EMPLOYMENT LAW LEGAL RESEARCH BLOG

Retirement Plans—Arbitration Provision—Waiver of Right to Bring Representative Actions

Nadine Roddy — Wed, 01 Oct 2025 14:56:14 GMT

Nadine Roddy—Senior Attorney

The 401(k) plan is perhaps the most popular form of tax-advantaged savings and investment vehicle for retirement offered by American employers under the Employee Retirement Income Security Act of 1974 (ERISA). Many plans contain provisions requiring arbitration of all disputes arising from the plan, and some of these provisions limit the rights and remedies of plan participants bringing suits in arbitration. The Sixth Circuit recently declared invalid a 401(k) plan’s “individual arbitration provision” requiring a plan participant to bring suit in arbitration only in their individual capacity, and not in a representative, class, or collective capacity. The provision also limited a participant to seeking remedies for losses to their individual plan account, rather than to the plan itself. The case involved two plan participants who filed in federal district court a putative class action against plan fiduciaries on behalf of the plan, themselves, and all others similarly situated. They claimed breach of fiduciary duties and sought all losses accruing to the plan, disgorgement of all profits, and other injunctive relief. Parker v. Tenneco, Inc., 114 F.4th 786, 792 (6th Cir. 2024).

The plan contained an arbitration provision that read in relevant part:

No Group, Class, or Representative Arbitrations. All Covered Claims must be brought solely in the Claimant's individual capacity and not in a representative capacity or on a class, collective, or group basis. Each arbitration shall be limited solely to one Claimant's Covered Claims and that Claimant may not seek or receive any remedy which has the purpose or effect of providing additional benefits or monetary relief (whether such monetary relief is described as legal damages or equitable relief) to any Employee, Participant, or Beneficiary other than the Claimant.

The fiduciaries moved to compel arbitration, arguing that this provision required arbitration of the plaintiffs’ claims on an individual basis (i.e., only losses to their individual accounts) and barred them from suing on behalf of the plans or in a representative capacity. The district court denied motion, ruling that the provision impermissibly limited participants’ substantive rights under ERISA, as it eliminated their statutory right to bring suit on behalf of a plan and to pursue plan-wide remedies under ERISA §§409 and 502(a)(2).

On appeal, the Sixth Circuit first noted that under the Federal Arbitration Act, an agreement to arbitrate “‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’” Parker, 114 F.4th at 792 (quoting 9 U.S.C. § 2). Through this “savings clause,” courts may invalidate an arbitration agreement based on generally applicable contract defenses such as fraud or unconscionability, as the Supreme Court recognized in Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022). One such generally applicable defense concerns contractual provisions that violate an express provision of positive law, contradict the purpose of positive law, or are otherwise inimical to public policy, all of which may be unenforceable.

One manifestation of these principles, the Sixth Circuit continued, is found in the federal common law doctrine of “effective vindication,” which requires that a person with a statutory right of action be afforded a means of effective vindication of the rights guaranteed by the statute. In this case, the participants sought plan-wide relief through a statutory mechanism designed for representative actions on behalf of the plan. The individual arbitration provision, however, restricted the participants to actions brought in an individual capacity and not in a representative capacity, and further restricted the monetary relief they could obtain to losses to their individual plan accounts and prorated profits. The provision thus eliminated the ability to proceed in a representative capacity on behalf of the plan and to obtain relief for losses to the plan—which were substantive statutory remedies provided by ERISA. The provision was therefore unenforceable as a prospective waiver of these essential statutory rights. The district court’s ruling was affirmed. Parker, 114 F.4th at 789. Accord Platt v. Sodexo, S.A., ___ F.4th ___, No. 23-55737, 2025 WL 2203415 (9th Cir. Aug. 4, 2025); Cedeno v. Sasson, 100 F.4th 386 (2d Cir. 2024); Henry ex rel. BSC Ventures Holdings, Inc. Emp. Stock Ownership Plan v. Wilmington Tr. NA, 72 F.4th 499 (3d Cir. 2023); Harrison v. Envision Mgmt. Holding, Inc. Bd. of Dirs., 59 F.4th 1090 (10th Cir. 2023); Smith v. Bd. of Dirs. of Triad Mfg., Inc., 13 F.4th 613 (7th Cir. 2021).

EMPLOYMENT: Employer Inquiries About Employee’s Plans to Retire

Nadine Roddy — Wed, 31 Jul 2024 18:27:19 GMT

Nadine Roddy—Senior Attorney

May an employer ask an employee whether they are thinking about retiring sometime in the foreseeable future without running afoul of the Age Discrimination in Employment Act (ADEA)? Some federal courts of appeals have answered this question in the affirmative.

In a recent Fourth Circuit case, Palmer v. Liberty University, Inc., Nos. 21-2390, 21-2434, 2023 U.S. App. LEXIS 18467 (4th Cir. June 30, 2023), a 79-year-old professor was notified by the university where she had taught studio art for over 30 years that her annual contract would not be renewed. Nearly all of the university’s faculty members were employed on an annual basis and served without tenure. Before informing the professor of the nonrenewal of her contract, the Dean and the Provost had privately decided to offer the option of retirement to the professor, but only if she brought up the subject herself. After receiving the nonrenewal notice, the professor “responded unfavorably” but she did not raise the issue of retirement. As a result, she was not offered that option, and she lost her employment upon the expiration of her contract. In the ensuing ADEA lawsuit, the district court entered summary judgment for the university.

