Supreme Court Update
The Supreme Court issued several employment-related decisions this month: (1) it narrowly defined “whistleblowers” who are entitled to protection under the Dodd-Frank Act; (2) it reiterated that retirees’ right to “lifetime” health benefits expires at the end of a collective bargaining agreement, unless the CBA specifically provides otherwise; and (3) it declined to clarify if sexual orientation discrimination is prohibited by Title VII.
- Dodd-Frank Does Not Protect Internal Whistleblowers. The Dodd-Frank Act protects whistleblowers from employment discrimination. Federal circuit courts were split on whether the whistleblower protections applied only to reports of financial wrongdoing to the U.S. Securities and Exchange Commission, or whether it applied also to internal complaints. The SEC also adopted this latter, broader approach in its regulatory guidance.
The Supreme Court, however, found in Digital Realty Trust, Inc. v. Somers that the definition of a whistleblower was clearly set forth in the Dodd-Frank Act: an individual who provides “information relating to a violation of the securities laws to the Commission.” Thus, employees who report internally are not protected by the anti-discrimination provisions of Dodd-Frank. This holding vastly narrows the group of employees protected by Dodd-Frank.
However, it likely will increase the number of SEC complaints filed against publicly traded companies.
- No Right To Lifetime Health Benefits After Expiration of CBA. The Supreme Court in CNH Industrial N.V. v. Reese, found that the U.S. Court of Appeals for the Sixth Circuit incorrectly relied on invalid legal precedent in ruling that retirees had a right to lifetime health benefits after the applicable collective bargaining agreement (CBA) had expired. The Sixth Circuit failed to apply the Supreme Court’s 2015 decision, M&G Polymers USA LLC v. Tackett, in which the Supreme Court stated that ordinary principles of contract law govern the interpretation of CBAs, specifically including provisions regarding retiree health benefits. Thus, under Tackett, the CBA must specifically provide for lifetime benefits beyond the term of the CBA, or else such benefits end with the expiration of the CBA.
The Tackett case overturned an earlier case, UAW v. Yard Man, Inc, that had provided for an inference of lifetime benefits where the CBA is silent on the duration of such benefits. The Supreme Court found that the Sixth Circuit had, in essence and inappropriately, relied on Yard Man in finding lifetime health benefits for retirees absent such clear cut direction in the CBA.
- No Decision on Title VII Coverage of Sexual Orientation Discrimination. The Supreme Court declined to review a case that would have resolved a federal circuit court split on whether discrimination based on sexual orientation constitutes sex discrimination under Title VII. As we have previously reported, the U.S. Court of Appeals for the Eleventh Circuit and, at that time, the Second Circuit, found that it does not (the Eleventh Circuit decision, Evans v. Georgia Regional Hospital, was the case on appeal to the Supreme Court). Until February 26, 2018, the Second Circuit agreed with the Eleventh Circuit, but has now joined the Seventh Circuit in reaching the opposite conclusion (the Second Circuit decision is discussed in the Take Note section of this E-Update). Meanwhile at the federal agency level, the Equal Employment Opportunity Commission strongly asserts that sexual orientation discrimination is a form of sex discrimination prohibited by Title VII, and recently won its first filed sexual orientation discrimination case in federal district court. The Department of Justice, which under President Obama had shared the EEOC’s position, has more recently under the Trump administration rejected that position.
Employers were hoping that the Supreme Court would resolve the issue. With the Supreme Court’s rejection of the appeal, whether sexual orientation discrimination is prohibited by Title VII will depend on the jurisdiction, and likely will be subject to shifting positions from the courts.