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

At the Supreme Court

• Salary Basis Test for Overtime. On February 22, 2023, the United States Supreme Court issued its opinion in Helix Energy Solutions Group, Inc. v. Hewitt, holding that paying an employee a “day rate” does not satisfy the salary basis test under the white-collar exemptions to the Fair Labor Standards Act (FLSA). Because of this ruling, even highly compensated employees may be eligible to receive overtime if they are paid solely on a day-rate basis.

The Court held that a worker is not compensated on a salary basis, and therefore cannot qualify for the FLSA’s white-collar exemptions, when the employee’s paycheck is based solely on a daily rate, meaning the employee receives a certain amount if the employee works one day in a week, twice as much for two days, three times as much for three, and so on. Employees paid on this day-rate arrangement are thus entitled to overtime pay unless they qualify for some other exemption.

A dissenting opinion by Justice Kavanaugh questioned whether the regulations supporting the Court’s reasoning are even consistent with the FLSA’s statutory language in the first place. Kavanaugh noted that the statutory text of the FLSA focuses on the duties of an individual, and makes no mention of how or how much an employee is paid, and questioned whether these salary requirements “will survive if and when the regulations are challenged as inconsistent with the [FLSA].”

Going forward, employers should be careful paying on a day-rate basis those employees they claim to be exempt, and, if they do, work to ensure that the overall compensation arrangement is in compliance with the salary basis requirement as articulated by the Supreme Court in Helix.

• Attorney-Client Privilege. When the U.S. Supreme Court agreed to hear In re Grand Jury, employer organizations were anticipating the Court would provide clear guidance and sort out the conflict between the federal appellate courts on whether and when “dual-purpose communications,” which include both legal and business advice, are protected by the attorney-client privilege. The case involved an appeal of the Ninth Circuit’s decision applying the “primary purpose” test to determine whether a communication is privileged. That test, which was also applied by the Second, Fifth and Sixth Circuits, “does not reflect the modern role that lawyers play in advising businesses,” the U.S. Chamber of Commerce argued in its brief. “[B]ecause the line between the business purpose and a legal purpose is blurry,” the Chamber argued, the primary purpose test is often “inherently impossible” to apply and therefore “bound to yield arbitrary and unpredictable results.”

In an opinion written by Justice Brett Kavanaugh when he was a federal appellate court judge, the U.S. Court of Appeals for the D.C. Circuit had adopted the broader “significant purpose” test when analyzing dual-purpose communications. Under that test, “So long as obtaining or providing legal advice was one of the significant purposes of the [communication], the attorney-client privilege applies.”

At least for now, however, the Supreme Court will not weigh in on the issue. Without explanation, not long after oral argument on the case, on January 23, 2023, the Court dismissed the appeal as “improvidently granted.” Although this case did not end in an opinion from the Supreme Court, the Court’s initial decision to hear the case brought attention to the issue and may prompt lower courts to consider the practical issues in complex situations in which business and legal issues are intertwined, providing protection of the attorney-client privilege to communications in those situations.

In the Federal Appellate Courts

• Enforcement of Arbitration Agreements in California. In a significant win for California employers, the Ninth Circuit Court of Appeals, in Chamber of Commerce v. Bonta, No. 20-15291 (Ninth Cir. Feb. 15, 2023), affirmed a district court injunction striking down California Assembly Bill 51 (“AB 51”) as preempted by the Federal Arbitration Act (FAA) after nearly three years of legal challenges.¹ As a result, California employers may continue to implement mandatory employment arbitration agreements for employee claims for unpaid wages, discrimination, and numerous other causes of action under the Labor Code and the Fair Employment and Housing Act (FEHA).

The Ninth Circuit also recognized that AB 51, while not expressly barring arbitration agreements, disfavored the formation of arbitration agreements and therefore imposed a “severe” burden on contract formation. The civil and criminal penalties create a deterrent effect on employers and inhibit their willingness to create an arbitration agreement with employees. AB 51 also “singles out arbitration provisions as an exception to generally applicable law,” noting employers can mandate that employees enter contracts for compensation and drug usage, but not arbitration agreements. Further, the penalty-based scheme of AB 51 violated the “equal treatment principle” and was a device “evincing hostility toward arbitration.” In reaching its decision, the Ninth Circuit joined two sister circuits, the First and Fourth Circuits, which previously had rejected state laws regulating the formation of arbitration agreements, finding such laws treated arbitration agreements “more harshly than other contracts” and was thus preempted.

• Exemption of Delivery Drivers from Arbitration. Like the U.S. Court of Appeals for the First Circuit,² the Second Circuit continues to reject claims by delivery drivers that they are exempt from arbitration under the FAA. Most recently, in Bissonnette v. Lepage Bakeries Park St., LLC, No. 20-1681 (2d Cir. Feb. 15, 2023), the full Second Circuit denied bakery delivery drivers’ petition for a rehearing of the court’s earlier decision finding the drivers are bakery workers, not transportation workers, and therefore not exempt from the FAA. While a majority of the judges supported the decision, several judges filed dissenting opinions.