As an initial matter, the Fourth Circuit noted that at least two other circuits—the Fifth and the Sixth—had held that an employer’s comments or inquiries about possible retirement, without more, do not constitute direct evidence of age discrimination. The court stated simply: “We agree with and adopt that well-reasoned proposition.” Applying this rule to the facts of the case, the court determined that the Dean’s and the Provost’s comments to each other about offering retirement to the professor did not amount to direct evidence of age-based discrimination attributable to the university. The comments had not been made directly to or in the presence of the professor, and, even if they had been, they were devoid of any reference to her age. Further, the comments were made after the two officials had concluded that the professor, who was reluctant to learn digital art, was not meeting the university's legitimate expectations.

The court then assessed whether the professor’s ADEA claim could be premised on the indirect/circumstantial evidence theory of McDonnell Douglas v. Green, 411 U.S. 79293 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). The parties disputed whether she had satisfied the third element of the prima facie case—that she was performing her job duties at a level that met the employer's legitimate expectations at the time of her nonrenewal. The court determined that even though she had been promoted to the position of Full Professor just two years before, the summary judgment evidence showed that she nonetheless had not satisfied the university’s legitimate expectations at the time of her nonrenewal because of her failure to develop digital art skills. During that two-year period, the Dean and the Art Department Chair had repeatedly informed her that she needed to bring her digital art skills up to a teaching level, but she inexplicably failed to do so. In addition to dooming her prima facie case, this failure also rendered her unable to show that age discrimination was the “but-for” cause of the nonrenewal of her contract. Summary judgment for the university was affirmed.

In reaching this result, the court followed Lefevers v. GAF Fiberglass Corp., 667 F.3d 721 (6th Cir. 2012) (questions concerning an employee's retirement plans do not alone constitute direct evidence of age discrimination), and Moore v. Eli Lilly & Co., 990 F.2d 812 (5th Cir. 1993) (questions about employee's age and retirement plans did not reveal discriminatory intent).

Workplace Drug-Use Policies and State Medical/Adult-Use Marijuana Laws

Nadine Roddy — Thu, 27 Oct 2022 13:47:16 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

Over the last two decades, over two-thirds of the states have enacted legislation authorizing the use of marijuana and marijuana products for medical purposes by persons with debilitating conditions. See, e.g., Va. Code Ann. § 18.2-251.1. At present, over one-third of the states have also decriminalized possession of small amounts of marijuana and marijuana products for recreational (“adult”) use by persons 21 years of age and older. See, e.g., Conn. Gen. Stat. § 21a-279a. Unsurprisingly, such laws have created difficulties for employers wishing to prevent their employees from bringing marijuana into the workplace and/or performing work while under its influence. Employers’ drug-use policies have been challenged in the courts by aggrieved employees on the basis of such laws, with mixed results.

Recently, the Nevada Supreme Court, sitting en banc, decided the case of Ceballos v. NP Palace, LLC, 514 P.3d 1074 (Nev. 2022), involving the state’s off-duty conduct statute, which creates a private right of action in favor of an employee who is discharged for engaging in “the lawful use in this state of any product outside the premises of the employer during the employee’s nonworking hours[.]” Nev. Rev. Stat. § 613.333(1)(b). The question presented was whether “adult recreational marijuana use” qualified for protection under this statute. The court held that it did not, pointing out that although Nevada had decriminalized adult recreational marijuana use, the drug continued to be illegal under federal law. Thus, its use was not “lawful . . . in this state,” and it could not support a private right of action under the statute.

In reaching this conclusion, the court cited a treatise by Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 101 (2012), for the canon of statutory interpretation that “general terms are to be given their general meaning.” The court acknowledged the discharged employee’s argument that because the off-duty conduct statute was enacted decades before Nevada decriminalized recreational marijuana use, its drafters could not have foreseen the state-federal split that exists today. Thus, the court should infer an exception for federal illegality by reading “lawful . . . in this state” to mean “lawful under state law.” But the court believed that such an interpretation would run directly contrary to the general-terms cannon, which holds that “the presumed point of using general words is to produce general coverage—not to leave room for courts to recognize ad hoc exceptions.” Ceballos, 514 P.3d at 1077 (quoting Scalia & Garner, supra, Reading Law).

Additionally, the court held that because the adult recreational-use statute authorizes employers to prohibit or restrict such use by their employees, an employee discharged after testing positive at work based on recreational marijuana use does not have a common-law tortious discharge claim. The employee argued that his termination offended public policy in two ways: (1) it violated the policy of protecting his right under the recreational-use statute to engage in marijuana consumption pursuant to the statute’s guidelines; and (2) it contravened the state’s policy interest in ensuring its citizens were not denied the ability to support themselves and their families due to engaging in “statutorily protected and completely lawful activities.” Id. at 1078. In the court’s view, neither of these policies rose to the level required to establish a tortious discharge claim arising out of a presumptively at-will employment relationship. In Nevada, tortious discharge actions are “severely limited” to those “rare and exceptional” cases where the employer’s conduct violates “strong and compelling” public policy. Id. (quoting Sands Regent v. Valgardson, 777 P.2d 898, 900 (Nev. 1989)).

