Category: Labor & Employment

US Supreme Court Holds That Airline Cargo Loaders Are Exempt From Arbitration

The US Supreme Court has held that airline cargo loaders who load and unload cargo from planes that travel across state lines are exempt from the Federal Arbitration Act (FAA) because they belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. Southwest Airlines Co. v. Saxon (June 6, 2020).

Background

Latrice Saxon worked for Southwest Airlines and was responsible for training and supervising teams of ramp agents who load and unload airplane cargo on Southwest planes that travel across state lines. Saxon brought a collective action alleging failure to pay proper overtime wages FLSA in the Northern District of Illinois. However, Saxon had signed an arbitration agreement requiring her to arbitrate her wage disputes, and Southwest moved to dismiss the lawsuit and to compel arbitration under the FAA.

Saxon opposed the motion, invoking § 1 of the FAA, which exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” She argued that ramp supervisors, like seamen and railroad employees, were an exempt “class of workers engaged in foreign or interstate commerce,” but the district court agreed with Southwest and found that only employees involved in “actual transportation,” not those who merely handle goods, fell within § 1 of the FAA. On appeal, the Seventh Circuit Court of Appeals disagreed with the District Court’s decision, holding that “[t]he act of loading cargo onto a vehicle to be transported interstate is itself commerce.” The Seventh Circuit’s decision conflicted with an earlier decision of the Fifth Circuit, Eastus v. ISS Facility Services, Inc., 960 F. 3d 207 (2020), and the Supreme Court granted certiorari to resolve the conflict between the two circuits.

The Supreme Court’s Decision

In a unanimous decision, the Supreme Court held that loaders who load and unload airplane cargo that travels intrastate play a direct role in the interstate transportation of goods and therefore belong to a “class of workers engaged in foreign or interstate commerce” under § 1 of the FAA. The Court engaged in a two-step analysis. First, it considered how to define the relevant “class of workers.” The Court rejected Saxon’s argument that the “class of workers” should be defined as virtually all airline employees, which would include shift schedulers or those who design Southwest’s website. Rather, the Court held that the inquiry must focus on the job duties of the employees themselves, rather than the employer’s business and that Saxon “belongs to a class of workers who physically load and unload cargo on and off airplanes on a frequent basis.”

Next, the Court considered whether that class of airplane cargo loaders “engaged in foreign or interstate commerce.” It determined that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce of that cargo” and that workers like Saxon who load and unload airplane cargo that travels in interstate commerce are exempt from the FAA.

Takeaway for Employers

Though the Court did find a class of workers exempt from the Federal Arbitration Act, it expressly rejected the assertion that this exemption should apply to all employees of an employer engaged in foreign or interstate transportation. It went on to provide examples of positions that would not satisfy the exemption, such as workers engaged in the sale of interstate asphalt or workers who supply janitorial services to a corporation engaged in interstate commerce.

Employers engaged in interstate or foreign transportation commercial should consult legal counsel if they plan to utilize arbitration agreements as part of their dispute resolution process.

Article By John P. Zaimes and Natalie C. Kreeger of ArentFox Schiff LLP

For more arbitration legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Abortion-Related Travel Benefits Post-Dobbs

Immediately following the Supreme Court decision in Dobbs v. Jackson returning the power to regulate abortion to the states, a number of large employers announced that they would offer out-of-state travel benefits for employees living in states where abortion-related medical care is unavailable. Employers considering offering abortion-related travel benefits have several key considerations to keep in mind. The law currently allows health plans to provide reimbursement for travel primarily for and essential to medical care. Although this area of the law is evolving, employers with self-funded medical plans may amend their existing medical plans to provide abortion-related travel benefits while those with fully insured medical plans may face more obstacles in providing such benefits.

In Dobbs v. Jackson, an abortion clinic challenged a Mississippi law that would ban abortion after 15 weeks of pregnancy, with limited exceptions. In establishing the constitutional right to abortion in Roe v. Wade, the Supreme Court restricted states in their ability to limit or ban abortions before viability of the fetus, or 24 weeks from the time of conception. In upholding the Mississippi law, the Supreme Court overturned Roe and held that the protection or regulation of abortion is a decision for each state.

