Supreme Court Cases That Affect Employers (June 2014)

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Sandifer v U.S. Steel Corp

This started as a simple dispute about whether or not employees should be paid for the time it takes them to take on and off safety gear, that ended in the Supreme Court of the United States having to re-iterate the definition of ‘clothes’. (This was due to the plaintiff’s side arguing that the term ‘clothes’ did not include equipment or hazard gear, but rather just something you wear for decency and comfort.) If you’re curious, the Supreme Court of the United States defined clothes as “items that are both designed and used to cover the body and are commonly regarded as articles of dress.” (This was actually a pre-existing definition that was upheld from a dictionary.)

This case wasn’t mainly about what we all define clothing as. The real issue here was that the plaintiff felt that they should be paid for the time it took to clean, maintain, put on and take off safety gear required for work. From something as simple as putting on a hardhat, to wearing specialized breathing apparatuses, to full on chem-suits that filter out debris and organisms at a micron level, many industries require workers to be dressed in special gear… (or should I say clothing…) to protect themselves from dangerous environments or to mitigate the dangers of an environment.

In the end, the SCOTUS ruled that the workers should not be compensated for the time it took them to put on the clothes. In a sense, it is like the argument that commuting time should be compensated. As far as the law goes, that is a lost argument. Workers show up to work at the agreed upon time, ready to work. If that means that some workers need to show up earlier to be safe, so be it.

One has to wonder if the ruling would be different for those who work in clean environments, as the cleanroom suits can take up to half an hour to get into.

The U.S. Steel plaintiffs may not be this happy, but they sure look safe.
The U.S. Steel plaintiffs may not be this happy, but they sure look safe.

Harris V Quinn

This case has a lot of potential to affect business in general, mainly through ripple effects. It centers around eight home care assistants in Illinois who believe they should not have to pay their public union dues. Illinois administrates the Medicaid program that is paying these workers. The plaintiff takes exception to this, and believes that no one should be required to pay into a union.

If this sounds familiar, it is because this issue has been addressed before. There was the Michigan “right to work” controversy, and the previous 1977 Supreme Court decision that addressed this very issue, Abood v Detroit Board of Education. That case compelled public employees to contribute to union costs that were specifically agency related and administrative. They were not compelled to contribute towards extra, political activities of a union.

What are the potential affects? Like we said… ripple effects. Let’s start with the most obvious, how this affects public unions. If the Supreme Court were to take the side of the plaintiffs and not require that public workers contribute to their union, what reason would any union worker have in paying union dues? Sure, there might be a few that truly believe in the cause and would be more than glad to provide a part of their paycheck to the union, but many others might just easily say “hey, others are paying the costs so I don’t have to.” This is called the ‘free-rider’ problem.

The second tier of effects revolves around how weakened unions affect businesses, workers, wages, and the economy. There has been a handful of studies that try to isolate the effect of ‘right to work’ laws in those states. (Not just public unions.)

A 2011 Economic Policy Institute study found results that generally side with the notion that less union influence equals less benefits for workers, except for more jobs:

  • Slightly lower unemployment rates in that state. (1%)
  • Lower wages for workers. (3.2%)
  • Lower employer sponsored health insurance. (2.6%)
  • Lower employer sponsored pensions. (4.8%)

As of the writing of this article, the Supreme Court has not issues it’s decision as to whether it will overturn the 1977 Abood case. Follow Nowland Law on Twitter, as we will update you on the results. (The Supreme Court will likely make a decision before the end of June.)

United States of America v Quality Stores, Inc.

We’ve mentioned that lawsuits can take a long time resolve. This story began all the way back in 2001. “Quality Stores” was a retail chain that filed bankruptcy in 2001. It had to let go of thousands of workers because of the bankruptcy.

The employees received ‘severance packages’ as part of the termination. Some employees were given one week’s of wages, and others up to 18 months of wages depending on seniority and years of service.
Quality Stores filed the payments as ‘wages’ on the workers W2 Forms, withheld the employees’ share of FICA and then paid their (employer) share of FICA taxes. Here is where the dispute occoured. Quality Stores then filed for a refund for FICA taxes for its own packages, and for some of the employees who had authorized to file it on their own.

Quality Stores argued that the severance packages should not fall under the term ‘wages’ for FICA tax purposes. The court disagreed.

The decision was 8-0, and stated that severance payments to employees that have been ‘involuntarily’ terminated are indeed taxable.

SeveranceTax

Lawson V. FMR

After reading multiple opinions, and reports about the effect of the recent ruling, we could try to explain the whole situation, or give a summary. If you’re really interested in this, there are many sources in which you could research further, but we will aim for a summary here:

Previous laws allowed protections for ‘whistle-blowers’ who were retaliated against for bringing to light complicity in various types of fraud. This was thought to only protect employees of publicly traded companies. This ruling allowed the same protections for whistle-blowers from private companies who have contracted with public companies. The dissenting judges disagreed with the ruling because they believed it would ‘open the floodgates’ of retaliation complaints.

They expressed their dissatisfaction by using a metaphor involving whistle-blowing baby sitters. The dissenting side pointed out that it was possible that a baby sitter could have whistle-blower protections if she was fired by a parent who happened to work at Walmart (a publicly traded company) because she expressed concern that the parent’s son had committed internet purchase fraud.

The other side dismissed the statement by saying the concern was ‘likely more theoretical than real. Few housekeepers or gardeners, we suspect, are likely to come upon and comprehend evidence of their employer’s complicity in fraud.”

Here’s a thought. Regardless of whether it is likely that the nannies of America will be seen in the ranks of whistle-blower suits, why wouldn’t it be good to protect any employee who raises a concern about fraud?

 

"I'm watching you, kid."
“I’m watching you, kid.”

As always, be sure to consult with an experienced business law attorney before taking any action on matters like these. This blog is for reference/information purposes only and is not legal advice.

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