Further, the interplay between adult recreational marijuana use and employment law had already been addressed by the legislature. The recreational-use statute specifically authorized employers to adopt and enforce workplace policies prohibiting or restricting such use. If the legislature meant to require employers to accommodate employees using recreational marijuana outside the workplace but thereafter testing positive at work, it would have done so. The court declared that when the legislature has enacted statutes addressing the same subject matter at issue in a case, the court does not intrude on the legislature’s prerogative. The trial court’s dismissal of the lawsuit was affirmed. Contra Palmiter v. Commonwealth Health Sys., Inc., 2021 PA Super 159, 260 A.3d 967 (medical marijuana statute impliedly provides a private right of action against an employer by an employee who experiences adverse employment action solely on account of using prescribed medical marijuana; employee also has tort claim for wrongful discharge in violation of public policy).

Love in the Time of COVID-19

sbailey@nlrg.com (Suzanne L. Bailey) — Wed, 23 Mar 2022 14:52:44 GMT

Suzanne L. Bailey—Senior Attorney, National Legal Research Group

The COVID-19 pandemic has been a fertile source of new litigation: challenges to mask mandates, challenges to vaccine mandates, construction of child custody visitation agreements in light of COVID-19, assertion of the defense of impossibility in response to attempted enforcement of a contract, etc. Recently, a federal district court in Virginia addressed whether an individual stated a cause of action against his employer for firing him after the employer denied the individual’s request to quarantine at home in order to avoid exposing his adult paraplegic brother to the coronavirus. The court in Crawford v. Creative Cost Control Corp., Case No. 7:21-CV-00419, 2021 WL 5049768, 2021 Wage & Hour Cas.2d (BNA) (W.D. Va. Nov. 1, 2021), held that plaintiff Christian Crawford (“Christian”) stated claims for (1) interfering with rights provided under the Family and Medical Leave Act (“FMLA”), and (2) retaliation or discrimination in violation of the FMLA. However, he did not state a claim under the Families First Coronavirus Response Act (“FFCRA”).

Christian performed “excellent” work as a crew chief for SERVPRO for five years. As alleged in the complaint, SERVPRO specializes in “disaster cleaning” and “biohazard decontamination” of restaurants, businesses, and other public spaces. During his employment with SERVPRO, Christian periodically received permission to miss work to provide regular bowel and bladder care for his brother, Chance Crawford (“Chance”), who had been paralyzed and confined to a wheelchair for 40 years due to a football injury.

SERVPRO, like many businesses across the country, closed its doors for two weeks in April 2020 in response to the COVID-19 pandemic. At the same time, Chance began to quarantine at home based on medical advice. Christian requested leaves pursuant to the FFCRA and the FMLA so that he could protect his brother and provide for his medical needs. SERVPRO denied his request and fired him on April 27, 2020, the day SERVPRO reopened. Chance remained quarantined for another two and a half months until his employer provided him a private entrance to his office, allowing him to quarantine in the office. Following termination of his employment, Christian brought suit alleging that SERVPRO interfered with his rights under the FMLA, discriminated and retaliated against him in violation of the FMLA, interfered with his rights under the FFCRA, and discriminated and retaliated against him in violation of the FFCRA.

The FMLA is intended to promote the national interest in family integrity by allowing eligible employees to take up to 12 work weeks of leave during any 12-month period in order to care for a spouse, son, daughter, or parent of the employee with a serious health condition. 29 U.S.C. § 2612(a)(1)(C). Under the FMLA, “son or daughter” includes “a child of a person standing in loco parentis” who is either under 18 or “18 years of age or older and incapable of self-care because of a mental or physical disability.” Id. § 2611(12) (emphasis added). “Persons who are ‘in loco parentis’ include those with day-to-day responsibilities to care for and financially support a child.” 29 C.F.R. § 825.122(d)(3) (emphasis added). SERVPRO did not dispute that Chance’s paralysis was a “serious health condition,” but it contested the notion that Christian acted in loco parentis to Chance. Crawford, 2021 WL 5049768, at *2-3.

The court noted that the existence of an in loco parentis relationship is found in the intent of the party assuming the status of parent and pointed to the following factors that could be considered: “(1) the age of the [person]; (2) the degree to which the [person] is dependent on the person claiming to be standing in loco parentis; (3) the amount of support, if any, provided; and (4) the extent to which duties commonly associated with parenthood are exercised.” Id. at *3. Focusing on the element of financial support, SERVPRO argued that Christian did not act in loco parentis with respect to Chance, because he did not provide financial support. The court ultimately found that financial support was not a necessary precondition and, instead, looked to the above-quoted language of 29 C.F.R. § 825.122(d)(3), particularly the use of the word “include.” The court explained that because the word “include” is “generally non-exhaustive,” it would not interpret the regulation to require both day-to-day responsibilities and financial support for a person to stand in loco parentis. 2021 WL 5049768, at *4. Accordingly, the court allowed Christian to go forward with his FMLA claims.

The court disposed of the FFCRA claims much more expeditiously. The FFCRA requires certain employers to provide eligible employees with two weeks of paid sick leave or expanded family and medical leave for certain reasons related to COVID-19. In particular, § 5102(a)(4) of the FFCRA requires an employer to give paid sick leave to an employee who is unable to work due to a need to care for an individual who has been advised by a healthcare provider to self-quarantine as a consequence of COVID-19. However, the FFCRA does not apply to employees “with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency.” 29 C.F.R. § 826.30(c)(2)(i). Thus, although Christian was caring for Chance, who had been advised to self-quarantine due to health concerns, the complaint’s allegations that SERVPRO performed “disaster cleaning” and “biohazard decontamination” in public spaces proved “fatal” to Christian’s FFCRA claims, and the court dismissed those claims. 2021 WL 5049768, at *5-6.