Alabama, Arkansas, Kentucky, Missouri, Oklahoma and South Dakota have already banned or made abortion illegal pursuant to trigger laws which went into effect as of the Supreme Court decision on June 24, 2022.  Also, a number of additional states are expected to soon have similar legislation in effect, either by virtue of expected legislative action or trigger laws with slightly delayed effective dates.  In response, a number of employers have announced that they will reimburse all or a portion of abortion-related travel expenses for employees in states where abortions are banned or otherwise not available.

Under Section 213(d) of the Internal Revenue Code, the definition of “medical care” includes transportation that is both “primarily for and essential to” the medical care sought by an individual. These types of travel benefits have historically been utilized in connection with certain specialized medical treatments, such as organ transplants.  However, Section 213(d) is not limited to particular types of procedures, and thus forms the framework for providing abortion-related travel benefits through existing medical plans.

Although Code Section 213(d) applies to both self-insured and insured medical plans, the substantive coverage provisions of insured medical plans will generally be governed by the state insurance code of the state in which the insurance policy is issued.  Coverage for abortion services or any related travel benefits may not be permitted under the insurance code of the state in which the policy is issued, or an insurer may not offer a travel benefit for such services even if permitted to do so.  Self-insured plans, by contrast, provide employers more flexibility in plan design, including control, consistent with existing federal requirements, over the types and levels of benefits covered under the plan. As noted above, existing plans may already cover travel-related benefits for certain types of medical procedures.

Employers with high-deductible health plans tied to health savings accounts (HSAs) will need to consider the impact of adding abortion-related travel benefits to such plans.  Travel-related benefits of any type would not appear to be eligible for first dollar coverage, and thus may be of minimal benefit to participants enrolled in high-deductible health plans.

Employers with fully insured medical plans that do not cover abortion-related travel benefits may be able to offer a medical travel reimbursement program through an integrated health reimbursement arrangement (HRA).  An integrated HRA is an employer-funded group health plan from which employees enrolled in the employer’s traditional group medical insurance plan are reimbursed for qualifying expenses not paid by the traditional plan.

Another potential option for employers with fully insured medical plans may be to offer a stipend entirely outside of any established group health plan. Such reimbursement programs may result in taxable compensation for employees who receive such reimbursements. Also, employers would need to be sensitive to privacy and confidentiality considerations of such a policy, which should generally be minimized if offered in accordance with the existing protections of HIPAA through a medical plan and under which claims are processed by an insurer or third-party administrator rather than by the employer itself.

Additionally, some state laws may attempt to criminalize or otherwise sanction so-called aiding and abetting actions related to the procurement of abortion services in another state.  This is an untested area of the law, and it is unclear whether any actions brought under such statutes would be legally viable.  In this regard, Justice Kavanaugh stated as follows in his concurring opinion in Dobbs:  “For example, may a State bar a resident of that State from traveling to another State to obtain an abortion? In my view, the answer is no based on the constitutional right to interstate travel.” (Kavanaugh Concurring Opinion, page 10.)  This is an area that will require continual monitoring by employers who offer abortion-related travel benefits.

Article By Thomas G. Hancuch, Philip L. Mowery, and Amal Rafiq of Vedder Price

For more labor and employment legal news, click here to visit the National Law Review.

© 2022 Vedder Price

Preparing Corporate Messaging in the Wake of Dobbs

The United States Supreme Court (“SCOTUS”), in Dobbs v. Jackson Women’s Health Organization, has held that there is no constitutional right to abortion, overruling Roe v. Wade and Casey v. Planned Parenthood.

Employers, who increasingly are finding themselves on the front lines of many societal issues, will need to decide quickly whether and how they might address the Dobbs decision, as public reaction has been and is likely to remain strong. Board members, employees, and shareholders may advocate for corporations to take a visible stand on the issue of abortion and reproductive rights. And employees may want to speak up themselves (possibly via employer social media accounts).

It is important to remember that company communication decisions and actions regarding the Dobbs ruling, as well as other political and social issues, can have practical and legal implications.

