GPSolo Magazine - September 2005

The Labor and Employment Law Decisions of the Supreme Court’s 2003-2004 Term

During the 2003-2004 term, the Supreme Court decided seven labor and employment cases. In three of these decisions, the Court construed provisions of the Employment Retirement Income Security Act (ERISA). The other four cases each raised issues under a different federal statute, namely the Age Discrimination in Employment Act (ADEA), Title VII, the Americans with Disabilities Act (ADA), and racial discrimination under 42 U.S.C. section 1981. This article will first summarize these decisions and then discuss some broader themes raised by this collection of cases.

The cases. In a case involving the ADEA, General Dynamics Land Systems, Inc. v. Cline, the Court held that the act does not prevent employers from implementing policies that treat older workers more favorably than younger workers. The Cline decision is important in two principal respects. First, the decision creates a standing requirement such that an ADEA claim is actionable only if it challenges an employment action that disadvantages older employees as compared to younger employees. Second, the outcome preserves the ability of employers to implement early retirement programs by which older workers, but not younger workers, are offered a financial incentive to exit the workplace.

In a Title VII case, Pennsylvania State Police v. Suders, the Court held that the affirmative defense described in Faragher v. City of Boca Raton and Burlington Industries, Inc. v. Ellerth is available to employers facing sexual harassment allegations where the plaintiff alleges a constructive discharge and no adverse official action precipitated the plaintiff’s resignation.

The Suders decision is a good news/bad news outcome. The good news is that the “official act” line of demarcation is well grounded in policy considerations. The Suders standard builds on the policy articulated in Ellerth and Faragher of only imposing strict liability where a supervisor engages in some objective use of agency authority on behalf of an employer. On the other hand, when a supervisor engages in harassing behavior that involves no official employment action, strict liability for the employer is less appropriate. In terms of bad news, the “official action” test is an imprecise standard that likely will spawn considerable litigation. This lack of predictability is aggravated by another aspect of the decision. For the first time, the Court ruled that a constructive discharge is actionable under Title VII. Although this result is not surprising, the Court’s articulated standard for determining the existence of a constructive discharge is somewhat surprising. In order to establish a constructive discharge, the plaintiff “must show that the abusive working environment became so intolerable that her resignation qualified as a fitting response.” This standard is a loose one and appears to differ from that adopted previously in some circuits.

The Americans with Disabilities Act was considered in Raytheon Co. v. Hernandez, where the Court held that an employment policy barring the rehire of employees whose prior employment with the same employer terminated because of a facially neutral workplace conduct rule does not establish a disparate treatment claim under the ADA absent evidence that the policy was applied in a discriminatory manner. The Hernandez decision, although certainly correct in ruling that the analysis of disparate treatment and disparate impact claims entails distinct proof structures, is unsatisfactory in a number of respects. First, the decision provides little guidance with respect to the substantive issues generally surrounding the validity of no-rehire policies as applied to recovered addicts. The status of a no-rehire policy under a disparate impact analysis also is unclear. Finally, the Hernandez decision does not provide any explicit guidance with respect to the proper interpretation of the Court’s controversial 2003 decision in Desert Palace, Inc. v. Costa.

In Jones v. R.R. Donnelley & Sons Co., the Court held that 28 U.S.C. § 1658’s four-year statute of limitations applies to federal causes of action made possible by post-1990 statutory enactments, including a 1991 amendment to 42 U.S.C. section 1981. The Jones decision underscores the Court’s preference for utilizing a uniform statute of limitations for claims arising under federal statutes lacking an express limitations period as opposed to a policy of borrowing state law statutes of limitations.

In Aetna Health, Inc. v. Davila, the Supreme Court held that state law claims challenging medical coverage decisions under an ERISA health plan were preempted by ERISA and thus removable to federal court. The Davila decision addresses the contentious realm of health care claims and remedies and makes clear that a state cannot expand tort liability for mixed coverage and treatment decisions made by a managed care health plan. Most significantly, the Davila Court firmly tosses the hot potato of health care reform back to Congress.