Title VII Plaintiff May Seek Punitive Damages After Releasing Compensatory Claim

Nadine Roddy — Wed, 15 Dec 2021 17:18:59 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

Recently, a federal district court sitting in New York held that an employee’s prior release of a claim for compensatory damages for unlawful employment discrimination did not preclude his claim under Title VII for punitive damages arising out of the same conduct. Barker v. Aramark Unif. & Career Apparel, LLC, No. 19-CV-2710, 2021 WL 4859741 (E.D.N.Y. Oct. 18, 2021). The employee in the case filed a charge of race discrimination against his former employer with the State Division of Human Rights. The parties entered into a Settlement Agreement by which the employee “waive[d] and release[d] any and all claims and allegations asserted in” the Division proceeding “arising from or relating to any and all acts, events and omissions alleged or that could have been alleged[.]” Subsequently, the employee brought a Title VII suit in federal court, seeking punitive damages—a remedy not available in the state agency proceeding. The employer moved for summary judgment, arguing inter alia that because the law does not recognize an independent cause of action for punitive damages, no such right could have been reserved by the Settlement Agreement.

In denying the employer’s motion, the court noted that since the enactment of the Civil Rights Amendments in 1991, Title VII plaintiffs have been able to recover punitive damages by demonstrating that the defendant engaged in a discriminatory practice “with malice or with reckless indifference” to federally protected rights. Subsequent federal court decisions established that an award of compensatory damages is not a prerequisite for recovery of punitive damages in Title VII cases. Although the Second Circuit has not yet ruled on the effect of a release of a compensatory claim on the viability of a request for punitive damages arising out of the same conduct, district courts within the Second Circuit have held that such a release does not preclude a subsequent punitive damages claim. The court agreed with this view.

Title VII and "Supervisors"

Nadine Roddy — Thu, 23 Sep 2021 15:59:28 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

One of the more difficult issues in the employment discrimination context has been the determination of whether an employee who is charged with misconduct toward another employee is a "supervisor" or a "coworker" for purposes of employer liability under Title VII and related statutes. Initially, the Equal Employment Opportunity Commission ("EEOC") took the position that an individual is qualified as an employee's supervisor if (1) the individual had authority to undertake or recommend tangible employment decisions affecting the employee, or (2) the individual had authority to direct the employee's daily work activities. EEOC Enforcement Guidance: Vicarious Liability for Unlawful Harassment by Supervisors (1999. In its 2013 decision in Vance v. Ball State University, 133 S. Ct. 2434 (2013), however, the Supreme Court narrowed the definition, holding that an employee is a "supervisor" only when empowered by the employer to take tangible employment action—such as hiring, firing, failing to promote, reassigning with significantly different responsibilities, or causing a significant change in benefits—against the employee alleging discrimination. Since then, the lower federal courts have refined this definition in relevant cases.

Recently, the Sixth Circuit Court of Appeals had occasion to consider the effect of a senior manager's delegation of some supervisory authority to a project manager—the alleged harasser—to whom the plaintiff employee had been temporarily assigned. The court noted that, most often, the status of the alleged harasser can be resolved as a matter of law before trial, but when material factual disputes arise about whether the harasser was a coworker or a supervisor, the plaintiff can proceed to trial under both theories. In this case, the project manager was in the employee's "chain of command" while she worked on the project, and she reported directly to him. Additionally, the project manager provided information concerning the quality of her work on the project to the senior manager for her performance reviews. These "indicia of reliance and authoritative input" sufficiently raised a material fact issue concerning whether the senior manager substantially relied on the project manager's recommendations when taking tangible employment actions regarding the plaintiff employee. Due to that reliance, the senior manager could be held to have effectively delegated the authority to take tangible employment actions to the project manager. Thus, the employee's Title VII sexual harassment suit against the employer could proceed on both theories. The case is Wyatt v. Nissan North America, Inc., 999 F.3d 400 (6th Cir. 2021), pet. for reh'g en banc denied (6th Cir. July 30, 2021).

Supreme Court Rebuffs Another Challenge to the ACA

Nadine Roddy — Thu, 23 Sep 2021 15:55:12 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

In a closely watched case, California v. Texas, 141 S. Ct. 2104 (2021), the Supreme Court recently turned back a third challenge to the federal Patient Protection and Affordable Care Act ("ACA" or "Act")—the extensive health-care reform law enacted in 2010 that includes, among other things, a requirement for all individuals (known as the "individual mandate") to obtain a minimum level of health insurance coverage (known as "minimum essential coverage" or "MEC") or to pay a tax penalty to the Internal Revenue Service ("IRS"). In subsequent legislation, Congress reduced the penalty from $695 to $0. At that point, the State of Texas, joined by several other states and two individual plaintiffs, filed a challenge to the amended Act in a federal district court sitting in Texas. The court held that Congress's effective elimination of the tax penalty had rendered unconstitutional the individual mandate to obtain MEC, as it could no longer be justified as a tax. Further, because the unconstitutional provision could not be severed from the rest of the ACA, the entire Act was invalid. In its June 2021 decision, the Supreme Court did not reach these substantive issues, instead ruling 7-2 that neither the states nor the individual plaintiffs had Article III standing to bring the suit, as none had shown a past or future injury "fairly traceable" to the officials' conduct.