The first question is whether your company will comment on Dobbs. If you decide to comment, there are many factors to consider. Your message is an important starting point. Who is your intended audience? Will your employees consider it an opportunity to join in the conversation? What will you say? Even if your message is internal, keep in mind that it may not stay that way, given the nature of social media. And before you think, “I’ll just stay out of it,” remember that some will view silence or neutrality as a statement in and of itself. If you choose not to speak, are you prepared to deal with any potential reaction from customers, employees, or shareholders?

Internally, employees may have questions about health benefits or other terms and conditions of employment because of Dobbs. It will be important to arm all key stakeholders, including leadership, corporate communications, and human resources, with tools to consistently manage these communications and responses.

Whether it’s internal or external communications, expect feedback! How that feedback is handled is as important as the initial communication (or lack thereof).

Certain industries, like healthcare and insurance, may also feel compelled to make an affirmative statement if the Dobbs decision has a direct impact on services and/or products. In those cases, the need to consider all implications is even more pressing.

In thinking through these decisions, employers should also consider who may need to approve any messaging. The board of directors, senior executives, legal, and marketing and communications teams are among the key stakeholders who may need to be consulted. And don’t forget that your public-facing employees may bear the brunt of your response. Are they prepared?

Employers should also keep in mind various laws that may govern their reaction, including those they might otherwise not consider. For example, the National Labor Relations Act protects employees’ rights to collectively discuss terms and conditions of employment at work and off duty – and that applies to employers with and without a unionized workforce. The current Biden-appointed General Counsel of the National Labor Relations Board has taken an expanded view of topics that are connected to the workplace. Moreover, some states, including California and New York, have enacted off-duty conduct laws that prohibit employers from disciplining employees for lawful conduct outside of work, which may include political advocacy. There may also be anti-discrimination laws and potential civil and criminal liability associated with your statements, depending on their wording.

Reactions to the Dobbs decision may vary. Some reaction may be comparable to what we’ve seen with respect to other recent political and/or social justice movements, such as Black Lives Matter and #MeToo; others may react differently, or not at all. In these rapidly changing times, companies — particularly publicly traded and consumer-facing ones — need to be make informed decisions. Clear, consistent messaging is key to establishing confident and consistent responses to potential concerns by employees and other stakeholders.

Article By M. Carter DeLorme, Frank C. Morris, JR, Susan Gross Sholinsky, Jennifer Barna, and Erin E. Schaefer of Epstein Becker & Green, P.C.

For more civil rights legal news, click here to visit the National Law Review.

©2022 Epstein Becker & Green, P.C. All rights reserved.

U.S. Supreme Court Overturns Roe and Casey: What This Decision Means for Employers

As many expected based on the draft opinion that was leaked months ago, the U.S. Supreme Court has held the U.S. Constitution does not protect the right to obtain an abortion. Dobbs v. Jackson Women’s Health Organization, No. 19-1392 (June 24, 2022).

Dobbs overturns nearly 50 years of precedent from the Court’s decision in Roe v. Wade and Planned Parenthood Pennsylvania v. Casey on the issue.

The impact of Dobbs will vary, as states are now at liberty to enforce and create abortion legislation without restrictions arising out of constitutional protections.

What does this mean for employers?

As pressure mounts on this issue, some employers may be considering what, if anything, they can or should do. Many states have enacted legislation that restricts individual abortion rights and potentially third parties who assist individuals who seek abortions. To the extent any state laws were not enforced because of the Court’s holding in Roe or Casey, states can move forward now to implement and enforce those laws.

Laws often referred to as “trigger laws,” those that are in place but unenforceable due to overriding federal restrictions, become enforceable once those federal restrictions are lifted. As a result of Dobbs, abortion-related “trigger laws” previously unenforceable can take effect, creating new standards for individuals and others that will redefine the national abortion law landscape.

Some existing state laws and trigger laws may affect employers and put employers at risk of violating state law if they implement policies to assist employees seeking an abortion or even continue to cover abortions under group health plans. For example, a state law may create liability for anyone who “aids or abets” a person who obtains an abortion. Employers also must be cognizant of how they apply their leave policies, who may seek accommodations based on a sincerely held religious belief, and whether certain provisions of the Pregnancy Discrimination Act apply to women who are seeking or who have had an abortion.

