Last week started the 2013-2014 Term at the Supreme Court of the United States. While the hot issues last year were DOMA, Title VII (Vance v. Ball State University and University of Texas Southwestern Medical Center v. Nassar), and class actions (for two years running with last term’s decisions including Genesis HealthCare Corp. et al. v. Symczyk, American Express Co. v. Italian Colors Restaurant, Oxford Health Plans LLC v. Sutter), the most high-profile cases of this term are in the wage and hour and traditional labor arenas. As you follow the Court’s activity this term, here is some information on the six cases that will have the most effect on how you run your company.

The Employment and Labor Law Docket

(1)               Sandifer v. United States Steel Corporation. Does the Fair Labor Standards Act (FLSA) require employers to compensate employees for the time they spend putting on and taking off their work clothes in a locker room at the plant? The Supreme Court will answer this question in Sandifer v. United States Steel Corporation, which came out of the Seventh Circuit Court of Appeals. The case was brought on behalf of 800 former and current steelworkers in Gary, Indiana. And, the “alleged clothes” as the Seventh Circuit puts it, include flame-retardant pants and jackets, work gloves, steel-enforced work boots, hard hats, safety glasses, ear plugs, and a hood that covers the top of the head, chin, and neck. The Seventh Circuit ruled that the changing time was not compensable. The specific question the Court has agreed to hear is what constitutes “changing clothes” within the meaning of Section 203(o) of the FLSA. The Supreme Court will hear arguments in the case on November 4, 2013.

(2)               National Labor Relations Board v. Noel Canning. The Noel Canning decision concerns the constitutionality of President Barack Obama’s recess appointments of Sharon Block, Terence F. Flynn, and Richard F. Griffin to the National Labor Relations Board (NLRB) on January 4, 2012. The president appointed theses three NLRB members pursuant to Article II, Section 2, Clause 3 of the U.S. Constitution—the “Recess Appointments Clause”—according to which the president is permitted “to fill up all vacancies that may happen during the recess of the Senate, by granting commissions which shall expire at the end of their next session.” The D.C. Circuit Court of Appeals found that these recess appointments were unconstitutional. The Supreme Court granted review of the case in order to evaluate the president’s recess appointment power and the validity of President Obama’s three appointments. In addition, the Court will decide whether the recess-appointment power may be exercised during a recess that occurs within a session of the Senate or is instead limited to recesses that occur between enumerated sessions of the Senate. Oral arguments in the case have not yet been scheduled.

(3)               UNITE HERE Local 355 v. Mulhall. This case centers around the meaning of the phrase, “thing of value” under section 302 of the Labor-Management Relations Act (LMRA)—often known as the Taft-Hartley Act—which makes it unlawful for an employer to give or for a union to receive any “thing of value,” subject to limited exceptions. In the case, the employer and union entered into an agreement according to which the employer promised (1) to provide union representatives access to non-public work premises to organize employees during non-work hours; (2) to provide the union a list of employees, their job classifications, departments, and addresses; and (3) to remain neutral to the unionization of employees. The Eleventh Circuit Court of Appeals held that this type of organizing assistance can be a thing of value that, if demanded or given as payment, could constitute a violation of section 302. The Supreme Court agreed to hear the case to decide whether the employer and union violated section 302 by entering into their agreement.

(4)               United States v. Quality Stores, Inc. The Supreme Court just recently agreed to hear this case on whether severance payments are taxable. The case is on appeal from the Sixth Circuit Court of Appeals, which considered a bankruptcy court’s ruling ordering refunds of tax payments collected under the Federal Insurance Contributions Act (FICA). The specific issue to be settled by the Court is whether severance payments are taxable under FICA when made to employees whose employment is involuntarily terminated.