• Private Lawsuits Challenging OSHA Decisions. The U.S. Court of Appeals for the Third Circuit has affirmed dismissal of a lawsuit challenging a determination by the Occupational Safety and Health Administration (OSHA) that conditions at a meatpacking plant did not constitute an “imminent workplace danger.” The court held that an individual cannot maintain a private cause of action for alleged imminent workplace danger once OSHA has concluded its investigation. The Third Circuit’s decision in Doe v. Scalia, No. 21-2057 (3d Cir. 2023 Jan. 31, 2023), appears to be the first federal appellate court ruling on this issue.

The case arose out of an inspection request to OSHA by meatpacking plant employees who claimed that although the company had taken some COVID-19 preventive measures such as issuing masks and face shields, it had not done enough to ensure worker safety at the plant. OSHA conducted an inspection, but determined that “conditions at the Plant did not constitute an imminent danger,” and therefore did not seek the expedited relief available under OSHA.

Plaintiffs promptly filed a complaint in federal court against OSHA and the secretary of labor, seeking emergency relief under 29 U.S.C. § 662(d), which allows employees in “imminent danger” to sue in federal court if the secretary of labor “fails to seek relief.” The district court dismissed the complaint, and plaintiffs appealed. Examining the statute and its enforcement procedures, the Third Circuit held that, “Employee-driven relief … is available only during the pendency of OSHA’s standard enforcement proceedings.” Noting that “[i]n general, OSHA, rather than private litigants, is responsible for assuring workplace safety,” the court stated, “the broad private right of action that Plaintiffs propose would undermine the OSH Act’s agency-driven enforcement structure.” The court concluded that “the private right embodied in

§662(d) is a narrow one, limited to combating imminent workplace dangers that cannot await the conclusion of OSHA’s enforcement proceedings.”

This decision may deter unnecessary litigation filed by employees or unions where OSHA has determined that workplace conditions do not pose an imminent danger, or provide a basis for quickly dismissing such lawsuits if they are filed.

• Pretext Under ADEA. In Markley v. U.S. Bank National Association, No. 21-1240 (10th Cir. Feb. 8, 2023) the Tenth Circuit rejected a high-level bank manager’s claim that he was terminated from employment because of his age in violation of the Age Discrimination in Employment Act (ADEA).³ The manager claimed the bank’s reasons for his termination—serious misconduct in providing a loan to a member of his sales team and crediting the team member with sales he did not make—were pretextual.

In support of his claims the manager asserted that the investigation the bank conducted into his conduct, following which a separate misconduct disciplinary committee unanimously voted to terminate his employment, was flawed. The Tenth Circuit rejected the manager’s assertions holding, “there must be some other indicator of protected-class-based discrimination for investigatory flaws to be capable of establishing pretext.” In this case there was no other evidence of age discrimination.

Moreover, the court held, even if deficiencies in an investigation alone could support a finding of pretext, the manager’s criticisms of the investigation in the case were “unpersuasive and insufficient” to establish pretext. Among other things, the court found the manager’s claim that the bank did not provide him a reasonable opportunity to refute the allegations against him was inaccurate but concluded that even if true “the argument would not establish pretext.” Accordingly, the court affirmed summary judgment in favor of the bank.

• Reasonable Accommodation and a Collective Bargaining Agreement. Providing a reasonable accommodation under the Americans with Disabilities Act (ADA) does not require an employer to violate a collective bargaining agreement, the Tenth Circuit held in Brigham v. Frontier Airlines, Inc., No. 21-1335 (10th Cir. Jan. 24, 2023).⁴ The appellant in the case was a flight attendant who was a recovering alcoholic. She asked to be excused from the airline’s bidding system for flight schedules or to be reassigned to light duty in the general office to avoid overnight layovers because she claimed they tempted her to drink. The airline’s collective bargaining agreement (CBA) with the flight attendants’ union, however, required use of the flight schedule bidding system to determine a flight schedule, and reassignment to the general office was only available to employees injured on-the-job, and as such the appellant was not eligible for reassignment. Accordingly, the airline rejected her requests. Unable to bypass the bidding system or move to the general office, the flight attendant violated airline policy and the CBA by missing too many assigned flights and the airline terminated her employment.

The flight attendant sued and the U.S. District Court for the District of Colorado granted summary judgment to the airline. The Tenth Circuit affirmed, citing the Supreme Court’s decision in Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 79 (1977) that “the duty to accommodate doesn’t require an employer to take steps inconsistent with a collective bargaining agreement.” As in Hardison, the court pointed out that “the requested accommodation [of bypassing the CBA’s bidding system] would have disrupted the legitimate expectations of other employees relying on the collective bargaining agreement.” It also found that no “vacancy” existed in the general office—which could have triggered the reassignment obligation under the ADA—because the airline had limited temporary general office positions to employees injured on-the-job, as was its right under Duvall v. Georgia-Pacific Consumer Products, L.P., 607 F.3d 1255 (10th Cir. 2010).