In addition, the Court’s ruling may affect employee benefit plans. Many employers are considering additional benefits for their employees, and their covered dependents, such as travel reimbursement for seeking an abortion outside of the local jurisdiction due to state law restrictions. There are many legal issues to consider in connection with the coverage of abortion-related services under employee benefit plans. (For additional guidance on the issue, see our article, Group Health Plan Considerations in the Face of (Potentially) Changing Abortion Laws.) Depending on how the state laws are enacted, there also may be issues with relying on ERISA preemption provisions to avoid these obligations.

Corporate management and directors should plan for changes and be aware of policies and fiduciary responsibilities. This can include preparing for public and employee reactions (for and against), legislative and law enforcement threats, social media posts, and other employee demonstrations. Pressure from a variety of groups to take a corporate public opinion also may occur.

Whether changes to leave policies, employee benefits, travel reimbursement, or handling accommodation requests, employers considering policies or benefit offerings in response to Dobbs must carefully review and consider federal and state laws, including state abortion-related legislation to evaluate the risk of potential liability.

Article By Patricia Anderson Pryor, Joy Napier-Joyce, Melissa Ostrower, and Tasos C. Paindiris of Jackson Lewis P.C.

For more labor and employment legal news, click here to visit the National Law Review.
Jackson Lewis P.C. © 2022

Governor Rolls Back California COVID-19 Executive Orders & Cal/OSHA Releases Draft Permanent COVID-19 Standard

On June 17, 2022, Governor Newsom issued an executive order terminating certain provisions of prior executive orders related to Cal/OSHA’s COVID-19 Emergency Temporary Standards (ETS). Some of the terminated orders were no longer necessary due to changes in the ETS. For example, previously the Governor had issued an executive order stating exclusion periods could not be longer than California Department of Public Health (CDPH) guidelines or local ordinances. However, since the ETS now defers to CDPH guidance on isolation and quarantine, the Governor has rescinded his prior executive order on this issue. Moreover, Cal/OSHA has issued guidance for employers on COVID-19 Isolation and Quarantine that aligns with CDPH requirements.

The current version of the ETS remains in effect until the end of 2022. However, Cal/OSHA won’t be done with COVID-19 regulations in 2023. The agency is currently working on a permanent COVID-19 Standard. Recently, the draft of the proposed regulation was released.

The draft regulation carries over many of the employer obligations from the current ETS. The following are some of the proposed requirements:

  • COVID-19 procedures, either included in their Injury and Illness Prevention Program (IIPP) or a separate document.
  • Exclusion and prevention requirements for positive employees and close contacts.
  • Employers would continue to be required to provide testing to employees who have a close contact in the workplace.
  • Employers would continue to have notice requirements for COVID-19 exposure.
  • Employers would continue to have to provide face coverings to employees.
  • Employers would continue to have reporting and recordkeeping requirements for COVID-19 cases and outbreaks in the workplace.

Currently, no public hearing has been set for the proposed permanent COVID-19 Standard, so it is uncertain how soon the regulations may be implemented.

Article By Sean Paisan of Jackson Lewis P.C.

For more coronavirus legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

You Have Mail (Better Read It): District Court Finds EEOC 90-Day Deadline Starts When Email Received

If a letter from the EEOC is in your virtual mailbox but you never open it, have you received it? Most of us are familiar with the requirement that a claimant who files an EEOC charge has 90 days to file a lawsuit after receiving what is usually required a “right-to-sue” letter from the agency. This is one of the deadlines that both plaintiff and defense counsel track on their calendars. But when is that notice officially “received” by the claimant — especially in these days of electronic correspondence? In Paniconi v. Abington Hospital-Jefferson Health, one Pennsylvania federal court decided to draw a hard line on when that date actually occurs.

A Cautionary Tale

Denise Paniconi worked for a hospital in Pennsylvania and filed a charge of discrimination with the EEOC alleging race and religious discrimination. The EEOC investigated and issued a right-to-sue letter dated September 8, 2021, which gave her 90 days to file her complaint. She filed her complaint 91 days after the EEOC issued the letter. The employer moved to dismiss the complaint for failing to comply with the 90-day deadline.

