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Eight for nine: the dog that didn't bark

“That was the curious incident”

Arthur Conan Doyle, “Silver Blaze” (1892)

The U.S. Supreme Court decided eight workplace-related cases during the 2015-16 term.

But it was the case the eight justices did not decide, due to a 4-4 tie vote, that may have been the most significant employment and labor law case on their docket this year.  Like the dog that didn’t bark in the Sherlock Holmes mystery “Silver Blaze,” that reticence provides a clue to the fractured nature of the eight-member tribunal.  Because of that deadlocked decision, the issue may resurface once the high court regains its full complement of nine justices when the vacancy left by the death last February of Justice Antonin Scalia is filled, probably sometime next year.

The reconvening of the high court next Monday, the traditional first Monday in October, for the 2016-17 term, still short-staffed with one vacancy, is an opportune occasion to review the tribunal’s workplace-related cases in the past term.

Tie tussle

The tussle that ended up in a tie vote was Friedrichs v. California Teachers Assn., 2016 U.S. LEXIS 4286 (June 28, 2016), the most highly-awaited workplace decision of the past term.  Its outcome left both sides unfulfilled.

It was one of five deadlocked decisions last term. See “Fit to be tied:  deadlocked decisions in Minnesota,”in the July 11, 2016 edition of Minnesota Lawyer.  The case consisted of a challenge to the “agency shop” requirement in California that public sector employees in labor organizations must be union members and pay dues, regardless of their support for the union or the issues it advocates.  The claimants, a group of teachers backed by a conservative legal foundation, asserted that the arrangement, which also exists in Minnesota and two dozen other states, violates the First Amendment right of freedom of expression and association, a proposition rejected by the federal trial and appellate courts in California.

The high court split 4-4, resulting in affirmance of the 9th Circuit ruling upholding the “agency shop” arrangement for teachers in that state, and in Minnesota, for that matter.  The challengers were dismayed because they expected to prevail, based on recent case law leaning in their direction, and many felt they would have if Scalia had not passed.  Union advocates were pleased that they dodged the bullet due to the tie, leaving the dues requirement intact, but disappointed that the tie vote, eschewing the merits, keeps the issue alive for later adjudication.

Impact: The effect of the deadlock will be felt in Minnesota.  It leaves, for the time being, the current “agency shop” posture in effect for many of the more than 80,000 public sector employees in this state.  Most of them pay full dues since fewer than 10 percent are “fair share” members who can opt out of the portion of their dues that go to political causes or candidates they oppose.

ERISA examined

The eight cases that did generate opinions on the merits covered a mixture of issues and will have varied effects in Minnesota.

A trio of cases examined issues of employee benefits to Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 10001, et seq.  In Montanile v. Board of Trustees of the Nat’l. Elevator Indus. Health Ben. Plan,136 S.Ct. 651  (January 20, 2016), the  court held that an ERISA plan may not seek subrogation for medical expenses paid to a recipient employee once the employee has dissipated assets from settlement of a tort claim against a third party.  The court held that attachment proceedings cannot be brought against other property assets.

Impact: The ruling will affect all Minnesota employees where employees receive benefits for injuries caused by third parties.  ERISA plans must to try to attach settlement funds before they are dissipated because the ruling bars them from going after other assets of injured workers.

But the ERISA plan prevailed in Gobeille v. Liberty Mutual Ins. Co., 2016 U.S. Dist. LEXIS  74165 (June 7, 2016)(unpublished), holding that  federal law preempts a Vermont law requiring reporting of various health insurance related data to state officials.  The court broadly construed that pre-emption provision of the statute to bar interference at the state level.

Impact:  The decision underlines how impervious ERISA plans are to state regulations a matter that has been addressed in some prior federal and state court litigation in this state, which almost uniformly have applied the preemption clause broadly, as in Gobeille.

Another ERISA-related decision in Amgen, Inc. v. Harris, 136 S.Ct. 758  (January 25, 2016), addressed the standard for a breach of fiduciary claim by employees against fiduciaries managing  Employee Stock Ownership Plans (ESOPs) under ERISA.  Reviewing the case for the second time, the justices reversed the lower court and held in a per curiam ruling that a complaint must “plausibly allege” that a prudent fiduciary “could not have concluded” that an alternative investment decision “would do more harm than good.”

Impact:  By raising the bar for pleadings and proof by ESOP claimants, the decision makes it more difficult for employees to pursue these types of actions in Minnesota and elsewhere.

Overtime opinions

Two other high court opinions this past term deal with another frequently litigated federal law:  overtime compensation under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq.