(5)               Heimeshoff v. Hartford Life & Accident Insurance Co. and Wal-Mart Stores, Inc. The only other employee benefits case currently pending at the Court is the Heimeshoff case, which takes up the issue of the precise statute of limitations within which an individual must challenge the denial of disability benefits. The Employee Retirement Income Security Act (ERISA) does not contain a specific limitations period within which individuals must bring a challenge to a denial of benefits. Instead, according to the Second Circuit Court of Appeals, the controlling limitations period on such claims comes from the “most nearly analogous state limitations statute.” The Supreme Court will thus settle the issue of when a statute of limitations should accrue for judicial review of a disability adverse benefit determination under ERISA. The Court heard oral arguments on October 15, so we may get this decision earlier in the Term.

(6)               Madigan v. Levin. The Supreme Court heard oral arguments in Madigan v. Levin on the first day of its Term (October 7, 2013), and it was the first case it decided in the 2013-2014 Term. The Court dismissed the writ of certiorari in the age discrimination case as improvidently granted in a one-line order. The issue in the case, which came out of the Seventh Circuit Court of Appeals, was whether the Age Discrimination in Employment Act (ADEA) is the exclusive remedy for age discrimination claims brought by a former state assistant attorney general. The writing was on the wall in this case as soon as the Court heard arguments last week and Justice Stephen G. Breyer suggested that the Court dismiss the case as one that should not have been granted.

Other Cases of Interest

There are several other cases, which while not emerging in the employment law or labor law context, will nevertheless likely have wide-ranging relevance. In the class action context, watch out for a group of three cases—Chadbourne & Parke LLP v. Troice and two others—on whether the Securities Litigation Uniform Standards Act (SLUSA) precludes certain class actions (concerning securities fraud allegations). The Court also agreed to hear Mississippi ex rel. Hood v. AU Optronics Corp., a case out of the Fifth Circuit Court of Appeals, on the issue of whether an action is removable as a “mass action” under the Class Action Fairness Act when the state is the sole plaintiff and the claims arise under state law. One of the issues to decide is whether the state, in suing manufacturers for price fixing, was acting as a class representative and if the real parties in interest are the consumers residing in that state.

In the affirmative action context, look out for a follow-up to last year’s decision in Fisher v. University of Texas at Austin, in which the Court remanded the affirmative action case to the Fifth Circuit Court of Appeals. This Term, in Schuette v. Coalition to Defend Affirmative Action, the Court will consider Michigan’s “Proposal 2”—an amendment to Michigan’s state Constitution prohibiting race-based and sex-based discrimination or preferential treatment in public-university admissions decisions.

Another case, Lawson v. FMR LLC, concerns the whistleblower protection provision of section 806 of the Sarbanes-Oxley Act (SOX). Two employees brought separate suits accusing their employers of unlawful retaliation. The employers are private companies that act under contract as advisers to and managers of mutual funds. The Supreme Court agreed to resolve whether an employee of a privately held contractor or subcontractor of a public company is protected from retaliation by section 806 of SOX.

The Court will also be hearing several cases on immigration law, attorneys’ fees, and arbitration. So far, none of these cases have the wide appeal of the closing-day decisions of the last two terms—last Term’s DOMA ruling or the previous Term’s Affordable Care Act ruling. But, the employment law community has been watching—and anticipating—Sandifer and Noel Canning , and the decisions in those cases will provide some much-needed clarity, especially to unionized workforces.

Hera S. Arsen, J.D., Ph.D. is managing editor of firm publications in the Torrance, California office of Ogletree Deakins.

The post “Alleged Clothes,” “Things of Value,” and “Recess Appointments”: What’s In “Store” In The New Supreme Court Term appeared first on Ogletree Deakins Blog.

The federal district court decision in Rochow v. Life Insurance Company of North America, No. 04-73628 (March 23, 2012) went unnoticed by most ERISA practitioners after it was issued in 2012, even though the court awarded millions of dollars in disgorged profits to a benefit claimant as appropriate equitable relief under section 502(a)(3) of the Employee Retirement Income Security Act (ERISA). Frankly, most practitioners did not take it seriously. However, now that the decision has been affirmed by the Sixth Circuit Court of Appeals in a rather incredible split decision issued on December 6, 2013, it will likely receive substantial press coverage and be roundly praised and criticized, depending on whether one represents benefits claimants or benefits plans.