What ordinarily would just be a day counting exercise took a twist because of how the EEOC issued the notice. The EEOC sent both the plaintiff and her lawyer an email stating that there was an “important document” now available on the EEOC portal. Neither the plaintiff nor her lawyer opened the email or accessed the portal until sometime later. They argued that the 90-day filing deadline should run from the date that the claimant actually accesses the document, not from the date the EEOC notified them it was available.

The court dismissed the complaint for failing to meet the deadline. The opinion noted that although the 90-day period is not a “jurisdictional predicate,” it cannot be extended, even by one day, without some sort of recognized equitable consideration. Paniconi’s lawyer argued that the court should apply the old rule for snail mail  ̶  without proof otherwise, it should be assumed that the notice is received within three days after the issuance date. The court disagreed and pointed out that no one disputed the date that the email was sent  ̶   it was simply not opened and read by either Paniconi or her lawyer. The court said that there was no reason that those individuals did not open the email and meet the 90-day deadline.

Deadlines Are Important

This is another example of how electronic communication can complicate the legal world. The EEOC has leaned into its use of the portal, and the rest of the world needs to get used to it. The minute you receive an email or notice from the portal, you need to calendar that deadline. Some courts (at least this one) believe that electronic communication is immediate, and you may not get grace for not logging on and finding out what is happening with your charge. Yet another reason to stay on top of your emails.

Article By J. William Manuel and Anne R. Yuengert of Bradley Arant Boult Cummings LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2022 Bradley Arant Boult Cummings LLP

The Intersection of the Bipartisan Infrastructure Law and Davis-Bacon Act Requirements for Federal Contractors and Subcontractors

On November 15, 2021, President Joe Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act into law, which is popularly known as the Bipartisan Infrastructure Law (“BIL”).

The BIL is estimated to create an additional 800,000 jobs.  The United States Department of Labor (“DOL”) contends that such new jobs will “expand the middle class, revitalize our nation’s transportation, communications and utility systems and build a more resilient, reliable, and environmentally sound future.”  The White House asserts that the BIL will provide protection to “critical labor standards on construction projects,” as a substantial portion of the construction projects included in the BIL will be subject to requirements of the Davis-Bacon Act (“DBA” or the “Act”).

While the BIL provides new revenue sources and opportunities for construction projects, federal contractors and subcontractors should ensure that their businesses comply with the DBA’s prevailing wage rates and labor standards requirements.

Scope and Coverage of DBA

In its simplest form, the DBA, enacted in 1931, requires federal contractors and subcontractors to pay prevailing wage rates and fringe benefits to certain construction workers employed on certain federal contracts.  The DOL’s Wage and Hour Division (“WHD”) administers and enforces the Act’s requirements on federally funded and assisted construction projects.  The DBA applies to contracts:

  1. Which the Federal Government or the District of Columbia is a party;

  2. For the construction, alteration, or repair, such as painting and decorating, of public buildings and public works to which the Federal Government or the District of Columbia is a party;

  3. Involving the employment of mechanics, laborers, and other workers that engage in manual or physical labor (except for individuals performing administrative, clerical, professional, or management work such as superintendents, project managers, engineers, or office staff); and

  4. Which are in excess of $2,000.

With respect to the DBA applying to federal contracts above $2,000, this value threshold only applies to the initial federal contract.  If the threshold is met, however, then the DBA applies to any lower-tier subcontracts even if the value of the subcontract is less than $2,000.

Requirements for Contractors and Subcontractors

There are various requirements for federal contractors and subcontractors under the DBA, which the United States Supreme Court has described as “a minimum wage law designed for the benefit of construction workers.”  The Act was designed to protect construction workers’ wage standards from federal contractors who may base their contract bids on wage rates that are lower than the local wage level.  Under the DBA, federal contractors and subcontractors are required, among other things, to do the following:

  1. Pay covered workers who work on the work site the prevailing wage rates and fringe benefits that are listed in the applicable wage determinations, which are provided by the WHD (the prevailing wage rate consists of both the basic hourly rate of pay and any fringe benefits to bona fide third-party plans, which may include medical insurance; life and disability insurance; pensions on retirement or death; compensation for injuries or illness resulting from occupational activity; or other bona fide fringe benefits – bona fide fringe benefits, however, do not include payments made by employer contractors or subcontractors that are required by other federal, state, or local laws such as required contributions to unemployment insurance);

