Tag Archives: United States Supreme Court

BREAKING NEWS: Supreme Court Upholds Affordable Care Act Tax Credits

Contributed by Kelly Haab-Tallitsch

In a major decision announced earlier today, the Supreme Court upheld the tax credits under the Affordable Care Act (ACA) in states that have a federal health care exchange, affirming the 4th Circuit’s ruling in King v. Burwell.  The Court’s ruling confirms the legality of tax credits for the purchase of individual health coverage in the 37 states that have a health care exchange run by, or in partnership with, the federal government – including Illinois, Indiana, Wisconsin and Missouri.

At issue was the interpretation of language in Section 36B of the ACA authorizing individual tax credits for insurance purchased through an “exchange established by the state.”  Currently, only 13 states run their own exchanges, with the remaining 37 states using the federal exchange or a state-federal partnership exchange. Plaintiffs in King argued that an “exchange established by the state” did not include the federal exchange – an interpretation that would have made the tax credits illegal in 37 states.

Agreeing that the phrase “an exchange established by the state” was ambiguous, the Court looked to the context and structure of the statute to determine the meaning. Finding that language used elsewhere in the ACA indicated state and federal exchanges should be treated the same, the Court interpreted Section 36B to allow tax credits for insurance purchased on any health care exchange created under the ACA.

The Court further reasoned that interpreting the language to prohibit tax credits in states with a federal exchange would be incompatible with the rest of the law and that the tax credits are necessary for the ACA to function as Congress intended. Without individual tax credits two of the ACA’s three major reforms – the tax credits and the coverage requirements – would not apply. The Court further noted that certain other provisions would “make little sense” if tax credits were not available on the federal exchange.

What Does This Mean for Employers?

In affirming the individual tax credits in the 37 states with a federal exchange, the Court has indirectly upheld the employer penalties for failing to offer health coverage.  Penalties for not offering mandated coverage are only imposed on an employer if one or more employees receive a tax credit to purchase individual coverage on the exchange. Employers should continue to analyze their risk of penalty exposure and manage their benefit offerings accordingly.

Perhaps more importantly, the Court’s ruling in King v. Burwell further illustrates the staying power of the ACA and decreases the likelihood of relief for employers any time soon.

Does Tibble Really Cause Trouble for Employers with 401(k) Plans?

Contributed by Rebecca Dobbs Bush

The articles claiming the U.S. Supreme Court decision in Tibble v. Edison International are plentiful.  Each one seems to claim with a great sense of urgency that a new increased liability is now imposed on employers.  If you read enough of them, the sky seems to be falling on all those who operate and administer 401(k) plans.  In reality, most of these articles appear to be quoting language from the decision completely out of context.  Where an employer has been advised properly, Tibble should not require any change in the administration of an employer’s 401(k) plan.

In Tibble, the Supreme Court basically made a decision about the statute of limitations and how it should be applied in the context of a lawsuit relating to 401(k) plan administration brought under ERISA.  The Supreme Court reviewed whether a “continuing duty” tolled the participants’ lawsuit (contrary to what the lower courts had determined).  In the end, the Supreme Court decided that a lawsuit filed in 2007 criticizing mutual funds selected back in 1999 (more than 6 years ago), could go forward.  Essentially, the lawsuit could go forward based on the theory that the employer didn’t just act when it selected the mutual funds, the employer also acted each time a decision was made to maintain that selection.

In its fairly brief written opinion, the Supreme Court stated absolutely nothing about what the scope of an employer’s “continuing duty” was.  In fact, the Court was pretty clear that their decision did not speak to that issue:  “The parties disagree, however, with respect to the scope of that responsibility.  Did it require a review of the contested mutual funds here, and if so, just what kind of review did it require?”  The Court went on to state, “We express no view on the scope of respondents’ fiduciary duty in this case.  We remand for the Ninth Circuit to consider petitioner’s claims that respondents breached their duties within the relevant 6-year period under §1113, recognizing the importance of analogous trust law.”

Common sense should have dictated to most employers that they cannot simply set up a 401(k) plan and then stick their head in the sand for the rest of the plan’s existence.  In addition, experienced ERISA counsel and 401(k) plan advisors have long been advising employers of this continuing duty and advocating for periodic review.

In the end, as Tibble does not provide any insight at all on the appropriate scope of the periodic review each employer should undertake, the Tibble decision is not going to be a reason or basis for diligent employers with 401(k) plans to change existing practices.  That said, if an employer hasn’t yet been advised to undertake periodic review of their 401(k) plan, that employer may want to consider seeking out a different source for advice on the administration of their plan.

