This Littler Lightbulb highlights some of the more significant employment law developments at the U.S. Supreme Court and federal courts of appeal in the last month.

At the Supreme Court

• Court to Decide Whether Lateral Transfers Can Violate Title VII. The Supreme Court agreed to resolve a circuit split on the degree of harm required to show discrimination in employee transfers. In Muldrow v. City of St. Louis, 30 F.4th 680 (8th Cir. 2022) the plaintiff claimed that a transfer that altered her scheduling and responsibilities but did not change her title, salary, or benefits, constituted gender discrimination in her “terms, conditions, or privileges of employment” under Title VII. The Eighth Circuit disagreed, holding “[a] transfer involving only minor changes in working conditions and no reduction in pay or benefits will not constitute an adverse employment action.”  The DC and Sixth Circuits have reached different conclusions in similar cases holding that shift changes are generally actionable under Title VII, even when they are unaccompanied by reductions in pay or benefits. The case will be argued next term.

In the Federal Appellate Courts

• Company Recission of Job Offer to DACA Recipient Because of Temporary Work Authorization Not Alienage Discrimination. The plaintiff in Resendiz v. Exxon Mobil Corp., 72 F.4th 623 (4th Cir. 2023) was a DACA (Deferred Action for Childhood Arrivals) recipient who applied for and was offered an internship with a major corporation. DACA does not provide recipients with legal immigration status, but rather protects eligible people who were brought to the United States as children from deportation and provides them with work authorization for temporary periods. The plaintiff was eligible for and received temporary work authorization under the DACA regulations. In his internship application he stated that he was not a United States citizen, but erroneously represented that he had permanent work authorization under federal law. The company’s policy provided for hiring regardless of citizenship status but required documentation of permanent work authorization. When the plaintiff submitted the required paperwork in response to the internship offer it showed that he lacked permanent work authorization. So, consistent with its policy, the company rescinded its offer and the applicant filed suit claiming the company discriminated against him based on alienage in violation of 42 U.S.C. § 1981.

The district court dismissed the complaint finding the applicant failed to plausibly allege the company intentionally discriminated against him based on his alienage, and the applicant appealed. The appellate court began its analysis stating: “Though the Supreme Court has expanded §1981’s protections and implied a private right of action, it has not yet held that it encompasses alienage-based discrimination. But the Fourth Circuit has squarely done so.” However, to prove violation of §1981 in the Fourth Circuit, a plaintiff must establish that (1) the defendant intended to discriminate on the basis of alienage, (2) the discrimination interfered with a contractual interest, and (3) the interference with the contractual interest would not have happened but for the plaintiff’s alienage. The applicant in this case, the Fourth Circuit found, failed to plausibly allege intentional discrimination based on alienage because, among other things, the company extended him an offer knowing he was not a U.S. citizen. Therefore, the court held, its policy clearly did not screen out applicants based on alienage but rather focused on the potential length of employment.Although requiring permanent work authorization would only apply to non-citizens, the court stated, “discriminatory impact alone does not suffice. The discrimination must be intentional” to establish a violation of § 1981.

• Comment About Resistance to Change Not Age Discrimination. After being promoted to full professor, the 79-year-old plaintiff in Palmer v. Liberty Univ., Inc., 72 F.4th 52 (4th Cir. 2023) sued for age discrimination when her university teaching contract was not renewed two years later. The district court granted summary judgment to the university and the plaintiff appealed. As evidence of age discrimination, the plaintiff cited to an e-mail in which the university dean rejected giving her a year to improve her performance , stating she would “have great difficulty with any changes, and this would most likely exacerbate negative student experiences.” This comment “provides no evidence that [the university] believed [the plaintiff] was resistant to change solely, or even partially, because of her age," the court found. The plaintiff also pointed to comments about potentially offering her retirement. Agreeing with decisions by the Fifth, Sixth, and Seventh Circuits, the Fourth Circuit stated that “mere comments or inquiries about retirement — without more — fail to constitute direct evidence of age discrimination.”

Rather, the court found, the record reflected that, despite her promotion to full professor, the plaintiff had repeatedly been informed that she needed to improve her technology and digital art skills, which she failed to do. She was the only faculty member in her department who did not have the requisite technology skills to teach the digital art courses that were increasingly in student demand, nor was she able to teach any courses in the university’s on-line platform. These factors, not plaintiff’s age, were the reason for her dismissal, the court held, affirming summary judgment for the university.