In an opinion by Justice Breyer, the Court first noted the individual plaintiffs' claim that they had suffered a particularized harm in the form of past and future monetary payments made each month in order to carry the required MEC. Assuming without deciding that this "pocketbook injury" satisfied the injury-in-fact element of Article III standing, the Court determined that the plaintiffs nevertheless failed to satisfy the "traceability" element. Their problem lay in the fact that the statutory provision, while it required them to obtain MEC, had no means of enforcement. With the penalty "zeroed out," the IRS could not extract a penalty from those individuals who failed to comply. Thus, there was no possible government action that could be causally connected to the plaintiffs' alleged injury. To put the matter conversely, the injury was not "fairly traceable" to any "allegedly unlawful conduct" of which the plaintiffs complained.

The Court then considered the individual plaintiffs' claim from the viewpoint of another standing requirement—the redressability of the injury. To determine whether an injury is redressable, a court considers the relationship between the judicial relief requested and the injury suffered. In this case, the plaintiffs sought injunctive relief and a declaratory judgment. The injunctive relief, however, concerned the ACA's other provisions that the plaintiffs argued were inseverable from the MEC requirement. The only relief they sought concerning the MEC provision was a declaration of its unconstitutionality. But the Declaratory Judgment Act alone does not provide a court with jurisdiction. The underlying dispute itself must meet the standing requirements, and the Court had just determined that in this case it did not. To find standing to attack an unenforceable statutory provision for an alleged injury that was not redressable, as in this case, would allow a federal court to issue an advisory opinion without the possibility of any judicial relief—something a federal court simply cannot do.

Concerning the state plaintiffs, the Court noted that the plaintiffs claimed they had sustained two kinds of pocketbook injuries. First, they alleged an indirect injury in the form of the increased use of, and therefore cost to, state-operated medical insurance programs. Second, they claimed a direct injury resulting from a variety of increased administrative and related expenses required by the MEC provision, along with other provisions of the Act that they believed were inextricably interwoven with it. Specifically, the state plaintiffs claimed that the MEC provision caused state residents who were subject to it to enroll in state-operated or state-sponsored insurance programs such as Medicaid, the Children's Health Insurance Program, and health insurance programs for state employees, thereby increasing the states' costs. The Court held, however, that, like the individual plaintiffs, the states failed to show how their injuries were fairly traceable to any actual or possible unlawful government conduct in enforcing the MEC provision. That failure alone was enough to defeat the states' claim to Article III standing.

Aside from that pure issue of law, the Court identified another fatal weakness on the part of the state plaintiffs: They failed to show that the challenged MEC provision, without any prospect of penalty, would harm them by leading more individuals to enroll in the state-related programs. Noting that these programs offer their recipients many benefits that have nothing to do with the MEC provision, the Court cited statutes providing for no-cost Medicaid services furnished to children and pregnant women, prohibiting Medicaid premiums for certain individuals with family income below 150% of the poverty line, and providing premium tax credits to make health insurance plans, including employer-sponsored plans, more affordable. Given these benefits, neither logic nor intuition suggested that the existence of the MEC requirement would lead an individual to enroll in one of the programs that the provision's nonexistence would cause them to ignore.

For these and other reasons, the Court concluded that none of the plaintiffs had shown a concrete, particularized injury fairly traceable to the federal officials' conduct in enforcing the specific statutory provision they attacked as unconstitutional. Thus, the plaintiffs failed to show that they had Article III standing to challenge the Act's MEC provision. The Court reversed and vacated the Fifth Circuit's judgment to the contrary and remanded the case with instructions to dismiss.

Justice Alito, joined by Justice Gorsuch, dissented, declaring that the states had standing for reasons that were "straightforward and meritorious." Regarding the "fairly traceable" requirement, the dissenters believed that the states sufficiently claimed that the individual mandate was unconstitutional and that without it they would not have had to pay the expenses flowing from provisions of the ACA that were inseverable from the mandate.

This decision is obviously of great consequence to all the stakeholders in the matter of health-care insurance coverage—including employers. The ACA remains intact. Nothing needs to be changed. If the Court had ruled that even one of the plaintiffs had standing, it would have proceeded to the merits of the claim, raising the possibility of the entire Act being struck down. To say that such a result would have required change by all stakeholders is perhaps the understatement of the year.

Exotic Dancers—Employees or Independent Contractors?

Nadine Roddy — Wed, 12 May 2021 15:22:34 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

An exotic dancer was an "employee" of an adult entertainment club under the Fair Labor Standards Act ("FLSA"), even though a written agreement disclaimed an employment relationship, a federal district court sitting in Florida recently held in Schofield v. Gold Club Tampa, Inc., No. 8:19-CV-3097-VMC-TGW, 2021 WL 533540 (M.D. Fla. Feb. 12, 2021). The summary judgment evidence showed that the economic reality of the relationship was one of employer and employee given the degree of control over the dancer's work exercised by the club, among other factors.

An exotic dancer who worked at an adult entertainment club brought suit against the club owner and its operator ("club"), seeking a ruling that she had been misclassified as an independent contractor, that she was the club's employee, and that she was thus entitled to employee's protections under the FLSA. The evidence showed that the club's DJ used a list of dancers present at the club on a given shift to set up a rotation for performances on the stage. Each dancer would perform for about two and a half minutes to music she had preselected. In addition to watching dancers on the stage, club patrons could purchase a lap dance in an open booth and/or time with a dancer in a private "VIP room." An employee called a "VIP host" would schedule such activities and collect the money before any activity took place.

