The Manufacturing Law Blog provides timely commentary on issues of importance to manufacturers and distributors.  Contributors from the law firm of Robinson & Cole LLP are corporate compliance and litigation attorney, Jeff White; environmental, health and safety attorney, Pam Elkow;  and labor and employment attorney, Nicole Bernabo.

As Part II of our U.S. Supreme Court roundup, this post will discuss select employment cases decided this term that may have a significant impact on manufacturers, including Title VII retaliation, same-sex marriage impacting employee benefits, class arbitration agreements, and affirmative action.

Title VII Retaliation

In University of Texas Southern Medical Center v. Nassar , No. 12-48 (U.S. June 24, 2013), the Court addressed Title VII  in the retaliation context and raised the burden of proof for employees claiming that their employers have retaliated against them.  The court considered Nassar’s claim that he was denied a position with a University of Texas medical center because he complained about suffering discrimination as a university faculty member on account of his Middle Eastern background.  In such cases, the Court said that an employee bears the burden of proving that retaliation was the sole reason the employer took action, not simply one of several motives.

This decision is certainly a victory for employers.  However, given the significant increase in the number of retaliation claims over the years, employers should consider reviewing their employment discrimination policies and training programs to address protected conduct and retaliation.  If such policies do not already address retaliation, employers may wish to include a strong non-retaliation statement that encourages employees to come forward with complaints of unlawful conduct without fear of reprisal and provide a process for employees to report acts of retaliation.

Same-sex Marriage

The U.S. Supreme Court also decided United States v. Windsor, No. 12-307 (U.S. June 26, 2013), a case we reported on in an earlier post.  The Court held that Section 3 of the Defense of Marriage Act was unconstitutional because it violated basic due process and equal protection principles.  This decision is far reaching.  Robinson & Cole’s Employee Benefits and Compensation Group wrote about the significant impact of this decision for employers.  You may access the Group’s alert here.   

Arbitration Agreements

Manufacturers are particularly vulnerable to class action claims because of the large number of employees involved in the manufacturing process, and a well-drafted class arbitration waiver may be an effective tool  to avoid the tremendous expense and risk of a class action suit.  Therefore, the U.S. Supreme Court’s decisions in American Express Co. v. Italian Colors Restaurant, No. 12–133 (U.S. June 20, 2013) , and Oxford Health Plans LLC v. Sutter, No. 12-135 (U.S. June 10, 2013) are significant and likely to have an impact for manufacturers who utilize or are considering utilizing such waivers.

The Court’s decision in American Express Co. v. Italian Colors Restaurant involved an antitrust dispute between the parties.  Italian Colors Restaurant initiated a class action against American Express Co. for charging higher credit card fees than competing cards.  American Express Co. sought to enforce the class arbitration waiver.  Despite Italian Colors’ argument that individually bringing an antitrust action would be prohibitively expensive, the Court nevertheless determined that such factors are insufficient to invalidate a class arbitration waiver.  Justice Scalia, writing for the majority, emphasized that courts must “rigorously enforce” arbitration agreements according to their terms as such terms are a matter of contract.

The Supreme Court’s ruling in Oxford Health Plans LLC v. Sutter is very narrow and arguably limited to the facts.  The Court strictly interpreted the parties arbitration agreement and focused on the fact that the parties had agreed to allow the arbitrator to determine the scope of the agreement.  Oxford never argued that the question of class arbitration was a question of arbitrability – what issue may be raised before the arbitrator during the arbitration hearing.  Therefore, the issue became one of contract interpretation, a legal issue that is traditionally decided by the arbitrator.  Since the parties agreed to entrust the arbitration decision to an arbitrator, a court may only vacate the arbitrator’s decision, including their decision to allow class arbitration, in limited circumstances.  In this case, Oxford failed to meet this test and the Court unanimously held that the arbitrator’s ruling must stand.

The American Express Co. and Oxford decisions are considered victories for manufacturers seeking to avoid costly and time-consuming class action litigation, especially in matters where courts have previously found that class action waivers conflict with federal or state statutes.[1]  These decisions also reinforce the need for employers to reevaluate their arbitration agreements, or if such agreements are not already implemented, whether manufacturers should draft and implement such agreements.  In this regard, manufacturers may wish to consider the various benefits of an arbitration program against the costs to develop a comprehensive dispute resolution strategy.  Further, in light of the Oxford decision, employers with arbitration agreements that are silent on class arbitration should consider revising their agreements to minimize the risk of having an arbitrator decide whether class arbitration is possible under the parties’ agreement. 

Affirmative Action

In Fisher v. Univ. of Texas at Austin, No. 11–345 (U.S. June 24, 2013), the court considered race among other factors in its admissions policies in the context of affirmative action.  Ultimately, the Court sent the case back to a lower court to review the case again, and directed the court to apply the “strict scrutiny” test to the university’s admissions policy.  The “strict scrutiny” test is a rigorous judicial review requiring the policy in question to be precisely tailored to serve a compelling governmental interest.

For manufacturers, the question is largely whether this ruling could apply to government contractors who are subject to the rules and regulations of the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP). It is unlikely that this ruling will have a significant impact as the OFCCP has been heavy-handed in prescribing how contractors must act in the hiring and employment of racial minorities.  Further, OFCCP’s regulations do not require affirmative action programs to hire a person who lacks qualifications or is less qualified than another candidate, an issue that was before the court in Fisher.  That said, manufacturers may wish to continue to stay abreast of any OFCCP developments that may impact hiring decisions in light of this recent ruling.