  2. Maintain accurate payroll records for employees that must be submitted to the contracting agency on a weekly basis (within seven days following the regular pay date for the particular workweek), which must include the following for covered employees: (i) name; (ii) classification; (iii) daily and weekly hours worked; and (iv) deductions made and actual wages paid (there are additional recordkeeping requirements for federal contractors who employ apprentices or trainees under approved DOL programs);

    • Federal contractors and subcontractors are also required to preserve the payroll records for three years following the completion of the covered work, provide accessibility to the records upon request by the DOL or its representatives, and allow the DOL or its representatives to interview employees during work hours.

    • Federal contractors and subcontractors can use the WHD’s Form WH-347 to satisfy the weekly reporting requirements.

  3. With respect to prime or general contractors, they must ensure that specific contract clauses and the applicable wage determinations are inserted into any lower-tier subcontracts (the contract clauses cover the following: (i) construction wage rate requirements; (ii) withholding of funds; (iii) payrolls and basic records; (iv) apprentices and trainees; (v) compliance with requirements under the Copeland Act; (vi) requirements for subcontracts; (vii) contract termination – debarment; (viii) compliance with construction wage rate requirements and related regulations; (ix) disputes concerning labor standards; and (x) certification of eligibility); and

  4. Post a notice of the prevailing wages as to every classification of worker and an “Employee Rights under the DBA” poster in a prominent location that is easily accessible to the covered workers at the work site.

Practical Consideration in Compliance with DBA

Federal contractors and subcontractors should ensure that covered workers are properly classified for the work such individuals perform and paid in accordance with the prevailing wage rate for their classification.

Employers will often face recordkeeping challenges when they have nonexempt employees who perform covered (manual) work and non-covered (administrative) work in the same workweek.

In such instances, the employer must determine whether the employee is salaried or paid hourly.  If the employee is salaried, the employer must determine whether the employee’s salary is greater than or equal to the prevailing wage rate for the employee’s classification.  If not, the employer contractor is required to increase the employee’s pay for the week the covered work is performed.

Likewise, if the employee is paid hourly, then the employer must ensure the employee’s hourly rate is greater than or equal to the prevailing wage rate for the employee’s classification.

Federal contractors and subcontractors could face various consequences due to their failure to comply with the DBA, ranging from termination of the federal contract and debarment to a contracting agency withholding money due to the contractor to cover back wages due to employees as well as criminal prosecution.  Accordingly, federal contractors and subcontractors should consult with legal counsel to ensure they comply with the various DBA requirements for any covered contracts.

Article By Xavier D. Lightfoot and Devon D. Williams of Ward and Smith, P.A.

For more government contracts legal news, click here to visit the National Law Review.

© 2022 Ward and Smith, P.A.. All Rights Reserved.

BREAKING: Supreme Court Reverses California Court of Appeal in Viking River Cruises v. Moriana

On June 15, 2022, the U.S. Supreme Court issued its decision on Viking River Cruises, Inc. v. Moriana (Case No. 20-1573) reversing the California Court of Appeal’s decision to affirm the denial of Viking’s motion to compel arbitration Moriana’s “individual” PAGA claim and to dismiss her other PAGA claims.

As previously reported, the question presented in Viking River Cruises involved whether the Federal Arbitration Act (“FAA”) preempts the California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, 58 Cal.4th 380 (2014), which invalidates contractual waivers of representative claims under California’s Labor Code Private Attorneys General Act (“PAGA”).

In a majority opinion authored by Justice Alito, the Court held that while Iskanian’s prohibition on “wholesale waivers” of PAGA claims is not preempted by the FAA, Iskanian’s rule that PAGA actions cannot be divided into “individual” and “non-individual claims” is preempted.

Applying this holding to the parties, the Court held that Viking was entitled to enforce the parties’ arbitration agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim.  As for Moriana’s non-individual PAGA claims,  because PAGA itself “provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding,” Moriana lacks “statutory standing” under PAGA to litigate her “non-individual” claims separately in state court.  Accordingly, “the correct course is to dismiss her remaining claims.”