The club did not pay the dancers any form of compensation. An agreement signed by both parties described the relationship as one of "Licensor-Lessor" and "Licensee-Temporary Space Lessee," and it stated that "no employee/employer relationship exists between the [parties]." The dancers kept whatever tips they made for dancing on stage, for lap dances, or in the VIP rooms. The dancer in this case moved for partial summary judgment.

In order to determine whether an employer-employee relationship exists under the FLSA, courts look to the "economic reality" of the relationship between the parties and whether that relationship demonstrates dependence by one upon the other, the Schofield court noted. Labels used by the parties are not dispositive. The factors considered by the courts include (1) the nature and degree of control over the worker, (2) the worker's opportunity for profit or loss, (3) the worker's investment in equipment or materials, (4) whether the service rendered requires a special skill, (5) the degree of permanency and duration of the working relationship, and (6) the extent to which the service rendered is an integral part of the alleged employer's business.

Noting that the district courts in the Eleventh Circuit have uniformly held that exotic dancers are employees of the clubs in which they perform, the Schofield court determined that the economic status of the dancer in this case was inextricably linked to conditions over which the club had complete control, such as advertising, customer flow, overall club atmosphere, and facilities' maintenance. Although the dancer set her own schedule, decided whether to dance on the stage or pursue the more lucrative private dances, chose her own choreography, costume, and music, and determined for which customers she would perform, she did not exercise any meaningful control over the business.

The court then explained that in applying the profit-or-loss factor, the focus should be on the worker's contribution to managerial decisionmaking and investment relative to the company's contribution. Because the club was primarily responsible for attracting customers and setting minimum fees for services, it exercised significant control over the dancers' opportunity for profit. The only risk of loss a dancer could incur was the nightly lease fee of $10 to $20, depending on when she arrived for work. The club's risk of profit and loss thus far exceeded that of its dancers.

Next, the court determined that the dancer's investment in equipment and materials—costumes, make-up, hair—was indisputably minimal compared to that of the club. Further, although the club asked potential workers about their prior experience, it did not require dancers to have any formal training, certification, license, or any experience at all; thus, no special skill was involved. The factor of the degree of permanence tipped in favor of the club, but it was entitled to little weight given the inherently "itinerant" nature of exotic dancers' work. Finally, the service of the dancers was unquestionably essential to the club's business for, without it, the club would have been just an ordinary restaurant and bar. With five of the six factors weighing in favor of the dancer, the court held that she was an employee of the club within the meaning of the FLSA. Her motion for partial summary judgment was granted.

Gay and Transgender Employees Are Protected by Federal Antidiscrimination Statute, Supreme Court Holds

Nadine Roddy — Wed, 17 Feb 2021 16:05:10 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

An employer that discharges an individual for being homosexual or transgender violates Title VII of the Civil Rights Act of 1964, the Supreme Court held 6-3 in one of the last decisions of its October 2019 term. Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020). Title VII contains the well-known prohibition of discrimination in employment against an individual “because of” the individual's “race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). Writing for the majority, Justice Gorsuch explained that an employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Thus, sex plays a “necessary and undisguisable role” in such decisions—precisely what Title VII forbids.

Three cases were consolidated for this appeal. Each one started with an employer discharging a long-term employee soon after the employee revealed that he was homosexual or gender-transitioning—and allegedly for no other reason. In Bostock v. Clayton County Board of Commissioners, 819 F. App’x 891 (11th Cir. 2020), the employee had been a county child welfare advocate for 10 years with an excellent performance record. After he joined a gay recreational softball league, however, influential community members allegedly began making negative comments about his sexual orientation and the “optics” of his playing in a gay athletic league. Shortly thereafter, he was discharged for conduct unbecoming a county employee.

In the second case, Zarda v. Altitude Express, Inc., 883 F.3d 100 (2d Cir. 2018) (en banc), the employee in question had worked as a skydiving instructor for a private employer. After several successful seasons with the company, he mentioned to a skydiving student that he was gay and just days later his employment was terminated.

The third suit, EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., 884 F.3d 560 (6th Cir. 2018), was brought by the Equal Employment Opportunity Commission (EEOC) against a funeral business that had discharged a male employee when, after six years of satisfactory performance as a funeral director, he announced that he was transitioning to live and work as a female. Although the employer had a professional dress code for its public-facing employees of each sex, it required the employee in this case to continue to follow the dress code for men. After the employee wrote a letter stating that upon returning from vacation he would be presenting as a woman, his employment was terminated.

Although the three cases began the same way, they ended differently. In Bostock, the Eleventh Circuit held that Title VII does not prohibit employers from discharging employees for being homosexual, and so the suit could be dismissed as a matter of law. Meanwhile, the Second Circuit concluded in Zarda that sexual orientation discrimination in employment is in fact prohibited by Title VII and, thus, the suit could proceed. Finally, in Harris Funeral Homes, the Sixth Circuit reached a conclusion similar to the Second Circuit's, holding that Title VII prohibits employers from discharging employees because of their transgender or transitioning status. The Supreme Court granted review in these cases to resolve the disagreement among the circuits over the scope of Title VII's protections for homosexual and transgender persons.