• Third Circuit Upholds Decision Compelling Arbitration in ERISA Case. Unhappy with their retirement plan’s performance, the plaintiffs in Berkelhammer v. ADP Totalsource Grp., Inc., --- F.4th ----, 2023 U.S. App. LEXIS 18028 (3d Cir. 2023) sued the plan, its administrators and fiduciaries, individually and as representatives of a class of participants and beneficiaries, claiming breaches of fiduciary duty and violations of the Employee Retirement Income Security Act (ERISA). The district court granted a motion to compel arbitration based on the arbitration provision in the Investment Advisory Agreement (IAA) with the retirement plan’s investment advisory manager, rejecting the plaintiffs’ argument that they did not personally agree to arbitrate. 

The Third Circuit agreed with the district court: “Although Appellants had not personally consented to the arbitration clause in the IAA, the Plan had. Since Appellants sued on the Plan’s behalf, the District Court held that arbitration was required.”  The question on appeal, the court noted, was “who is a party to the IAA and whose consent—Appellants’ or the Plan’s—is needed for arbitration[?]” In response, the court stated, “it is the plan—and not the individual claimant—to whom the breaching fiduciary owes its duty…. If the claimants are successful, ‘the plan takes legal title to any recovery, which then inures to the benefit of its participants and beneficiaries.’” Accordingly, the court upheld the district court decision compelling arbitration.

• Fourth Circuit Addresses the Primary Duty Test for FLSA Outside Sales Exemption. In Carrera v. E.M.D. Sales Inc., --- F.4th ----2023 U.S. App. LEXIS 19308 (4th Cir. 2023) three sales representatives for a food-products distribution company claimed they were owed overtime pay. In response, the employer argued that the plaintiffs were outside sales representatives who were exempt from overtime under the FLSA exemption for employees whose primary duty is making sales and who customarily and regularly work outside the employer’s place of business. After a bench trial, the district court held that the outside sales exemption did not apply and awarded standard liquidated damages of two years’ back pay, rather than three years’ back pay, which the plaintiffs sought, claiming the employer willfully violated the law.  Both sides appealed.

Examining the employees’ qualification for the outside sales exemption, the Fourth Circuit found there was no dispute that the employees regularly worked outside the office while servicing stores on their assigned routes. As to the key issue, whether the plaintiffs’ primary duty was making sales, the Fourth Circuit distinguished the Supreme Court’s decision in Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018), which rejected a narrow interpretation of the FLSA’s exemptions, and applied Fourth Circuit precedent, requiring the employer prove the plaintiffs satisfied the outside sales exemption by clear and convincing evidence.Applying this standard, the court found the employer failed to establish the plaintiffs’ primary duties were making sales. Rather, the court found, their primary duties were restocking shelves, replenishing depleted products, removing damaged and expired items from the shelves, and issuing credits to the serviced stores for removed items – tasks the plaintiffs themselves described as inventory management even when dealing with independent stores where some sales were made.

As to the issue of damages, the appellate court agreed with the district court that the plaintiffs failed to show that the company’s violation of the FLSA was willful, “meaning that the employer ‘either knew or showed reckless disregard’ for …whether its conduct was prohibited by the FLSA.” Thus, the Fourth Circuit affirmed the district court’s judgment in all respects.

• Seventh Circuit Again Upholds Ministerial Exception to LGBTQ Title VII Claim.  In Fitzgerald v. Roncalli High School., Inc., 73 F.4th 529 (7th Cir. 2023), the Seventh Circuit again applied the ministerial exception to block a sex discrimination suit under Title VII by a religious school guidance counselor who was fired for being in a same-sex relationship. After being employed as a high school guidance counselor for 14 years, during which she received exceptional performance reviews, the employee’s employment contract was not renewed because, the school explained, her same-sex marriage was contrary to the Catholic faith. The employee filed suit, and the district court granted summary judgment for the school, two months after granting summary judgment to the school in a nearly identical case by another guidance counselor at the school, which was upheld by the Seventh Circuit.

On appeal in this case, the Seventh Circuit relied heavily on its prior decision in the previous case, Starkey v. Roman Catholic Archdiocese of Indianapolis, Inc., 41 F.4th 931 (7th Cir. 2022). Acknowledging that it was undisputed that the school fired the plaintiff because of her same-sex marriage and that “Title VII prohibits this kind of sex discrimination,” the court reiterated that the First Amendment bars employment discrimination suits “when the employer is a religious group and the employee is one of the group’s ministers. ”The court pointed out, however, that the ministerial exception is a defense and therefore the burden to prove that an employee is a minister is on the defendants. The court further emphasized that “a church cannot show entitlement to the ministerial exception simply by asserting that everyone on its payroll is a minister or by requiring that all employees sign a ministerial contract…. In such circumstances, like in other Title VII cases, the plaintiff can defeat summary judgment by producing evidence that the church’s justification is pretextual.”