Unanimous U.S. Supreme Court: EEOC Must Attempt to Conciliate Claims

Contributed by Noah A. Frank

Amid much anticipation, the Court unanimously held in Mach Mining, LLC v. EEOC that under Title VII, the EEOC must attempt to conciliate prior to filing suit against an employer. U.S. Sup. Ct., No. 13-1019 (Apr. 29, 2015). Title VII’s enforcement mechanism governs employment discrimination and Gavelretaliation claims related to race, color, religion, sex/pregnancy, national origin, age, and disability.  Under Title VII, the EEOC’s duty is to endeavor to eliminate discrimination by informal methods of conference, conciliation and persuasion and to insist upon legal compliance; the employer’s obligation is to refrain from illegal conduct.

Conciliation involves communication and exchange of information between the parties.  The EEOC must:

  • Inform the employer about the specific allegation(s);
  • Describe what the employer has allegedly done;
  • Describe which employee(s) or class allegedly suffered;
  • Engage in some form of discussion with the employer; and
  • Provide the employer an opportunity to cure the allegedly discriminatory practice.

However, the requirement that the EEOC conciliate is but a minor victory for employers as the required effort is limited to the employer being afforded a chance to (i) discuss and (ii) rectify the specified discriminatory practice.    Further, the proper remedy for the EEOC failing to take those specific conciliation steps prior to bringing a cause of action is for the court to order the EEOC to undertake the mandated efforts to obtain voluntary compliance.

What this means for businesses:

An ounce of prevention is worth years and thousands (or more) of dollars of cure.  Companies should proactively ensure that their written employment policies and implemented practices comply with federal and state law.

If a claim arises or a charge of discrimination is filed, employers should engage seasoned employment counsel who regularly work with the EEOC and understand the ramifications of this decision to help investigate and respond to the charge.

And, in those cases where the EEOC finds “reasonable cause” of a violation, counsel should make certain to engage the EEOC in good faith discussion and conciliation efforts along the lines outlined by the Supreme Court with an eye to resolving the claim, if at all possible.


Contraceptive Mandate Accommodation Requirements Are Holding Strong Despite Recent Supreme Court Opinion

Contributed by Jamie Kauther

There have been very few if any health care policies as controversial as the Affordable Care Act (ACA).  One of its most talked about provisions, the contraception mandate, again made headlines this past month, especially here in the Seventh Circuit.  Unless you were living under a rock or enjoying a tropical vacation without Wi-Fi last July, you’ve heard of Burwell v. Hobby Lobby, 134 S. Ct. 2751 (2014), the Supreme Court decision that held corporations controlled by religious families cannot be required to pay for contraception coverage for their female workers, contrary to the contraception mandate found in the ACA.   This decision sparked the attention of the nation but, although lost in most of the media coverage, was a decision that applied to only a handful of employers.

Just last month, the Supreme Court revived the University of Notre Dame’s challenge to the contraceptive mandate accommodation under the ACA that applies to religious nonprofit organizations (RNO).  This accommodation to the customary mandate requires RNOs to tell the Health and Human Services Department in writing that they object to the mandate on religious grounds and their insurance provider must then provide the mandated contraception coverage.  In its February 2014 decision, Univ. of Notre Dame v. Sebelius, 743 F.3d 547 (7th Cir. 2014), the Seventh Circuit upheld the accommodation and denied Notre Dame’s argument that it was unenforceable.   However, just last month the Supreme Court vacated the decision and asked the Court to determine if the subsequent Hobby Lobby decision impacts the outcome.  The parties filed their respective position briefs on April 7th.  The government argued Hobby Lobby has no impact and the accommodation should remain, while faith-based Notre Dame argued it’s a substantial burden against religious beliefs and thus the prior decision must be reversed.

What does this mean for employers?  If you are not a closely held corporation controlled by a religious family (a very small group qualifies), or a RNO (albeit a much larger group), this means nothing.  If you are an RNO, it is important to remember your contraceptive mandate accommodation requirements are still intact.   The Supreme Court did not attack the Seventh Circuit’s decision, it did not waive the accommodation requirement for RNOs, and it did not extend Hobby Lobby to apply to any other employer group.   As such, there should be no change in policy or practice and there should be no expectation that a change is imminent as the Seventh Circuit is anticipated to affirm its prior ruling.

Supreme Court Holds that Mortgage Loan Officers are Eligible for Overtime

Contributed by Michael Wong

On March 9, 2015, the U.S. Supreme Court issued a ruling in Perez v. Mortgage Bankers Association that should put all employers on notice.  In this decision, the Court held that federal agencies, specifically the Department of Labor (DOL), do not need to go through the same rulemaking procedure of providing notice to the public and soliciting input before issuing their own interpretive guidance, even if it contradicts the agency’s prior guidance.