Article By Timothy Kim and Michele J. Beilke of Hunton Andrews Kurth

For more litigation legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Supreme Court Declines to Resolve Circuit Split on Exercise of Personal Jurisdiction in FLSA Collective Actions

On June 6, 2022, the Supreme Court of the United States declined to hear petitions seeking review of whether federal courts may exercise personal jurisdiction over claims of nonresident plaintiffs who join Fair Labor Standards Act (FLSA) collective actions when their claims are not connected to the defendant’s activities in the forum state. The petitions sought review of rulings on the issue by the First and Sixth Circuit Courts of Appeals in Waters v. Day & Zimmermann NPS, Inc. and Canaday v. The Anthem Companies, Inc., respectively. As a result of the Supreme Court’s decision declining to hear the petitions, there remains a circuit split as to whether the Court’s 2017 ruling in Bristol-Myers Squibb Co. v. Superior Court applies to FLSA collective actions, and employers with nationwide footprints remain subject to uncertainty depending on jurisdiction.

To date, only the First, Sixth, and Eighth Circuits have ruled on the issue. On August 17, 2021, the Sixth Circuit was the first to address the issue in Canaday. There, the Court held that federal courts may not exercise personal jurisdiction over claims of nonresident plaintiffs who join FLSA collective actions when their claims are not connected to the defendant’s activities in the forum state. Just one day later, on August 18, 2021, the Eighth Circuit came to the same conclusion in Vallone v. CJS Solutions Group, LLC.

On January 13, 2022, in Waters, the First Circuit held to the contrary, concluding that federal courts do have personal jurisdiction over claims asserted by nonresident opt-in plaintiffs.

The Significance of Bristol-Myers

The Supreme Court’s decision in Bristol-Myers provides the basis for the current circuit split. Bristol-Myers involved a mass tort action under state law for alleged defects in a blood-thinning drug, Plavix, which the company manufactured. Residents and nonresidents of California sued Bristol-Myers in California state court, alleging injuries related to the drug. The nonresident plaintiffs claimed no relationship with the forum state, nor did they purchase Plavix in California or suffer any harm from it in California. The Supreme Court reasoned that any similarity between the resident and nonresident plaintiffs’ claims was an “insufficient basis” to exercise specific jurisdiction. Unless nonresident plaintiffs could demonstrate that their claims arose out of the defendant’s contacts with the forum state, personal jurisdiction over the company did not exist, no matter “the extent of a defendant’s unconnected activities in the State.”

In ruling that the California state court lacked jurisdiction over the claims of the nonresident plaintiffs, the Supreme Court acknowledged that its holding might ultimately generate more litigation in the form of separate actions by nonresident plaintiffs in their respective states. But the Supreme Court also noted that all plaintiffs to the action could have brought a mass tort action against Bristol-Myers in New York (the company’s headquarters) or Delaware (its place of incorporation) because courts in those states would have had general personal jurisdiction over the company. Instead, the California state court could exercise only specific personal jurisdiction over the company based on its activities in the state. Notably, Bristol-Myers was limited to Rule 23 class actions, leaving lower courts to determine whether its holding applied to FLSA collective actions, which differ procedurally.

The Circuit Split

In Canaday, the Sixth Circuit reiterated the basic tenet that, pursuant to the Due Process Clause of the Fourteenth Amendment, the question of whether a court has personal jurisdiction over a defendant depends on the defendant’s contacts with the state in which the plaintiff filed the lawsuit. Because Anthem is both incorporated and headquartered in Indiana and not otherwise “at home” in the state of Tennessee, the district court in Tennessee lacked general jurisdiction over Anthem as a defendant. At issue was whether the district court in Tennessee had specific personal jurisdiction over Anthem, and thus, whether there was a claim-specific and Anthem-specific relationship between the nonresidents’ FLSA claims and the state of Tennessee.