In Tyson Foods, Inc. v. Bouaphoakeo, 136 S.Ct. 1036  (March 22, 2016), the justices affirmed a ruling of the Eighth Circuit Court of Appeals upholding a $2.9 million verdict for overtime compensation for some 200 workers at a food processing plant in Iowa.  See “High court to hear 8th Circuit class wage case in the October 5, 2015, Minnesota Lawyer.  It affirmed the use of expert witness “representative” statistical evidence to support the claim for time spent on putting on or taking off employer-required garments before and after work, so-called “doffing and donning.”

Impact:  The decision facilitates employees pursuing wage and hour claims, which constitute an ever-increasing genre in Minnesota, like the one decided this summer by the state Court of Appeals, Burt v. Rackner, Inc.882 N.W.2d 627 (Minn. App. 2016). That case held that a waiter may sue under state law for wrongful discharge due to refusal to share tips with co-workers.

Near the end of the term, the high court in Navarro v. Encino Motorcars, LLC, 136 S.Ct. 2117  (June 20, 2016) held that “service advisers” who sell vehicle repair and maintenance work at car dealerships might not be covered by the overtime law, despite a regulation of the Department of Labor saying  service providers were exempt. The court said the regulation was procedurally defective  and remanded  the case Ninth Circuit for further consideration without applying agency deference.

Impact:  The ruling could affect a number of the many licensed vehicle dealerships and their employees throughout Minnesota.  Depending upon the outcome on remand, it could require that the larger ones whose employees sell repair or maintenance services be compensated at 1½ times their normal rates for overtime work.

Disciplinary Decisions

Three other decisions arose out of disciplinary actions in the workplace.

A claim of constructive discharge due to discrimination was held to arise at the time an employee resigns inGreen v. Brennan136 S.Ct. 1769  (May 23, 2016).  Construing the 45-day limitations period for an internal administrative claim against the U.S. Postal Services, the justices held that the time for bringing a discrimination claim due to “intolerable” working conditions accrues at the time the quitting worker gives notice of quitting, not when the underlying wrongdoing occurred.  The case was remanded to decide whether the operative date is the time the employee gives notice of intent to quit or the last day of employment.

Impact:  The case is significant for the large number of employees who quit due to claimed hostile working conditions.  In Minnesota one-year limitations under the state human rights act for wrongful discharge claims has been held to run from the time the employee becomes aware of the employer’s intent to terminate the employee, even if the actual termination occurs later, Turner v. IDS Financial, 471 N.W.2d 105 (Minn. 1991).  The Green decision may fortify the ability of resigning employees to extend the limitation period for suit in many circumstances.

Public sector employees received a favorable ruling in Heffernan v. City of Paterson, 136 S.Ct. 1412  (April 26, 2016), which allows them to sue for wrongful termination under the First Amendment based on an employer’s factual mistake of the employee’s participation in protected freedom of expression activities.  It held that any retaliatory discharge claim can be pursued by an employee who did not engage in protected activities but was fired by management under the erroneous belief that the employee did so.

Impact:  The case will strengthen the rights of employees for governmental entities to seek redress for discharge that they claim to be retaliatory. The decision allows them to do so even if they did not undertake protected activities but can show that the employer thought they did.

But employers came out ahead in CRST Van Expedited v. EEOC, 136 S.Ct. 1642 (2016)which broadens the grounds for them to recover attorney’s fees in Title VII litigation. Overturning a decision of the 8th Circuit, the justices held that an employer may be entitled to its legal fees if a claim is dismissed without addressing the merits of the employee’s claim if the action was “frivolous, unreasonable, or groundless.”

Impact:  The decision strengthens the ability of employers to seek attorney’s fees for improper discrimination litigation by employees if a lawsuit is disposed of for reasons other than the merits.  Although decided under federal law employers in Minnesota could argue that it reasonably should apply to cases under the state human rights act as well as other discrimination laws.

These cases comprise a mixed bag benefiting employees and management, and their respective lawyers, in Minnesota.


Five other key Supreme Court rulings in  2015 term

  • Whole Women’s Health v. Hellerstedt: Invalidates burdensome abortion restrictions;
  • Fisher v. University of Texas: Upholds “affirmative action” in college admissions;
  • Evenwheel vAbbotts: Voting apportionment must be based on total population;
  • Utah v. Streif: Search permissible after unlawful police stop; and
  • Birchfield v. North Dakota/Bernard v. Minnesota: No warrant needed for DWI breath tests but required for more “intrusive” blood testing.

As published in Minnesota Lawyer.