § 825.700(a). However, in a 5-4 decision, the Supreme Court ruled in favor of the employer and struck down the regulation.

The Supreme Court noted that the FMLA itself requires employees claiming a violation of that statute to demonstrate that they were prejudiced by the alleged violation. By contrast, the DOL regulation at issue punished employers for failing to provide written notification that time off was being counted as FMLA leave, without regard to whether employees were prejudiced by this failure. Because the regulation automatically imposed a penalty on an employer that fails to provide written notice of FMLA designation -- without regard to whether an employee was actually prejudiced by the employer's failure to provide written notice -- the Court concluded that the regulation was invalid, and that the employer in Ragsdale had been properly granted summary judgment.

Employer's Unsuccessful, Retaliatory Suit Against A Union Does Not Constitute An Unfair Labor Practice Absent A Finding That The Suit Was Objectively Baseless

In BE&K Constr. Co. v. NLRB, 122 S. Ct. 2390 (2002), the Supreme Court held that an employer's unsuccessful lawsuit against a union, even if filed for a retaliatory purpose, does not constitute an unfair labor practice absent a finding that the suit was "objectively baseless."

In BE&K, the employer allegedly brought suit against several unions in retaliation for the unions' efforts to delay a construction project. Ultimately, all of the employer's claims against the unions were either dismissed or voluntarily withdrawn. The National Labor Relations Board (the "Board") ruled that by filing and maintaining the suit, the employer had violated Section 8(a)(1) of the National Labor Relations Act which prohibits employers from restraining, coercing or interfering with employees in the exercise of union activity. The Board based its decision on its finding that the suit was meritless and that it had been brought for a retaliatory purpose.

The U.S. Court of Appeals for the Sixth Circuit enforced the Board's order. However, the Supreme Court reversed the Board's decision, ruling that the Board's standard for imposing liability was invalid. Specifically, the Court held that an unsuccessful lawsuit that is brought for a retaliatory purpose can constitute an unfair labor practice only if it is objectively baseless. That is, unless no reasonable litigant could realistically expect success on the merits, the bringing of the suit, even for a retaliatory purpose, is not unlawful.

2002-2003 Term

Unlike the Supreme Court's 2001-2002 docket, the Court's docket for 2002-2003 contains relatively few significant employment-related cases. Two of the most significant employment cases that the Court is scheduled to hear are Clackamas Gastroenterology Associates P.C. v. Wells, No. 01-1435, in which the Court will decide whether shareholders in a professional corporation should be counted as employees for purposes of determining coverage by federal anti-discrimination laws, and Nevada Dep't of Human Resources v. Hibbs, No. 01-136, in which the Court will decide whether state employers are immune from Family and Medical Leave Act claims.

The Court has also agreed to hear two cases (Grutter v. Bollinger, No. 02-241, and Gratz v. Bollinger, No. 02-516) that involve constitutional challenges to the affirmative action policies employed by the University of Michigan in its undergraduate and laws school admissions programs. In those cases, the Court will decide whether the university's goal of ensuring student diversity constitutes a "compelling state interest" -- the test employed whenever a government policy takes race into account. If that test is met, the Court will then decide whether the specific programs employed by the university are "narrowly tailored" to accomplish that goal with as little harm as possible to other interests.

Although Grutter and Gratz concern the use of affirmative action polices in college admission programs, the analysis employed by the Court may impact future cases that address affirmative action policies in the employment context, such as affirmative action policies mandated by the federal government in the construction industry.