Recent U. S. Supreme Court Decisions Impact Employers in Litigation and Immigration

Recent U. S. Supreme Court Decisions Impact Employers in Litigation and Immigration

                Recently, the United States Supreme Court issued three decisions which impact employers.  Also, the Eighth Circuit recently benefitted employers with a decision regarding standards for summary judgment dismissal.

Wal-Mart Class Action Reversed

                The Supreme Court reversed decisions of the Ninth Circuit Court of Appeals and the District Court for the Northern District of California which had approved the certification of "one of the most expansive class actions ever," one and a half million current and former female Wal-Mart employees.   The employees claimed that local supervisors' discretion over pay and promotion violated federal discrimination laws.  The case is Wal-Mart Stores, Inc. v. Dukes, No. 10-277.

                Writing for the Court, Justice Scalia said that the employees' claims lacked "commonality" under Federal Rule of Civil Procedure 23(a)(2), which governs class actions.  The Rule requires that the employees show that "there are questions of law or fact common to the class" in order to have the case certified as a class action.   A class action would not be the appropriate vehicle because Wal-Mart had potentially different reasons regarding each proposed class member's pay or promotion decision.  Justice Scalia wrote:

Here respondents [employees] wish to sue about literally millions of employment decisions at once.  Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question why was I disfavored.

Wal-Mart's policy leaving employment decision discretion at the local level was the opposite of a uniform employment practice that might lend itself to a class action.

                The Supreme Court also determined that the back pay claim was also improperly certified as appropriate to decide on a class-wide basis since that is a claim for individualized relief.  The Court reasoned that permitting a combination of individualized and class-wide relief was inconsistent with Federal Rule of Civil Procedure 23(b).

                Four Justices, Ginsburg, Breyer, Sotomayor, and Kagan, joined with the majority in most respects but felt the case should be remanded for consideration by the lower courts as to whether a class could be certified under Federal Rule of Civil Procedure 23(b)(3).  The majority, however, found that the commonality required in that part of the Rule still could not be fulfilled because the employees "provide no convincing proof of a companywide discriminatory pay and promotion policy" and the Court "concluded they have not established the existence of any common question."

                The case indicates that courts should inquire further into the merits of claims before considering certification of class cases and carefully consider whether class certification requirements are truly appropriate to the particular case.

Limiting Attorneys' Fees to Defendants for Frivolous Claims

                On June 6, 2011, the Court decided Fox v. Vice, No 10-114, which deals with the circumstances when a defendant may obtain attorneys' fees from a plaintiff for frivolous claims.  In that case, the plaintiff asserted several claims, including a federal civil rights claim that the Courts considered frivolous.  The lower court dismissed the federal civil rights claim and sent the other claims back to state court.  The defendant's attorney sought attorneys' fees for defending the allegedly frivolous federal claim.  The attorneys' fees submission by the defense attorney did not differentiate between the time spent on the state claims and the allegedly frivolous federal claim.  The lower court still awarded defendant the fees, despite the failure to differentiate.  The Supreme Court ultimately vacated and remanded that decision.  The Supreme Court said only those fees clearly and directly related to the frivolous claim may be recovered by a defendant.  In Fox, the attorneys' fees incurred also benefitted the defendant in the defense of the remaining state claims.  The Court stated that the appropriate inquiry to make in determining whether to award attorneys' fees to a defendant was whether the fees would have been incurred in the absence of the frivolous allegation.  If so, the fees should not be awarded to the defendant and against the plaintiff.     

                While this decision did not involve an employment case, it affects employment cases.  Employers defending such claims face significant attorneys' fees and costs of their own in addition to laws requiring them to pay a plaintiff's fees too should the employer ultimately lose.  In this case, the Supreme Court reiterated a standard unfavorable to employers.  While an employer may have a meritorious defense, it almost always must pay the plaintiff's fees if it loses.  Conversely, when an employer wins the case, it may not recover its fees unless it can demonstrate the plaintiff's case was frivolous.  This Supreme Court decision further restricts the employer's already limited ability to recover fees from plaintiffs. 

State Immigration Licensing Penalties Do Not Conflict with Federal Law

                In another decision, Chamber of Commerce v. Whiting, No. 09-115, the Supreme Court upheld a 2007 Arizona state law suspending or revoking the licenses of businesses that employ unauthorized aliens.  The Supreme Court noted that while the federal Immigration Reform and Control Act (IRCA) prohibits states from imposing "civil or criminal sanctions" on those who employ unauthorized aliens, it preserves state authority to impose sanctions "through licensing and similar laws."  Arizona's law followed the parameters available to it.  The Court also sanctioned Arizona's mandatory requirement that Arizona's employers utilize the federal E-Verify system to confirm employees' authorization to work.  The decision was basically split 5-3, with Justice Kagan not participating.  In light of this ruling, other states will likely also adopt laws similar to Arizona's, especially with regard to the use of the E-Verify system.

The E-Verify system is a free internet program operated by the Department of Homeland Security.  It compares a Form I-9 to data from U.S. government records.  If the information matches, the employee is eligible to work in the United States.  If not, E-Verify alerts the employer of the mismatch and the employee is allowed to work while he or she resolves the problem.  However, the employee must contact the appropriate agency to resolve the mismatch within eight federal government work days from the referral date.  Chief Justice Roberts noted that the E-Verify system is quite accurate.  See Footnote 12 of the opinion.  Employers will need to be vigilant in their hiring practices or risk licensure forfeitures in addition to federal sanctions. 

Eighth Circuit Reviews Summary Judgment Standards in Employment Cases

                The Eighth Circuit Court of Appeals recently clarified that employment cases deserve no kid-glove treatment when it comes to summary judgment.  In an en banc decision, the Appeals Court held that summary judgment standards apply equally in all cases, in contrast to a number of past holdings that suggest summary judgment should be "sparingly" granted in employment cases.  The Court wrote:

Because summary judgment is not disfavored and is designed for "every action," panel statements to the contrary are unauthorized and should not be followed. There is no "discrimination case exception" to the application of summary judgment, which is a useful pretrial tool to determine whether any case, including one alleging discrimination, merits a trial.

This Appeals Court decision is Torgerson v. City of Rochester, No. 09-1131.