The 2017-18 U.S. Supreme Court term saw employers having their cake and eating it, too (with a couple of minor exceptions). Overall, the court rejected plaintiffs' quests for more favorable applications of Fair Labor Standards Act overtime, retaliation and arbitration laws or precedent. The several decisions that negatively impact employers are largely procedural or very limited in their application. Think of them as vegetables along what was otherwise a cakewalk term.

Sweet Treats From SCOTUS

• State agency rebuked for failing to consider cake baker's sincerely held religious belief.

The court issued a 7-2 decision against the Colorado Civil Rights Commission (CCRC) in Masterpiece Cakeshop v. Colorado Civil Rights Commission, holding that CCRC failed to give due deference to a baker's religious beliefs when CCRC determined that the baker was required to bake and sell a wedding cake for a same-sex couple.

The bakery owner argued that (1) compelling him to make a cake for a same-sex marriage violated the free speech clause of the First Amendment; and (2) requiring him to design a cake for a same-sex marriage would violate his free exercise of religion under the First Amendment. Specifically, he argued that the government singled him out because of his sincerely held religious beliefs against same-sex marriage.

Justice Anthony Kennedy's majority opinion hinged on evidence that the CCRC treated the Masterpiece case differently than other cases where bakers had refused to perform work, and he explained that the CCRC did not approach the case “with the religious neutrality that the Constitution requires.” The court thus reversed the CCRC's previous decision and sent the matter back to the agency for review.

• Justices shut down attempt to expand FLSA to service technicians in auto dealerships.

The Supreme Court ruled 5-4 that service advisers are exempt from the Fair Labor Standards Act's overtime pay requirements as salesmen who primarily engage in servicing automobiles.

The relevant portion of the statute exempts “salesm[en] … primarily engaged in … servicing automobiles.” After years of treating service advisers as exempt despite the fact that they never go under the hood of the vehicle, the Department of Labor completely reversed course and issued an interpretation that concluded service advisers were generally not exempt.

Justice Clarence Thomas' majority opinion noted that the plain language of the statute covered salesmen who primarily engaged in servicing automobiles, which is what service advisers do in selling services. In what can only be described as icing on the cake, the court also dismissed the frequently recited principle that FLSA exemptions should be interpreted narrowly. Rather, the court stated that a court's reading of the exemptions should be fair, not narrow.

• Class action waivers in employment arbitration agreements live on.

The court's super-sweet decision in three consolidated cases (Epic Systems v. Lewis; Ernst & Young v. Morris; and NLRB v. Murphy Oil, USA) upheld class action waivers in arbitration agreements. In a 5-4 decision, the court concluded that these waivers do not violate the National Labor Relations Act (NLRA), and are enforceable under the Federal Arbitration Act (FAA).

Under the NLRA, contracts that conflict with workers' “concerted activities for the purposes of collective bargaining or other mutual aid or protection” are unenforceable. Justice Neil Gorsuch's majority opinion concluded that the right to bring a joint, collective, representative, or class-based claim is not a “concerted activity” and is therefore not protected under the NLRA.

• SCOTUS rejects attempt to expand retaliation law.

In Digital Realty Trust v. Somers, the court issued a unanimous decision (vanilla, you could say) that rejected an attempt to broaden the definition of “whistleblower” under the Dodd-Frank Act's anti-retaliation provisions. The Dodd-Frank Act protects employees who provide information relating to a possible violation of securities law to the SEC. Additionally, the Sarbanes-Oxley Act (SOX) protects whistleblowers who provide information to federal agencies, Congress, or a person with supervisory authority over the employee. SOX also requires certain employees to internally report suspected securities law violations.

Paul Somers reported alleged securities law violations to senior management that he argued he was compelled under SOX to report, and he claimed that he was fired shortly thereafter. He alleged that Digital Realty Trust Inc. therefore retaliated against him and violated the Dodd-Frank Act. On appeal to the U.S. Court of Appeals for the Ninth Circuit, the court determined that although Somers did not fit within Dodd-Frank's narrow definition of whistleblower, it would disregard the plain language and rule that Somers was protected because to do otherwise would yield an absurd result.

SCOTUS shot down the Ninth Circuit's ruling and clung to the clear definition of “whistleblower” as set forth in Dodd-Frank, which requires the reporting employee to notify the SEC. In order for the anti-retaliation provisions of Dodd-Frank to apply, an employee who raises an internal complaint of securities law violations must also raise said complaints to the SEC.

• Public sector labor takes a hit to the wallet.

The court went out with a bang on the last day of the term and served organized labor its just desserts in Janus v. AFSCME. The court ruled that the First Amendment prohibits public sector entities from collecting fees from non-union members. The ruling addresses the previous requirement that non-union employees pay mandatory fees that financed union campaign efforts and sponsored anti-employer legislation.

Prior to this decision, employees who were covered by a collective bargaining agreement had to pay “agency shop” fees or “fair share” fees even if they chose not to join the union. Now, the union fees may only be deducted if the employee “affirmatively consents to pay.”

Vegetables

• Plaintiffs get two shots with supplemental state claims.

The Artis v. District of Columbia decision held that the statute of limitations on an employee's state law claims is tolled while a federal lawsuit in which those claims are included is pending. Specifically, the court held that “tolling” the statute of limitations suspends the statute of limitations (i.e., stops the clock) while the federal lawsuit is pending.

The practical application of this ruling is tough for employers to digest, as it means that employees can refile their claims in state court later on if the federal court declines to decide them. Thus, the employer can find itself rehashing the same issues that it litigated in federal court already.

• Appellate extension deadline is more flexible.

The court determined that a Federal Rule of Appellate Procedure that prohibits extensions of appeal deadlines beyond 30 days is a mandatory claims processing rule. In its unanimous decision that will probably only appeal (pun intended) to procedural nerds, the court determined that the deadline can be modified by court order or otherwise excused if the court believes it is warranted. A jurisdictional rule, which is the opposite of a mandatory claims processing rule, would preclude the lower court from making any modifications. The court's opinion did not elaborate on whether a district court can grant a longer extension than 30 days.

• Trump's travel ban 3.0 upheld.

After the president's first two travel bans were blocked by federal judges in multiple states, he issued a Presidential Proclamation that provides for travel and immigration restrictions on individuals from Iran, Libya, Syria, Yemen, Somalia, North Korea and Venezuela. In upholding the ban in a 5-4 decision, the Supreme Court gave due deference to the president's authority under the Immigration and Nationality Act and determined that President Donald Trump's restrictions were a lawful exercise of his authority. Employers who employ nationals of banned countries are affected, and should caution those employees to avoid unnecessary travel outside of the United States.

Katherine P. Sandberg is an associate in the Sacramento office of Fisher Phillips. She can be reached at ksandberg@fisherphillips.com.