Applying Bristol-Myers, the Sixth Circuit held that there was not. The court found that the nonresident plaintiffs did not bring claims arising out of or relating to Anthem’s conduct in Tennessee, because Anthem neither employed nor paid the nonresident plaintiffs within the state. The Sixth Circuit went on the explain that adherence to this approach should not change the way FLSA collective actions are filed, because plaintiffs traditionally file their actions where courts have general jurisdiction, or where the conduct occurred. Of note, Sixth Circuit Judge Bernice Donald dissented in Canaday, contending that Bristol-Myers does not apply to FLSA collective actions because the Supreme Court in that case addressed only the limitations of state courts, not federal courts, in their exercise of personal jurisdiction over nonresidents.

In Waters, the First Circuit largely followed the reasoning in Judge Donald’s dissent, concluding that the Supreme Court’s decision in Bristol-Myers Squibb “rest[ed] on Fourteenth Amendment constitutional limits on state courts exercising jurisdiction over state-law claims” and thus did not control whether a federal court could exercise jurisdiction over federal claims asserted by nonresident plaintiffs. The First Circuit also observed that the plain language of Rule 4(k) of the Federal Rules of Civil Procedure merely concerns the service of summonses and does not “constrain[] a federal court’s power to act once a summons has been properly served, and personal jurisdiction has been established.”

Key Takeaways

The Supreme Court’s decision to deny the petitions means that employers with nationwide footprints continue to live with potentially inconsistent rulings on the question of whether a federal district court has jurisdiction to hear claims of out-of-state workers when the defendant is neither headquartered nor incorporated in the state. Canaday and Vallone stand to significantly limit the size and geographic scope of FLSA collective actions in the Sixth and Eighth Circuits, absent a district court’s exercise of general jurisdiction over a corporate defendant, while Waters permits nationwide jurisdiction in the First Circuit. For now, at least, multistate employers face continued uncertainty on the issue until courts of appeals in the remaining circuits weigh in.

Article By Maggie (Hanrahan) Santen, Monica Lacks, and Samuel H. Ottinger of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

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ERIC Files Amicus Brief Rebutting DOL Attempt to Create New Regulations in Lawsuit, Petitions US Supreme Court on Seattle Healthcare Case

Read on below for coverage of recent law firm news from McDermott Will & Emery.

ERIC Files Amicus Brief Rebutting DOL Attempt to Create New Regulations in Lawsuit

McDermott Will & Emery’s Andrew C. Liazos, Michael B. Kimberly and Charlie Seidell recently filed an amicus brief in the US Court of Appeals for the 10th Circuit on behalf of the ERISA Industry Committee (ERIC). McDermott filed the brief in response to a US Department of Labor (DOL) amicus brief that advanced a novel interpretation of its regulations which, if adopted through litigation, would change longstanding procedures for benefit determinations under self-funded medical plans sponsored by large employers. The amicus brief focuses on key arguments against the DOL’s attempted regulatory reinterpretation, including that:

  • DOL may not rewrite its regulations outside of notice-and-comment rulemaking;
  • DOL’s interpretation of its own regulations is inconsistent with the plain text of the regulations;
  • There are good policy reasons underlying differential treatment of healthcare and disability benefits determinations; and
  • DOL’s interpretation of the regulations in its amicus brief is not entitled to deference under the Supreme Court decision in Kisor.

Read ERIC’s amicus brief here.

Read ERIC’s statement here.

ERIC Petitions US Supreme Court on Seattle Healthcare Case

McDermott Will & Emery’s Michael B. Kimberly, Sarah P. Hogarth and Andrew C. Liazos, are co-counsel on a petition for certiorari before the Supreme Court of the United States on behalf of the ERISA Industry Committee (ERIC). The petition calls for review of ERIC’s legal challenge to the City of Seattle’s hotel healthcare “play or pay” ordinance. The ordinance mandates hospitality employers make specified monthly healthcare expenditures for their covered local employees if their healthcare plans do not meet certain requirements. The petition demonstrates that Seattle’s ordinance is a clear attempt to control the benefits provided under medical plans in violation of the preemption provision under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This case is of significant national importance. Several other cities have proposed making similar changes, and complying with these types of ordinances will substantially constrain the ability of employers to control the terms of their medical plans on a uniform basis. ERIC’s petition is joined by several trade associations, including the US Chamber of Commerce, the American Benefits Council and the Retail Industry Leaders Association.

Read ERIC’s petition for writ of certiorari here.

Read ERIC’s statement here.

 

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