Recent Supreme Court decisions will have wide-ranging effects on employers

The Supreme Court of the United States handed down three crucial decisions the week of June 24, 2013 with wide-ranging effects on federal employment law.  Most noteworthy, of course, is the 5-4 decision striking down a key provision of the Defense of Marriage Act (“DOMA”), which had previously defined marriage, for federal purposes, as the union between members of the opposite sex.  The court also ruled for employers in two employment discrimination cases narrowing the scope of federal employment discrimination laws.  Those cases, both 5-4 decisions, narrowly construe the scope of Title VII as it relates to retaliation claims and employer liability for harassment claims between employees.

United States v. Windsor
The Supreme Court, in U.S. v. Windsor, found Section 3 of the Defense of Marriage Act (“DOMA”) to be unconstitutional and in violation of the Fifth Amendment as a deprivation of the liberty of persons. Edith Windsor, a New York resident who inherited the property of her same-sex spouse upon her death, faced a tax bill of roughly $360,000.  DOMA did not allow the IRS to treat Windsor as a surviving spouse and was thus required to pay the tax that an opposite-sex spouse would not have had to pay.

The court, found that “[t]he class to which DOMA directs its restrictions and restraints are those persons who are joined in same-sex marriages made lawful by the State.”  The federal law is invalid because “no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.”  Thus, the definition of “spouse” will be left to the states.

The immediate effect of this ruling will be to extend various federal benefits to same-sex married couples in states that allow gay marriage.  Same-sex spouses in states that allow gay marriage will likely see changes in the way federal laws are administered as a result of the court’s decision.  A sampling of federal laws that will most likely be impacted are profiled below:  

  •  FMLA: For employees taking leave to care for a spouse with a serious medical condition, the FMLA currently provides that a “family member” includes “a husband or wife as defined or recognized under State law for purposes of marriage in the State where the employee resides.”  This would seem to indicate that the state law definition of spouse would be controlling, however, a 1998 Department of Labor opinion letter actually found DOMA’s definition of spouse to be controlling.  As a result of U.S. v. Windsor, a person with a same-sex spouse will be entitled to FMLA leave if all other conditions are met.
  • Immigration Law: Prior to this case, a U.S. citizen or permanent resident was prohibited under DOMA from sponsoring a same-sex foreign national spouse for U.S. permanent residence (green card).  With this decision, the U.S. joins many other countries in recognizing same-sex marriage as the basis for immigration benefits.  If the marriage was legally recognized in the state or country where it took place, the couple seeking U.S. immigration benefits can reside in any U.S. state.  The decision also opens the category of derivative family member status to same-sex spouses of persons who enter the U.S. on work or student visas.
  • Employee Benefits: Same-sex spouses will likely be treated equal to opposite-sex spouses when it comes to spousal rights to pension and retirement benefits, including survivor annuity rights, death benefits, 401(k) plans, and Social Security Benefits.  Previously, under the Employee Retirement Income Security Act (“ERISA”), a same-sex spouse was not entitled to distributions upon the death of the plan participant in a defined contribution plan.  For welfare plans, dependent coverage definitions referring to “spouse” did not include same-sex partners, but the court’s decision will inevitably change the way employee benefit plans governed by ERISA are administered.
  • Federal Taxation: For federal income tax purposes, health and welfare coverage will likely be affected since the government will no longer be able to tax the coverage of same-sex spouses as a federal tax dependent under Internal Revenue Code 152.  Same-sex spouses would also be relieved of the tax burden associated with inheritance, which was the tax precisely at issue in U.S. v. Windsor

Employers should be aware of the ever-changing landscape regarding federal benefits as a result of the Supreme Court’s decision and review their benefits policies accordingly.

University of Texas Southwestern Medical Center v. Nassar
In University of Texas Southwestern Medical Center v. Nassar, the plaintiff claimed he was retaliated against by not being offered full-time employment after he complained to his supervisor about discrimination at the medical center where he worked.  The Supreme Court tackled the question of whether, in a retaliation case, the plaintiff must prove that the retaliation was a “motivating factor” in the employer’s decision not to hire the plaintiff, or whether the plaintiff only must prove that he would have gotten the job but-for the employer’s retaliatory intent.

In finding that the but-for causation standard is the proper standard of evidence in retaliation cases, the court noted that the retaliation provision of Title VII does not evidence any intent to depart from the traditional but-for standard of causation.  For “status-based” discrimination claims, a plaintiff establishes employer liability if it proves that race, color, religion, sex or national origin was a motivating factor for an employer practice, even though other factors also motivated the practice—a less stringent standard of evidence.  The status-based discrimination provision of Title VII, amended in 1991, is a provision separate and distinct from the retaliation provision.  According to the court, the retaliation provision was not affected by the 1991 amendment, which indicates the higher standard of proof in retaliation cases is the standard Congress intended.

The court also noted, importantly, that if it were to hold retaliation claims to a less stringent standard, there would likely be more retaliation claims and potentially disingenuous retaliation claims as a result.  In 2012, more than 31,000 retaliation claims were filed, a number that has been steadily growing each year.

In Nassar’s wake, employers who maintain detailed and comprehensive documentation on the reasons for their employment-related decisions and actions can be somewhat more assured that they will not be subject to liability simply because a plaintiff might show that retaliation was one of multiple motivating factors in an adverse employment action taken against him or her.

Vance v. Ball State University
In Vance v. Ball State University, the court addressed the principle of vicarious liability as it relates to Title VII liability of an employer for harassing conduct of both “supervisors” and “co-workers.”  In general, a plaintiff will more easily prevail against an employer where the person engaging in the harassing conduct is a “supervisor” rather than a mere “co-worker,” but the test for determining what constitutes a supervisor has historically been unclear. 

To aid in the determination of employer liability, the court in this case held that a “supervisor” is someone the employer has empowered to take tangible employment actions against the victim, i.e., 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.  A co-worker who merely directs the day-to-day activities of a worker will not constitute a supervisor and thus will not subject the employer to vicarious liability for harassing conduct of the co-worker by virtue of that status.  Thus, an employee is a “supervisor” for purposes of vicarious liability under Title VII only if he or she is empowered by the employer to take tangible employment actions against the victim of harassment.

In defending its decision against claims that the court’s opinion will insulate employers from liability for maintaining abusive workplaces, the majority noted that employers can still be held liable when it is negligent in failing to prevent harassment from taking place.  An employer will be liable for harassing acts of its employees unless it establishes the affirmative defense that it exercised reasonable care to prevent and correct harassing behavior, and that the victim unreasonably failed to take advantage of any opportunities the employer provided to prevent or correct the harassment.

The court’s decision will aid employers in assessing their liability at the early stages of an internal investigation.  The decision provides a clearer understanding as to how courts will treat supervisor-on-victim harassment and co-worker-on-co-worker harassment going forward.

For more information, please contact Daniel J. Moore at 585-419-8800 / or the Harris Beach attorney with whom you usually consult.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, New York City, Niagara Falls, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.