Employment Cases To Watch In 2017

Law360, New York (January 2, 2017, 1:03 PM EST) — The next year is poised to be a tumultuous one in employment law and not just because of the transition to the Trump administration.

While the regulatory pendulum is widely expected to swing back toward the management side after eight years of labor-friendly policy, several pending cases could have greater impact than any regulation.

Given the glacial pace at which suits move through the appeals courts, the list of cases to watch in 2017 is much like the list at this time last year. This time, though, employment attorneys expect some of their biggest legal questions will finally be answered. Here are a few cases likely to be heard — and in most cases, decided — in 2017.

Class Waivers

It would be an understatement to say employers were upset in January 2012 when the National Labor Relations Board ruled homebuilder D.R. Horton Inc. violated the law by making its workers waive their rights to file class actions.

Nearly four years later, that decision — and a handful of conflicting orders handed down recently in the appellate courts — are all but a lock to be on the U.S. Supreme Court’s calendar in the coming months. Employers can’t wait, attorneys say.

“I’ve been a defense lawyer for 38 years. I talk to general counsel and HR professionals on a daily basis,” Seyfarth Shaw LLP partner Gerald L. Maatman said. “That’s the No. 1 issue on their minds.”

Just under two years after the D.R. Horton decision came down, it was reversed by a split Fifth Circuit panel on the grounds that it did not give proper deference to the Federal Arbitration Act and that the ability to file class action suits is not a substantive right. But while the Fifth Circuit would reject the NLRB’s take on class waivers in two other cases in late 2015 and again this past June, a rift emerged between the circuit courts in 2016.

In May, the Seventh Circuit ruled the Federal Arbitration Act could not save Epic System Corp.’s class waiver provision, and the Ninth Circuit ruled similarly on Ernst & Young’s arbitration pact in August. But not all other courts to rule have disagreed with the Fifth Circuit: The Second Circuit shot down the NLRB’s ruling the next month in a case involving Raymours Furniture Co.

Several petitions for the Supreme Court to settle this split have been filed, the most recent coming from the NLRB in December, and the four fully-briefed pending cert petitions are set for a conference on Jan. 6.

Attorneys are confident the high court will intervene.

“The issue will be accepted. It will be briefed. It will be decided by June 30, 2017,” Maatman said.


Another recent NLRB ruling set for review this year is the board’s August 2015 decision that waste management company Browning-Ferris Industries of California Inc. jointly employed workers it brought on through a staffing agency.

The decision loosened the labor board’s test for deciding whether two affiliated companies are joint employers that share bargaining responsibilities when workers organize and legal liability when they file suit. For franchisors, the decision poses difficult questions over how much control they can exert over franchisees. For businesses, it poses questions over how tightly they should link their operations with those of their partners.

“It raises a host of issues that businesses never had to worry about before,” Maatman said. “It’s the new ‘Tort of the Day.’”

Five months after being ruled a joint employer with staffing agency Leadpoint Business Services Inc., Browning-Ferris in January 2016 asked the D.C Circuit to overturn the new test along with a recent NLRB ruling finding it unlawfully refused to bargain with its joint employees.

In its final brief filed in November, the waste company argued the revised test “creates an amorphous, unworkable fog” that leaves companies unsure how to avoid joint employer liability. In its final defense, the NLRB argued the court should give it broad authority to interpret the National Labor Relations Act. The Equal Employment Opportunity Commission and Teamsters, which represents the companies’ joint employees, also filed briefs in favor of the labor board’s ruling.

Browning-Ferris is the agency prong of a growing body of litigation over joint employer liability that also includes a California state suit against McDonald’s Corp. and a New York state suit against Domino’s Pizza Inc. The broader question may not see final resolution in 2017, but the D.C. Circuit’s impending ruling will add an intriguing wrinkle to one of the most impactful employment law sagas in recent years.

Oregon Restaurant and Lodging et al. v. Thomas Perez et al., Joseph Cesarz et al. v. Wynn Las Vegas et al.

Between challenges to the U.S. Department of Labor’s rule requiring companies to note when they hire union busters and its revision to the salary threshold for deciding whether white-collar workers qualify for overtime, the power of federal authorities to interpret their statutory mandates was a big topic in 2016. This will likely be the case again in 2017, when the Supreme Court is expected to consider whether the DOL overreached in 2011 when it barred restaurants from requiring their wait staff to share tips with employees in the back of the house.

“The plaintiffs are stating the Department of Labor exceeded its authority, that they went beyond what they’re empowered to do,” Epstein Becker Green employment attorney Jeffrey H. Ruzal said. “It’s a current theme, and it’s been a current theme throughout the Obama administration.”