The case started out as a routine denial of disability benefits, which was overturned by the district court on a finding that the defendant insurance company had acted arbitrarily and capriciously. It then morphed into a case involving an award of nearly $1 million in benefits, a substantial award of attorneys’ fees, and most disturbingly, a $3.8 million disgorgement of profits judgment against the disability insurer for breach of fiduciary duty. One can only wonder at the potential ramifications of the decision, whether it will withstand review by the full Sixth Circuit Court of Appeals, and how it will fare in other circuits.

Daniel Rochow sued for disability benefits under section 502(a)(1)(B) of ERISA and also sought equitable accounting and disgorgement of profits as “appropriate equitable relief” under section 502(a)(3). The district court determined that Life Insurance Company of North America’s (LINA’s) benefit determination had been arbitrary and capricious. The Sixth Circuit affirmed that decision. When the case was remanded to the district court, Rochow sought an accounting and disgorgement of profits under section 502(a)(3) in addition to an award of nearly $1 million in back benefits and attorneys’ fees. After months of additional discovery, expert opinions, and further hearings, the district court applied a return-on-equity analysis to the disgorgement claim and awarded an additional $3.8 million in disgorged profits against LINA.

In a 2-to-1 decision, the Sixth Circuit affirmed the district court a second time. Among other things, the majority held that ERISA does not bar tandem claims for withheld benefits under section 502(a)(1)(B) and breach of fiduciary duty claims under section 502(a)(3)—even where there is no allegation of a separate injury, aside from the benefit denial, and even though the same alleged fiduciary breach serves as the basis for both types of claims. The panel majority held that because Rochow had sought the disgorgement remedy as a separate type of relief, disgorgement was an appropriate remedy for the arbitrary and capricious benefit denial.

Responding to LINA’s argument that appropriate equitable relief under section 502(a)(3) is intended to be limited to make-whole relief, the majority held that where section 502(a)(3) allows equitable relief “to redress” violations of ERISA, such relief extends not only to relief designed to “set right” the alleged wrong, but also to relief designed to “avenge” the alleged wrong. Amazingly, the majority then went on to suggest that the $3.8 million disgorgement remedy was not “punitive.” The majority also affirmed the district court’s application of a return-on-equity analysis to the disgorgement claim, rather than an analysis offered by LINA that would have equated disgorgement of profits to an award of prejudgment interest on the withheld benefits. The rationale for the more generous disgorgement award was the fact that LINA did not retain the unpaid benefits in a segregated account, but rather retained the money in its general assets.

A vigorous dissent reasoned that the majority decision was both wrong and shortsighted. It was wrong because it was contrary to the Supreme Court’s decision in Varity Corp.v. Howe, 516 U.S. 489 (1996) and to subsequent Sixth Circuit decisions interpreting Varity Corp. to the effect that section 502(a)(3) is inapplicable where relief is available in a benefits claim under section 502(a)(1)(B). The dissent also pointed out that the disgorgement award was a pure windfall to the plaintiff and was contrary to the intent of section 502(a)(3), which is to provide only make-whole relief. The dissent also predicted that the decision would change ERISA benefits cases, which are typically decided on dispositive motions based on a written record, into complex accounting cases with substantial discovery. The dissent also criticized the majority decision as “willfully blind to the negative repercussions that undoubtedly will ensue” in ERISA benefits litigation.

It is too early to determine precisely what impact Rochow will have on ERISA benefits litigation. However, at least in the short term, there is no question that it will create further litigation as benefits claimants and benefits plan fiduciaries attempt to wrestle with how the decision may apply in specific situations. Certainly, plaintiffs’ lawyers will attempt to amend existing complaints and expand such cases beyond what is intended by the statute.

Mark E. Schmidtke is a shareholder in the Chicago office of Ogletree Deakins.

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