Employing a textual analysis, the Court discerned a straightforward rule emerging from the ordinary meaning of the statute's language as it was understood at the time of the law's adoption in 1964: An employer violates Title VII when it intentionally fires an individual employee based in part on the employee’s sex. It does not matter if other factors contributed to the decision; nor does it matter if the employer treated women as a group the same when compared to men as a group. If the employer intentionally relied in part on an individual employee's sex when deciding to terminate employment—or put differently, if changing the employee's sex would have yielded a different result—a statutory violation has occurred.

As the Court further explained, it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual on the basis of sex. The Court offered as an example an employer with two employees, both of whom are attracted to men. To the employer’s mind, the two individuals are materially identical in all respects, except that one is a man and the other a woman. If the employer were to fire the male employee for no reason other than his attraction to men, the employer would be discriminating against him for traits or actions it tolerated in his female colleague. Put differently, the employer would have intentionally singled out the employee to fire based in part on the employee's sex, and the affected employee's sex would be a cause of his discharge. As another example, the Court hypothesized an employer discharging an employee who was identified as male at birth but who currently identifies as female. If the employer were to retain an otherwise identical employee who was identified as female at birth, the employer would be intentionally penalizing the employee identified as male at birth for traits or actions that it tolerated in the employee identified as female at birth. Again, the individual employee's sex would play “an unmistakable and impermissible role in the discharge decision.” Bostock, 140 S. Ct. at 1741-42.

An employer cannot mount a defense by declaring that it is equally happy to discharge both male and female employees who are homosexual or transgender, the Court continued. Title VII liability is not limited to employers that, through the sum of all of their employment actions, treat the class of men differently than the class of women. Instead, the law makes each instance of discriminating against an individual employee because of that individual's sex an independent violation of Title VII. So, just as an employer that fires both Hannah and Bob for failing to fulfill traditional sex stereotypes doubles rather than eliminates its Title VII liability, an employer that fires both Hannah and Bob for being gay or transgender does the same.

In summary, the Court stated that these cases involved no more than the straightforward application of legal terms with plain and settled meanings. For an employer to discriminate against employees for being homosexual or transgender, of necessity, the employer must intentionally discriminate against individual men and women in part because of sex. This has always been prohibited by Title VII's plain terms.

Justices Alito and Thomas dissented, believing that the majority had engaged in outright legislation. Because homosexuality and transgender status are not included in Title VII's list of protected characteristics—race, color, religion, sex, and national origin—and because homosexuality and transgender status are conceptually distinct from sex, they are excluded from Title VII's protections. Put another way, if Congress had wanted to address homosexuality and transgender status in Title VII, it would have referenced them specifically. Justice Kavanaugh also dissented, writing separately to emphasize his belief that under the Constitution's separation of powers, the responsibility to amend Title VII belongs to Congress and the President in the legislative process, not to the Court.

Note. One aspect of the Court’s ruling that is not entirely clear is whether bisexual individuals come within Title VII’s protection. Notably, the majority opinion uses only the terms “homosexual,” “gay,” and “transgender.” As Justice Gorsuch wrote, “in Title VII, Congress outlawed discrimination in the workplace on the basis of race, color, religion, sex, or national origin. Today, we must decide whether an employer can fire someone simply for being homosexual or transgender. The answer is clear. An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.” Bostock, 140 S. Ct. at 1737 (emphasis added). Indeed, the term “bisexual” does not appear in the decision until the eighth footnote of Justice Alito’s dissenting opinion. Id. at 1758 n.8. Nor does the majority opinion contain the acronym “LGBT” (lesbian, gay, bisexual, transgender) or any other umbrella term that would include bisexual individuals.

Further, the majority’s reasoning would not appear to support Title VII protection for bisexual individuals. If an employer were to discharge all of its bisexual employees, and only those employees, would the employer be discriminating because of the employees’ sex? A male who is attracted to both males and females would be fired, as would a female who is attracted to both males and females. The same trait—bisexuality—would be treated the same way for both male and female employees. Under the majority’s analysis, this result would seemingly not violate Title VII.

Still, it is difficult to imagine that any court would conclude that even though homosexual and transgender individuals are protected by Title VII, bisexual individuals are not. Therefore, the prudent approach for employers revising their equal employment opportunity policies after Bostock would be to prohibit discrimination on the basis of “sexual orientation” (rather than “homosexuality”) as well as “transgender status.”

Recent Legislation Provides Coronavirus Relief for the American Workforce

Nadine Roddy — Tue, 12 May 2020 16:30:38 GMT

Nadine Roddy—Senior Attorney, National Legal Research Group

On March 18, 2020, the federal Families First Coronavirus Response Act of 2020 ("Families First Act"), Pub. L. No. 116-127, was signed into law. The measure is the second in a series of recent legislative attempts to ameliorate the adverse health and economic effects of the novel coronavirus COVID-19 in the United States. The Act applies to employers with fewer than 500 employees, and its major provisions require (1) paid sick leave, and (2) paid FMLA leave for child care during the pandemic. The Act's leave provisions are effective April 2, 2020 through December 31, 2020.

A third piece of legislation, the Coronavirus Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), Pub. L. No. 116-136, was signed on March 27, 2020. A massive relief package, it provides for increased public health spending, cash relief for individual citizens earning under $75,000 a year ($150,00 a year for married couples), enhanced unemployment benefits, a lending program for small businesses, and targeted relief for certain heavily impacted industries.