In Central Laborers’ Pension Fund v. Heinz, the Court unanimously held that ERISA’s “anticutback” rule bars pension plan amendments that expand the categories of post-retirement employment triggering suspension of previously accrued early retirement benefits. The Court ultimately found that the employer’s attempted benefit reduction ran afoul of ERISA’s core objective of requiring employers and other plan sponsors to live up to promises on which employees have relied.

In Yates v. Hendon, the Court held that a working owner of a business qualifies as a participant in a benefit plan covered by ERISA, so long as the plan covers one or more employees other than the business owner and his or her spouse. Justice Ruth Bader Ginsburg’s opinion conveniently provided its own assessment of the benefits flowing from the Yates decision. The Court stressed two benefits in particular. First, the Court noted that its decision furthers “Congress’ aim” by encouraging the creation of ERISA benefit plans. Second, the Court’s ruling “avoids the anomaly that the same plan will be controlled by discrete [legal] regimes.”

The trends. The decisions of the 2003-2004 term provide a snapshot of two ongoing trends in the labor and employment law field. The first concerns the growing importance of employee benefit matters relative to other labor and employment topics. As the baby boomer cohort ages, issues relating to health care and re-tirement income loom ever larger. Congressional inertia, not only specifically with respect to health care reform but also more generally with respect to labor and employment law reform, likely will ensure that issues relating to employee benefits will continue to gain on the more traditional practice areas under the National Labor Relations Act and Title VII in relative significance.

The second trend illustrated by this term’s set of decisions is the Supreme Court’s continued efforts to redirect employment law claims away from the federal court system. The seven labor and employment decisions issued by the Court in 2003-2004 represent the second-lowest number of the past two decades. This reflects the fact that, by virtue of its interpretation of arbitration agreements, the Eleventh Amendment, and the ADA, the Court has diverted a growing number of employment disputes to arbitral and state court forums. As a result of these efforts, and barring the enactment of congressional reforms, the Supreme Court’s labor and employment law agenda likely will remain lean for the foreseeable future.

Stephen F. Befort is Gray, Plant, Mooty, Mooty & Bennett Professor of Law, University of Minnesota Law School. He can be reached at

For More Information About the Section of Labor and Employment Law

- This article is an abridged and edited version of one that originally appeared on page 177 of The Labor Lawyer, Fall 2004 (20:2).

- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221 or go to

- Website:

- Periodicals: The Labor Lawyer, journal, published three times per year; Labor and Employment Law, newsletter, published quarterly; substantive committee newsletters, published biannually.

- Books and Other Recent Publications: Labor Arbitration: A Practical Guide for Advocates; Labor Arbitration: Cases and Materials for Advocates; Labor Arbitrator Development: A Handbook; Tortious Interference in the Employment Context: A State-by-State Survey; Fair Labor Standards Act and 2003 Supp.; Employment Discrimination Law, 3d ed. and 2002 Supp.; Elkouri and Elkouri: How Arbitration Works, 6th ed.; How ADR Works; Covenants Not to Compete: A State-by-State Survey, 3d ed.; The Developing Labor Law, 4th ed. and 2003 Supp.; 2003 Supp. to How to Take a Case before the NLRB, 7th ed.; Equal Employment Law Update, Summer 2003 ed.; Employee Duty of Loyalty: A State-by-State Survey, 2d ed. and 2002 Supp.; The Railway Labor Act and 2001 Supp.; Employee Benefits Law, 2d ed. and 2003 Supp.; Occupational Safety and Health Law, 2d ed.; Trade Secrets: A State-by-State Survey and 2002 Supp.; International Labor and Employment Laws, vols. 1 and 2 and 2002 Supps.; Discipline and Discharge in Arbitration and 2001 Supp.



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