What You Need To Know: Employment Implications of Key Recent US Supreme Court Decisions
The United States Supreme Court ended its October 2012 term with a flurry of high profile decisions. A number of those will have significant implications for employers. Among other noteworthy opinions, the Justices handed down one opinion regarding affirmative action and two dealing with Title VII. Employers should be aware of the precedents established by the respective cases, but should remain watchful for developing trends under the doctrines enunciated by the Court. Each of these three cases is summarized below with a discussion of the implications for employers.

Fisher v. University of Texas at Austin

The petitioner in this affirmative action case, Abigail Fisher, sued the University of Texas under the Equal Protection Clause of the U.S. Constitution because it used race as one factor (among many others) in its admission process. Texas’ legislature enacted a law that provided for automatic admission to anyone who graduated in the top 10% of his or her high school’s graduating class. The University of Texas filled its remaining vacant slots with applicants who underwent a holistic evaluation of numerous criteria -- one of was race.

In a 7-1 opinion, the Supreme Court held that the lower deciding courts did not “hold the University to the demanding burden of strict scrutiny” enunciated in its prior decisions in Grutter v. Bollinger, 59 U.S. 306 (2003). That standard consists of a two-step test to determine whether an affirmative action program passes Constitutional muster. The university must first show that its use of race furthered a compelling state interest. Then, it must prove its chosen means were necessary to achieve that interest.

Of significant importance, Justice Kennedy began the majority opinion by noting that diversity in education remains a compelling state interest. While that holding was welcome news for affirmative action programs everywhere, the inquiry does not end there. Instead, the Supreme Court held that a reviewing court must be satisfied that after a “searching examination” of the admissions program, it is “necessary” to use race to achieve the compelling interest of diversity in education. Moreover, the university must establish that no race-neutral alternatives exist and that each applicant is evaluated as an individual. The court may not defer to the university’s “good faith” use of racial classifications to achieve its stated goal.

When the Court granted certiorari in this case, many people predicted a death knell for affirmative action and preferential treatment based on race. The Court stopped short of that but it did clarify the extremely high standard of review that such programs must overcome to avoid violating the Equal Protection Clause. Public universities must abide by this very high burden in enacting any affirmative action admissions program. And although not directly binding on private employers and universities engaged in affirmative action programs, Fisher provides important guidance as to the intensive proofs that would be required in order to pass muster if diversity programs are called into question. Employers seeking to reduce legal risks must continuously evaluate the scope and duration of their programs. Under Fisher, it seems, narrow and necessary is the lesson of the day.

University of Texas Southwestern Medical Center v. Nassar

In Nassar, the Court established the standard for proving causation in a Title VII retaliation case brought under 42 U.S.C. § 2000e-3(a). Prior to that decision, the Court had not settled the question of which standard the statute required -- but-for causation or the more lenient “motivating factor” standard.

Naiel Nassar filed suit against the University of Texas Southwestern Medical Center, alleging Title VII claims of constructive discharge based on race and religion and alleged that he was retaliated against for complaining about the alleged harassment. The Fifth Circuit affirmed a jury award on the retaliation claim on the basis that those claims require only a showing that the employee’s protected activity constituted a “motivating factor” for the employer’s decision.

The Supreme Court vacated the Fifth Circuit’s judgment and established “but-for” causation as the standard for Title VII retaliation claims. Justice Kennedy, writing for a 5-4 majority, compared the Title VII retaliation provision to similar language in the Age Discrimination in Employment Act, which the Court previously determined required but-for causation. He also noted the difference between language in Title VII’s retaliation provision and the section regarding discrimination. The latter allows such a claim to be proven by showing “motivating factor” causation. Finally, Justice Kennedy rejected the EEOC’s guidance which followed the “motivating factor” analysis under administrative law principles.