Examining the facts of this case the court found that, as in Starkey, the guidance counselor, who was also co-director of the department, played a crucial role on the Administrative Council, which was responsible for at least some of the school’s daily ministry, education, and operations, “helped develop the criteria used to evaluate guidance counselors, which included religious components like assisting students in faith formation and attending church services,” and that she held herself out as a minister. In so doing, the Seventh Circuit repeated that “[a] fact-specific inquiry remains necessary in cases where the ministerial exception is asserted as a defense to balance the enforcement of our laws against the protections of our Constitution.”Accordingly, the court held, the district court properly granted summary judgment for the school.

• Termination of Alcoholic Employee for Missing Shifts Did Not Violate the ADA. Mueck v. La Grange Acquisitions, L.P., --- F. 4^th ----, 2023 U.S. App. LEXIS 18647, (5th Cir. 2023)¹ involved a natural gas plant worker who was court-ordered to attend a substance abuse program several times per week following multiple DWI (Driving While Intoxicated) convictions. Participation in the program conflicted with some of the employee’s required shifts. Although he was able to arrange for someone to cover the impacted days shifts, he could not find coverage for the night shifts for which he would have to arrive late. According to the employee, he told his supervisor of his legal situation and that he was an alcoholic. The supervisor tried to help facilitate a voluntary shift swap but told the employee he could not force another employee to cover for him. Ultimately, when coverage for the shifts could not be found, the employee was terminated and told that the decision was based on the conflict between the court-ordered substance abuse classes and his shift schedule.

The employee sued under the ADA for intentional discrimination, failure to provide reasonable accommodation, and retaliation. The district court granted summary judgment on all claims finding, first, that the plaintiff failed to provide evidence his alcoholism was a disability under the ADA, relying primarily on Burch v. Coca-Cola Co., 119 F.3d 305 (5th Cir. 1997), in which the Fifth Circuit found that the plaintiff did not show that his alcoholism rose to the level of a disability. The court overturned this finding on appeal, distinguishing its prior decision in Burch and noting that Burch was decided prior to the enactment of the ADA Amendments Act of 2008, which directed courts to lower the standard for determining whether an impairment substantially limits a major life activity.  In addition to stating that it now acknowledged “as our sister circuits have, that…an impairment need not be ‘permanent or long-term’ to qualify as a disability,” the court also found that, unlike the plaintiff in Burch, the plaintiff in this case “provided evidence demonstrating that the ‘the effects of his alcoholism-induced inebriation were qualitatively different than those achieved by an overindulging social drinker.’” Accordingly, the Fifth Circuit found the district court erred in granting summary judgment on the issue of whether plaintiff’s alcoholism was a disability under the ADA.

The court found, however, that the plaintiff had failed to prove intentional discrimination under the ADA, emphasizing that the plaintiff has the burden of proving that the employer’s explanation of its actions was a pretext for discrimination. The plaintiff in this case, the court found, failed to do so, noting that the company had attempted to coordinate coverage for the employee and it was only when those efforts were unsuccessful, and the employee’s shifts were left uncovered, that the company dismissed him. “Given this context,” the court concluded, “no reasonable jury could find that [the company’s] legitimate, non-discriminatory reason — the shift conflict — for [the employee’s] suspension and termination was pretext for discrimination.”

The court also rejected plaintiff’s claim that his employer failed to accommodate his disability of alcoholism.  “As a threshold matter,” the court held, “[an] employee who ‘needs an accommodation because of a disability has the responsibility of informing [his] employer’…. Failure to request an accommodation, particularly where an employee’s disability is not obvious, will doom a claim.” In this case, the court found, the employee failed to request an accommodation for his disability, which would have triggered the required interactive process under the ADA. Rather, the court found, the plaintiff’s discussions with his supervisor focused on the legal consequences of his most recent DWI and the court-ordered participation in a substance abuse program that interfered with his work schedule. “Here, no reasonable juror could have found that [the plaintiff], by notifying [his employer] that his court-ordered classes would conflict with his shift schedule and informing his supervisors that he was attempting to resolve this conflict by finding coverage, was requesting an accommodation for his disability of alcoholism.” Because the court found the plaintiff did not request a reasonable accommodation for his disability, it also rejected his retaliation claim.