The court also rejected the employee’s argument that the airline violated the ADA by failing to engage in the interactive process. Citing cases from other circuits, the court held that “the failure to engage in the interactive process is not independently actionable under the Act.”

• Adverse Action in a Title VII Retaliation Case. What actions by an employer are sufficient to constitute adverse action in a retaliation case? That is the question the Tenth Circuit addressed in Henrie v. Carbon School District, No. 22-4015 (10th Cir. Feb. 13, 2023). Following her retirement as a teacher, the plaintiff in the case filed suit for retaliation in violation of Title VII, which prohibits employers from retaliating against employees who engage in protected activity, and Title IX, which prohibits educational programs that receive federal funding from retaliating against employees who oppose discrimination because of sex. The school district, she claimed, had retaliated against her because of a sexual harassment complaint she made against her supervisor a year earlier. That complaint was investigated and found to be meritless.

The district court granted summary judgment to the school district on the plaintiff’s retaliation claims and the Tenth Circuit affirmed. Although the plaintiff’s complaint of sexual harassment by her supervisor constituted protective activity, the court held, to succeed on her retaliation complaint she was also required to show that as a result she was subject to “materially adverse employment actions.” In support of her claim the employee alleged that she was 1) excluded from a meeting where she had to provide a minor data point; 2) stopped from training for a role she did not have; and 3) given a letter that directed her to “stop spreading negative information” about her former supervisor, and that stated that it was “not a disciplinary letter” and would “not go in [her] permanent personnel file.” These actions, the court concluded, were insufficient to establish that the employee suffered a materially adverse employment action. “Because no reasonable jury could find the [school] [d]istrict engaged in retaliatory conduct, summary judgment was appropriate,” the court held.

• Retaliation under the FMLA. “[A]t the heart of this case,” the Sixth Circuit stated in Milman v. Fieger & Fieger PC, No. 21-2685 (6th Cir. Jan. 25, 2023), is “the scope of protected activity under the FMLA.” The case involved an attorney whose employment was terminated immediately after she made a request for unpaid leave to care for her two-year-old child who had a history of respiratory illness and was experiencing symptoms resembling COVID-19. She filed suit alleging her termination was retaliation in violation of the Family and Medical Leave Act. The district court dismissed her claim, concluding that she could not state a claim for retaliation under the FMLA because she was not entitled to FMLA leave. The Sixth Circuit reversed.

In reaching its decision, the court distinguished between situations in which an employee takes leave without being entitled to the leave which “unambiguously falls outside the FMLA’s protections,” and the situation, as in the case before it, where an employee inquires about and requests leave “even if it turns out that she is not entitled to such leave.” Noting that other circuits have treated an employee’s request for leave “regardless of whether the employee was ultimately entitled to the leave as protected conduct.” Moreover, the court held, “‘[A]n employee does not have to expressly assert [their] right to take leave as a right under the FMLA to trigger its protections.” Accordingly, the court concluded, the district court erred in dismissing the case.

• Unpaid Lunch Breaks. The U.S. Court of Appeals for the Seventh Circuit recently ruled that Wisconsin wage and hour laws concerning the compensability of meal periods empower employers to require that such breaks be unpaid. In Wirth v. RLJ Dental, No. 22-2122 (7th Cir. Jan. 31, 2023), the court focused on whether the employer provided a qualifying meal break in the first instance, not on whether employees decided to work during that time.

Under Wisconsin law, bona fide meal periods are not considered work time, and therefore, are not compensable for non-exempt employees. If the employee is required to perform any duties while eating, whether active or inactive, then they are not considered completely relieved from duty. In Wirth, the employer, a dental service organization, provided the employee, an office manager, an hour-long lunch break. During that time, the employer closed its offices and did not schedule any patients. Although the employee was not required to work and was free to leave the office, she frequently clocked out for less than 30 minutes. The employer admonished her not to clock in or work during that time, but she continued to do so anyway. The employer paid her for the time she was clocked in, but the employer did not pay her for the time she was clocked out.

The employee filed suit arguing that if an employee elects to take any break of less than 30 minutes, then the entire break period offered by the employer (here, an hour-long lunch break) must be compensated. In other words, because she decided to shorten her meal periods to less than 30 minutes, the employee claimed she was entitled to be paid not just for the portion of her lunch break during which she was clocked in, but also for the time she was clocked out and admittedly not working.

The court held that the proper inquiry must focus not on the employee’s choice to clock in early but rather on what the employer provided, which was an hour-long meal period that met all the requirements to be non-compensable (i.e., the meal periods were 30 minutes or longer, and she was completely relieved from duty). Because the employer provided 30 minutes or more during which the employee was completely relieved from duty for the purposes of eating lunch, the employer was not obligated under the law to pay her for the time she was off the clock and not working.