Employers should take note of several key takeaways from Nassar. Moving forward, employers should find it easier to prevail on summary judgment in Title VII retaliation claims. Accordingly, retaliation plaintiffs can no longer survive summary judgment, or prevail at trial, simply by pointing to a few stray comments from supervisors. The presence of a clear “but-for” standard on jury forms will likely be beneficial as well. Retiring the nebulous “substantial motivating factor” standard should reduce jury confusion and may lead to a greater number of favorable verdicts for employers.

While certainly good news for employers, the effect of the decision should not be overstated. Many Title VII retaliation claims are brought in conjunction with discrimination claims. The number of claims employers face may thus be unaffected by this ruling. And as the Court made clear, the less burdensome standard of causation -- the “motivating factor” standard -- still governs discrimination claims. Employers may be able to narrow the issues that proceed beyond summary judgment by winning on retaliation claims, but other Title VII claims have the same chance of survival under Nassar. At the end of the day, the ultimate outcome in the decisions often turn on whether the employer’s reason for an employment action is found to be legitimate or pretextual, i.e., a lie.

As always, documentation remains key. An employer faced with a lawsuit is much better positioned to defend itself by ensuring that it has the documentation in place that supports the decision at issue. Though not a panacea for employers embroiled in Title VII litigation, Nassar is a pro-employer decision that will have far reaching implications for retaliation claims.

Vance v. Ball State University

In another Title VII case, the Supreme Court provided more good news for employers. In Vance, the Court narrowed the definition of who is a “supervisor” for purposes of the Farragher/Ellerth affirmative defense. Maetta Vance brought suit against Ball State University alleging a hostile work environment perpetrated based on her race by a fellow employee. The Seventh Circuit affirmed the district court’s determination that the university was not liable because the co-worker did not have authority to hire, fire, demote, promote, transfer or discipline Vance, and was thus not a “supervisor.”

The distinction of who is a “supervisor” is important because the Supreme Court has previously held that employers will be held to different standards in harassment claims based on whether the alleged “harasser” is a co-worker or supervisor. For instance, an employer is liable for the offensive conduct of a co-worker only if the employer was negligent. An employer is found liable for negligence if it is shown that the employer knew or reasonably should have known of the harassment and failed to take remedial action.

When a supervisor is the alleged harasser, however, the employer is held to a higher standard. An employer will be subjected to “strict liability” if a supervisor’s harassment ends with a “tangible employment action” such as a firing, failure to promote or a significant change in responsibilities. If there was no “tangible employment action”, however, an employer can escape the strict liability standard under the so-called Farragher-Ellerth affirmative defense. To be successful, the employer must show that (i) the employer exercised reasonable care to prevent and correct promptly any offending behavior caused by the “supervisor”; and (ii) the employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer.

In light of the different standards applied to employers based solely on the status of the alleged harasser, it is critically important to understand who is a supervisor and who is a co-worker. For instance, is a “lead” or a “project manager” a co-worker or a supervisor? In Vance, the Court held that a supervisor is one who is empowered “to take tangible employment actions” against an employee. The Court described that power as the ability “to effect a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” In adopting this bright-line approach, the Court explicitly rejected the nebulous standard advocated by some circuits and the EEOC. That standard, which has been adopted by several courts of appeal, defines a “supervisor” as one with “significant direction over another’s daily work."

The decision is welcome news for employers. The narrower definition of “supervisor” removes from that class of employee those that have authority to direct or manage another employee’s daily activities. This will reduce liability in general. With respect to specific litigation, the benefits may be even greater. By providing a standard that can be “readily applied,” the definition eliminates uncertainty from claims by employees alleging harassment by a co-worker. As the Court recognized, the parties should now be able to discern “even before litigation is commenced whether an alleged harasser was a supervisor.” Part of the analysis will undoubtedly include a review of job descriptions that describe the scope of responsibility of the individuals. Thus, it remains critically important to keep job descriptions up to date in a way that clearly defines the scope of authority that each individual has to affect the terms and conditions of employment of others.