The push for the Supreme Court to review this rule is being fueled by a Ninth Circuit ruling in February. In a split decision, the court found the Labor Department acted within its powers when it expanded the tip pool rule. Previously, the rule blocked restaurants that used workers’ tips to fulfill minimum wage requirements from making wait staff share tips with kitchen workers, but in 2011, the DOL expanded that rule to all restaurants, regardless of whether they took a tip credit.

The Ninth Circuit decision reversed an Oregon district court win by the National Restaurant Association and other hospitality industry groups in their challenge of the rule. It also revived a Nevada district court case by workers at a Steve Wynn-owned casino alleging its tip pool arrangements violated the new rule.

In an August petition for certiorari, Wynn Las Vegas argued the decision departs from court precedent and gives federal agencies too much rulemaking authority. The hospitality groups, which are readying a cert petition of their own, filed an amici brief arguing the rule hurts minority workers and puts restaurants in a bind.

The groups also cite as argument for review an apparent circuit split, pointing out a 2015 ruling in which the Fourth Circuit found servers could recover tips their employers made them share with nontipped workers. The DOL and attorneys for the Wynn employees, however, have argued there is no split because the Fourth Circuit did not consider the 2011 rule.

Kimberly Hively v. Ivy Tech Community College, Christiansen v. Omnicom Group Inc. et al.

Another question poised for a legal shakeup is whether Title VII of the Civil Rights Act bars employers from discriminating against employees because of their sexual orientation.

Appellate courts have long held that Title VII does not cover sexual orientation, applying a strict construction of the 1964 statute. But the Seventh Circuit may be gearing up to upset the status quo following a recent en banc rehearing of a suit alleging Indiana’s Ivy Tech Community College violated civil rights law by passing up a gay professor for promotions because of her sexual orientation.

“It comes back to this policy-based argument,” Maatman said. “Should the law be stretched, should it be accommodating to modern needs? Or do we go back to 1964, when the statute was passed? Those are the kinds of time-worn arguments that you see.”

Ivy Tech adjunct professor Kimberly Hively sued the school in August 2014 alleging it blocked her from a full-time job because she’s gay. The Northern District of Indiana dismissed her suit, and she appealed.

A reluctant-sounding panel affirmed the district court decision in July, saying its hands were tied by circuit precedent. But after Hively pushed for rehearing with the backing of the Equal Employment Opportunity Commission and lawmakers behind a bill that would amend the Civil Rights Act to explicitly cover sexual orientation discrimination, the full court took up her call. At a hearing in November, the court questioned the notion that it need follow a strict construction of a statute, pointing out that other acts, such as the Sherman Act, are interpreted far differently now than they were when first issued.

And if the Seventh Circuit again rules against Hively, gay rights advocates have another vehicle for change in a Second Circuit suit alleging a supervisor at ad agency DDB Worldwide discriminated against a gay advertising executive because of his sexual orientation.

Carcano et al v. McCrory et al., United States of America v. State of North Carolina

North Carolina drew national headlines in March when it passed a law requiring that visitors and employees at government buildings use the bathroom corresponding to their birth sex. The legal challenges to the law have likewise captured the eyes of court watchers.

The American Civil Liberties Union filed a lawsuit in March on behalf of two transgender men and a lesbian law professor in the University of North Carolina system alleging the law violated the U.S. Constitution and Title IX of the Civil Rights Act. The federal government joined the fray in May, filing a suit alleging the law violates Title VII, Title IX and the Violence Against Women Act. In August, a North Carolina federal judge denied a broad injunction against the rule but said UNC couldn’t enforce it against the three workers behind the suit. The ACLU has appealed.

The lone district-level suits on this list have another appellate connection: Both have been stayed by joint stipulation while the Supreme Court considers whether Title IX allows the U.S. Department of Education to ban discrimination in schools over gender identity. In the suit underlying that case, a transgender high school student alleged he was illegally barred from using the men’s bathroom.

The case implicates only Title IX and so only has direct bearing on some of the allegations in the bathroom law suits. Still, a ruling could be a significant factor in the bathroom law’s fate.

“I would say the justices will say there needs to be — assuming there’s not a Scalia-type appointment but a more moderate judge — I would assume the judges would come down and say this is one where accommodation needs to be made,” Barnes & Thornburg LLP employment partner Tina Syring said.

Update: This story has been updated to include recent activity in the push to have the class waiver issue heard by the Supreme Court.

~Additional reporting by Daniel Siegal, Kat Greene, Matthew Bultman, Vin Gurrieri, Diana Novak Jones, Jeff Overley and Kevin Penton. Editing by Christine Chun and Aaron Pelc.