In Perez, the DOL issued opinion letters that stated mortgage loan officers were not eligible for overtime under the administrative exemption of the Fair Labor Standards Act (FLSA). Subsequently, at the request of the Mortgage Bankers Association (MBA), the DOL issued another opinion letter reaffirming that mortgage loan officers were exempt from overtime under the administrative exemption of the FLSA. However, several years later the DOL flip flopped and reversed its prior opinion letters stating that mortgage loan officers did not fall under any of the FLSA exemptions and thus were entitled to overtime.

At issue in Perez was whether the DOL’s 2010 interpretation was procedurally invalid under the Administrative Procedure Act’s (APA) and doctrine set forth in Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C. Cir. 1997).  Under the Paralyzed Veterans doctrine and APA, when a federal agency was issuing an interpretation that significantly revised its prior interpretation, the federal agency had to comply with the APA notice-and-comment procedures.   The APA’s notice-and-comment procedures required that federal agencies publish a notice of the proposed rulemaking in the federal registry and allow interested persons to provide input on the proposal. Then, in finalizing the rule, the federal agency was required to take all comments into consideration and any amendments or changes would be subject to the same notice-and-comment requirements.

In Perez, the Supreme Court reversed the lower court’s decision applying the Paralyzed Veterans doctrine and held that the Paralyzed Veterans doctrine was contrary to the text of the APA and exceeded the scope of judicial review authorized by Congress.

The first takeaway for employers from the Supreme Court’s decision in Perez is that under the DOL’s opinion letter, mortgage loan officers are not exempt from overtime under the FLSA administrative exemption.  As such, mortgage loan officers must be paid overtime, unless you can show that they fit under another FLSA exemption. Additionally, it creates significant questions for employers in how much credence they should give to interpretations, opinion letters and guidance issued by federal agencies, as the agencies may be able to issue contradictory opinions or interpretations without having to go through the notice and comment procedures set by the APA.

Collectively Bargained Retiree Health Benefits for Life? U.S. Supreme Courts Says Ordinary Contract Principles Apply

Contributed by Kelly Haab-Tallitsch

On January 26, 2015, the U.S. Supreme Court established a new standard for the vesting of collectively bargained retiree medical benefits, holding in M&G Polymers USA, LLC, et al. v. Tackett, et al., that collective bargaining agreements (CBAs) must be interpreted using ordinary principles of contract law and rejecting the presumption that collectively bargained retiree welfare benefits vest for life.  M&G Polymers, No. 13-1010 (U.S. Jan. 26, 2015).

In M&G Polymers, a group of retirees brought suit against their former employer after the announcement that retirees would be required to begin making contributions toward their retiree health coverage premiums. The plaintiffs argued that a CBA provision requiring the employer to pay 100% of retiree medical premiums created a vested right to contribution-free health care benefits beyond the expiration of the CBA’s three-year term. The Sixth Circuit Court of Appeals found in favor of the retirees based on an “inference” that collectively-bargained retiree health benefits were intended to vest for life, absent language to the contrary.

The Supreme Court expressly rejected the Sixth Circuit’s “inference” of lifetime benefits, stating that the inference placed a “thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements,” and distorted attempts to ascertain the parties’ real intent. Relying on the Employee Retirement Income Security Act (ERISA), the Court found that “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life,” but must use ordinary contract principles to determine whether retiree health benefits continue past the expiration of a CBA.

The concurring opinion in M&G Polymers cautioned that clear and express language is not required to demonstrate intent that retiree benefits vest, intent may arise from the implied terms of an agreement.  As such, employers must be cautious in negotiating and drafting CBA provisions relating to retiree welfare benefits.  If the inclusion of an express term that retiree benefits do not survive the expiration of the agreement is not possible, employers must take care to avoid any language that could be interpreted (under ordinary contract law) as demonstrating the intent to provide vested or lifetime retiree medical benefits.

Further, employers should review all retiree benefit plan documents and communications to ensure the contractual term of the benefit is clearly explained and consider how best to include language that will reserve the right to amend or terminate the arrangement, wherever possible.

EEOC Issues Enforcement Guidance on the Pregnancy Discrimination Act

Contributed by Jill Cheskes

Recently, the U.S. Supreme Court granted certiorari to review a Fourth Circuit opinion holding that an employer did not violate the Pregnancy Discrimination Act (PDA) when it did not offer light duty to a pregnant employee, even though the employer had an established light duty program for certain categories of employees, including those injured on the job. Young v. United Parcel Service, Inc. The following week, the EEOC released enforcement guidance that takes an opposite position to that reached in Young. The guidance was not offered for public comment prior to being released.