Paid sick leave. Employers subject to the Families First Act must provide up to 10 days of paid sick leave at the employee's regular rate of pay (or the applicable minimum wage, if higher) to enable the employee to self-quarantine or seek treatment for COVID-19 illness. However, sick pay is limited to two-thirds of the employee's regular rate of pay/minimum wage when leave is taken to care for an ill family member or a child out-of-school.

Specifically, an employer must provide paid sick leave for any of the following reasons:

The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
The employee is caring for an individual who is subject to an order as described in the first point above or has been advised as described in the second point above.
The employee is caring for his or her child because the child's school or place of care has been closed, or the child's care provider is unavailable, due to COVID-19 precautions.
The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretary of the Treasury and the Secretary of Labor. (An employer of a health care provider or an emergency responder may elect to exclude the employee from this provision.)

Full-time employees are entitled to 80 hours of paid sick time. A part-time employee must be given a number of hours equal to the hours the employee works, on average, over a two-week period. The pay cannot exceed $511 a day and $5,110 in the aggregate when the leave is required for the employee's own health or need to quarantine, and it cannot exceed $200 a day and $2,000 in the aggregate when the leave is required to care for a family member or a child out-of-school.

Paid sick leave pursuant to the Families First Act must be granted in addition to any preexisting paid leave benefits the employee may have accrued, and the employer may not alter its existing paid leave policy to avoid this requirement. Sick leave must be made available for immediate use by an impacted employee regardless of length of employment, and the employer cannot require that any employee first exhaust other paid leave benefits.

An employer who violates the sick leave provisions of the Families First Act will be deemed to have failed to pay minimum wages in violation of the Fair Labor Standards Act ("FLSA") and will be subject to FLSA penalties.

"Public health emergency" child care leave. The Families First Act also amends the Family and Medical Leave Act ("FMLA") to provide up to 12 weeks of job-protected leave—10 of which must be paid, subject to a cap—to employees who have a "qualifying need related to a public health emergency." This new type of leave can be used by an employee who is unable to report for work due to a need to care for the employee's minor child at home when the child's school or place of care has been closed, or the child's care provider is unavailable, due to a public health emergency.

The first 10 days of emergency leave may be unpaid (presumably because 10 days of paid sick leave are available for this purpose under the Families First Act). The employee may elect to substitute other accrued paid leave during this time. After the first 10 days, the employer must provide paid leave in an amount not less than two-thirds of the employee's regular rate of pay, capped at $200 a day and $10,000 in the aggregate. The Families First Act provides a calculation for employees with varying workweek schedules.

Emergency leave may be used by any employee who has been employed for at least 30 calendar days by the employer, which is a much lower threshold than for other FMLA leave. Further, the regular requirement that the employee work at a job site with 50 employees within a 75-mile radius does not apply to emergency leave. For employers with fewer than 25 employees, there is a narrow exception to the FMLA's job reinstatement requirements that applies in specific circumstances.

The Families First Act gives the Department of Labor the authority to exempt small businesses (those with fewer than 50 employees) from the emergency leave requirements when the viability of the business as a going concern would be jeopardized. Guidance from the Department on the application of this exemption is anticipated.

Employer tax credits. The Families First Act provides employers subject to its leave requirements with payroll tax credits as a reimbursement measure. The paid sick leave credit is equal to 100% of the sick leave wages paid, including qualified health plan expenses related to those wages. The credit can be claimed on a quarterly basis. It is limited to $511 a day ($5,110 total) if an employee has taken time off for self-care, and to $200 a day ($2,000 total) if the leave have been taken to care for a family member who is quarantined or has symptoms of COVID-19, or a minor child whose school has closed.

For wages paid for public health emergency leave, an employer may take a payroll tax credit equal to 100% of the emergency leave wages paid, including qualified health plan expenses related to those wages. The credit is limited to $200 a day ($10,000 per employee total). Either type of credit is refundable if it exceeds the amount the employer owes in payroll tax. The Families First Act does not provide a payroll tax cut or an extension of standard filing deadlines for federal tax returns, although the IRS has separately extended the April 15th deadline for tax payments (but not filings) by 90 days. To prevent a double benefit, employers must include the amount of credits received in their gross income. Further, any wages taken into account in determining the credit allowed under the Families First Act will reduce the Code Section 45S paid family and medical leave credit that may be available to the employer under the 2017 Tax Cuts and Jobs Act.

On April 1, 2020, the Department of Labor issued temporary regulations implementing the sick leave and family leave provisions of the Families First Act. Visit www.federalregister.gov/d/2020-07237.

Unemployment benefits. The CARES Act creates the Pandemic Unemployment Assistance Program, which is in effect through December 31, 2020. The program provides federal funding for unemployment compensation to self-employed individuals, independent contractors, gig-economy workers (i.e., Uber drivers), and those with limited work history who are adversely impacted by the pandemic. Such workers must not be otherwise covered by state unemployment compensation laws. A worker eligible under this provision is entitled to the same unemployment benefits that regular employees receive under the relevant state's law.

The CARES Act also gives states the option of entering into agreements with the federal government to provide enhanced unemployment benefits under their existing benefit programs. Such an agreement would provide immediate benefit payments (i.e., no waiting period), an additional $600 a week for up to four months, and an additional 13 weeks of benefits for participating states.

Additionally, the states are offered agreements to receive funding for state-enacted "short-time compensation" programs that would subsidize employees whose hours have been reduced in lieu of a lay-off. Such employees would receive benefits prorated for the partial workweek reduction. Funded benefits under this provision are capped at 26 weeks.