Big Week for Supreme Court Decisions

By Think HR and WAKEUP CALL

In the last few days before the summer recess, the Supreme Court has decided cases that may impact employers. What follows below is a summary of these cases.

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Monday, June 30: Court Rejects the Affordable Care Act Contraceptives Mandate for Some Companies

The Supreme Court ruled in a 5-to-4 decision that requiring family-owned corporations to pay for insurance coverage for contraception under the Affordable Care Act violates a 1993 federal law protecting religious freedom. The decision applied to two corporations challenging the coverage requirement: Hobby Lobby, an Oklahoma-based chain of craft stores owned by evangelical Christians with more than 13,000 employees, and Conestoga Wood Specialties, a Pennsylvania cabinet company owned by Mennonites. [Burwell v. Hobby Lobby and Conestoga Wood v. Burwell, U.S. Supreme Court, No. 13-354, 13-356].

The Affordable Care Act stipulates that covered employers provide female workers with insurance coverage for a variety of methods of contraception approved by the Federal Drug Administration (FDA). The two companies objected to four of the 20 preventive contraceptives required in the mandate that can terminate the fertilized egg (after conception).

“Under the standard that [the Religious Freedom Restoration Act] prescribes, the HHS contraceptive mandate is unlawful,” Justice Samuel Alito wrote in the opinion, which was joined by Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, and Anthony Kennedy. Justice Alito stressed that the ruling applies only to the birth control mandate and does not mean companies would succeed if they made similar claims regarding other insurance requirements, such as vaccinations and drug transfusions. Alito also indicated that employees could still be able to obtain the birth control coverage via an accommodation to the mandate that the Obama Administration has allowed for religious-affiliated nonprofit organizations. The accommodation allows health insurance companies to provide the coverage without the employer being involved in the process.

Experts believe that the decision will affect other cases filed by employers relating to similar issues.

Thursday, June 26: 2012 NLRB “Recess” Appointments Ruled Invalid

The Court unanimously ruled that President Obama’s January 2012 “recess appointments” to the National Labor Relations Board (NLRB) were invalid because the three appointments did not follow the Recess Appointments Clause of the U.S. Constitution. Legal experts believe that this ruling probably means that all of these appointees’ board decisions made between January 4, 2012, and July 30, 2013 (when the replacement nominees to the board were confirmed) are void for lack of the required three-member quorum. Most experts agree that the court’s ruling in this case was more a matter of law regarding the checks and balances built into the Constitution.

During that time period, many of the now-invalidated NLRB decisions had a negative impact on employers, and the 800+ pending cases that have not been resolved will have to be “re-decided” by the properly-constituted board.  While employers are greeting this ruling as pro-employer, legal experts believe that the board’s “re-decided” decisions may be similar to the invalidated decisions because the Obama Administration’s valid appointees on the board share the same views as the 2012 invalid appointees.

Employers and legal experts will be watching the board’s decisions on such matters as employer-employee social media rights, employment-at-will doctrines, and labor matters with great interest in the coming months.

Monday, June 30: Ruling Allows Public-Sector Workers to Reject Union Dues

In a 5-4 decision, the Supreme Court rejected an Illinois requirement that home health care workers who are reimbursed through a federal Medicaid-funded state program financially support the Service Employees International Union (SEIU) even though they did not want to join the union as members. Illinois is one of 26 states that require public-sector workers to pay partial dues, called “agency fees,” to the unions that negotiate the contracts they work under and represent them in grievances or other union advocacy. The ruling did not strike down these state laws as unconstitutional, but issued a narrower ruling based on the premise that the home health care workers in the case are not “full” public employees because they are hired and fired by patients and work in private homes.

The Obama Administration and unions were disappointed with the court’s decision, and experts agree that this decision is relatively limited to the workers in the case.

Wednesday, June 25: Court Clarifies ESOP Fiduciary Requirements

In a unanimous ruling, the Supreme Court decided that a fiduciary of an Employee Stock Ownership Plan (ESOP) is subject to the same duties of “financial prudence” that the Employee Retirement Income Security Act (ERISA) requires of fiduciaries in general. The court noted that § 1104(a)(1)(B) of ERISA “imposes a ‘prudent person’ standard by which to measure fiduciaries’ investment decisions and disposition of assets,” while § 1104(a)(1)(C) requires fiduciaries to diversify plan assets. The court stated further that ESOP fiduciaries are not “entitled to a presumption of prudence” because § 1104(a)(2) establishes the extent those duties are relaxed for ESOPs and does not make reference to a special presumption so that the same standard of prudence applies to ESOP fiduciaries as applies to all other ERISA fiduciaries. The court went on to further state that an ESOP fiduciary is not required under § 1104(a)(1)(C) to diversify plan investments to “minimize the risks of large losses” because Congress recognized that ESOPs are “designed to invest primarily in” the employer’s stock, “meaning that they are not prudently diversified.”

Justice Stephen Breyer wrote, “The law does not create a special presumption favoring ESOP fiduciaries. Rather, the same standard of prudence applies to all ERISA fiduciaries, including ESOP fiduciaries, except that an ESOP fiduciary is under no duty to diversify the ESOP’s holdings.”

 

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