The enforcement guidance outlines the EEOC’s position that an employer must offer pregnant employees the same benefits as it offers to employees with other medical-related conditions such as light duty, reasonable accommodations, modified tasks alternative assignments and leave. The EEOC’s position is that if non-pregnant employees are offered these options, an employer must also offer them to pregnant employees to be in compliance with the PDA; absent showing that the policy is job related and consistent with a business necessity. The EEOC also outlined that past, present and potential pregnancies are covered and can be the basis of pregnancy discrimination. Additionally, the EEOC acknowledged that pregnancy itself is not a disability, but it outlined that employers have obligations under the ADA to accommodate pregnant employees. The EEOC noted that many pregnancy-related impairments could be considered disabilities and thus entitled to accommodations.

The enforcement guidance is the first issued on the PDA since 1983. A fact sheet and Q&A were also issued. It is important to note that the EEOC’s enforcement guidance does not have the force of law and courts are not obligated to follow it. However, the EEOC will follow this enforcement guidance in cases argued before it. Note: If the Supreme Court upholds the Fourth Circuit’s opinion, which contradicts the guidance in certain respects, the guidance will be moot and of no significance, even before the EEOC.

Bottom Line: The EEOC enforcement guidance on the PDA attempts to quietly but significantly alter employer’s obligations to pregnant employees and employers should be cognizant of the guidance when making decisions related to pregnant employees and also when defending a pregnancy charge before the EEOC. As to the long-term implications of the enforcement guidance, the U.S. Supreme Court’s decision on Young will determine whether employers need to re-think its employment policies as it relates to pregnant employees or not. As previously reported, Illinois employers are reminded that Illinois law was recently amended to provide broad coverage and protections for pregnant employees.

Neutral? Not Exactly. The End of the Union Neutrality Agreements?

Contributed by Steven Jados

Last week, we briefly introduced Unite Here Local 355 v. Mulhall, a case in which the U.S. Supreme Court will determine whether a union neutrality agreement can be a “thing of value” paid, lent, or delivered to a union in violation of Section 302 of the Labor-Management Relations Act (“LMRA”).  The LMRA was enacted for purposes including the protection of employees’ freedom to choose whether or not they want a union.

With that purpose in mind, when the Court hears oral argument in November, several justices are likely to be troubled by how little the agreements have to do with neutrality.  Instead, the agreements often require the employer to actively assist the union.  In truth, neutrality agreements are a means for one particular union to fast-track its way to representative status for employees who may never have heard of the union, let alone shown any interest in having the union as their representative.  

The assistance sought in Mulhall included giving the union (that is, the particular union that proposed the agreement, but not any other union) the right to come onto the employer’s property during working hours to give pro-union speeches to an assembly of workers.  (Apparently the union has no problem with so-called “captive audience” speeches when the union is giving them.)    

Additionally, the neutrality agreement in Mulhall required the employer to recognize the union as the collective bargaining representative only upon a showing of authorization cards, sometimes referred to as “card check,” a procedure far less reliable than the secret ballot election typically used. 

The true benefit of the neutrality agreement to a union is that the agreement bypasses expensive, time-consuming processes that include actually convincing employees to choose the union, convincing them not to choose a competing union, overcoming employer opposition, and winning an election.  Those processes can cost a union hundreds of thousands of dollars just in legal fees.    

As such, there can be little question that a neutrality agreement is a thing of value as a matter of plain English.   Whether that is so as a matter of law remains to be seen.  

Predicting the outcome of Supreme Court cases is virtually impossible.  That said, organized labor has little reason to believe it has five friends on the Court, especially when a decision against the union can be framed as both pro-business and pro-employee.  (The union’s opponents, Mulhall and Hollywood Greyhound Track, Inc., are an employee and his employer, respectively.) 

Whatever the Court decides, it will likely have a significant impact on union organizing strategies in the coming years.

The Stakes Are High For Labor Unions in the 2013-2014 Supreme Court Docket

Contributed by Caryl Flannery

The 2012-2013 term of the United States Supreme Court brought some significant employment law decisions, but the 2013-2014 term may find traditional labor stealing the spotlight in the workplace. 

Last term, we learned that for Title VII purposes, a “supervisor” is someone with the ability to make significant changes in an employee’s status (Vance v. Ball State) and a Title VII plaintiff must meet a “but for” standard for a successful retaliation claim (UTSMC v. Nassar).  The death of DOMA meant that many employers had to revisit their tax, benefits, and leave policies.  The rules for pursuing or avoiding class and collective action claims were also solidified. (Comcast Corp. v. Behrend; Genesis Health Care Corp. v. Symczyk). 

As the Supreme Court opened its 2013-2014 term, two cases that could make organizing significantly more difficult for labor unions were on the docket.

In United Here Local 355 v. Mulhall, the Court will consider what constitutes “a thing of value” under section 302 of the Labor-Management Relations Act.  Section 302 makes it illegal for employers to “pay, lend, or deliver any money or other thing of value” to a labor organization.  The purpose of section 302 is to prevent unions from colluding with or coercing employers to benefit the union in ways that undermine employees’ choice of representative and bargaining rights. At issue is an agreement between the Mardi Gras Gaming and Local 355 in which the employer agreed to provide the union with employee contact information and expanded access to employees on the employer’s premises.  The union, in turn, supported a proposed gaming law (to the tune of $100,000) which was important to Mardi Gras, and agreed not to engage in disruptive activities like pickets and strikes.  The question before the Court is whether this agreement was an unlawful “thing of value” as found by the Eleventh Circuit, or whether it was merely a “neutrality agreement” or a “ground rules” agreement similar to those that have been expressly upheld by the Third and Fourth Circuits.  Right to Work supporters and employers who wish to avoid organization dislike these agreements, claiming that employers are coerced into paving the way for a union, thus eliminating employee choice.  Unions argue that outlawing neutrality agreements will severely hamper their ability to organize and will ratchet up disruption and animosity during organizing campaigns.

In a late entry to the 2013-2014 docket, the Court has agreed to consider whether workers paid through government-funded programs can be compelled to pay union dues.  Harris v. Quinn is receiving close scrutiny because several states currently permit organization of individuals who are not traditional “government employees” on the justification that they are compensated through publicly administered funds.  The individuals at issue in Harris are home-based health care aides (some of whom are family members of the person receiving services) who are compensated with Medicare funds.  The employees are challenging an Illinois executive order permitting such organization claiming that forcing them to accept and financially support a bargaining representative violates their First and Fourteenth Amendment Rights.  Harris impacts labor unions not only in their ability to collect dues under existing agreements but also on their ability to organize publicly-funded workers who operate in arguably private sector jobs.

A Step Towards Clarity: NLRB Petitions U.S. Supreme Court for Review of Noel Canning Decision on Invalidity of President Obama’s Recess Appointments

Contributed by Beverly Alfon

On April 25, 2013, the National Labor Relations Board filed a petition asking the U.S. Supreme Court to review a decision that a federal appeals court issued earlier this year in Noel Canning Div. of Noel Corp. v. NLRB, 705 F.3d 490 (D.C. Cir. 2013).  In Noel Canning, the appeals court held that President Obama’s recess appointment of Sharon Block (D), Terrence Flynn (R) and Richard Griffin (D) to the NLRB was unconstitutional.  Without the valid appointment of those three members, the Board did not have a quorum and could not act lawfully.  The appeals court decision called into question the validity of every NLRB decision issued since January 4, 2012 (when President Obama appointed these members) — including controversial rulings that reversed long-standing precedent.   Nonetheless, as we discussed a few weeks ago, the NLRB has continued to conduct business as usual, leaving politicians clamoring for resolution and employers uncertain about the true effect of the D.C. Circuit’s decision.

The issues presented for review before the Supreme Court are “(1) whether the president’s recess-appointment power may be exercised during a recess that occurs within a session of the Senate, or is instead limited to recesses that occur between enumerated sessions of the Senate; and (2) whether the president’s recess-appointment power may be exercised to fill vacancies that exist during a recess, or is instead limited to vacancies that first arose during that recess.” In its petition, the NLRB argues that the president’s recess appointment authority is not limited to intersession recesses and that the president may fill a vacancy that exists during a Senate recess, even if the vacancy did not arise during that recess.

The NLRB also asserts that the D.C. Circuit’s decision would have “serious and far-reaching consequences,” including numerous presidential recess appointments made long before 2012, and therefore, any decisions rendered under such constitutionally flawed Boards.  The NLRB notes in its petition that there is no time limit on petition for review of Board rulings and further warns that the appeals court decision “also threatens a significant disruption of the federal government’s operations — including, most immediately, those of the National Labor Relations Board.”

Assuming that there are no extensions sought and granted, opposition to the certiorari petition is due May 28, 2013. Typically, a petition filed at this point in time would not be considered for review until after the Court’s summer recess, during the Court’s first conference in September 2013. However, it is possible that the response to the petition will be filed early and the Court may decide on whether or not to grant certiorari before summer recess.