Part I: SCOTUS 2021-2022 Decisions Impacting Employers – Arbitration Decisions and Vaccine Mandates

In the 2021 Supreme Court term (October 2021 – September 2022), the United States Supreme Court (SCOTUS) issued decisions in 66 cases. With its new conservative majority (J. Roberts, J. Alito, J. Thomas, J. Gorsuch, J. Kavenaugh and J. Barrett), the Court tackled a wide variety of issues ranging from immigration, freedom of religious expression, gun safety to abortion rights.

Part I of this article will discuss the Court’s decisions impacting arbitration and the vaccine mandate. Part II will discuss decisions impacting religious expression and damages recoverable under the Rehabilitation Act and the Affordable Care Act. Part II will also discuss how employers are responding to the Court’s ruling, eliminating the right to an abortion as a constitutionally protected right.

Summary

Eight Supreme Court decisions concerned employment issues, although some were more directly related than others. Of these, four decisions considered arbitration issues. With employment contracts often including waivers of class and collective actions in favor of individual arbitration and requiring arbitration of all employment claims, this developing body of law has relevance for employers. Three other Supreme Court decisions concerned OSHA’s vaccine mandate for large employers, the regulation of prayer by a school board and the recovery of compensatory damages. Finally, the Supreme Court overruled 50 years of precedents by declaring there is no right to an abortion in the United States Constitution. The Supreme Court sent the abortion issue to the states where there is a vast patchwork of laws, some eliminating access to abortion, others severely restricting abortion, with still others permitting or expanding the right to abortion. This decision, although not directly impacting employment, has led employers in many states to consider offering travel benefits to employees and their dependents to allow them to travel to receive reproductive health care if it is illegal or severely restricted in their own state.

Arbitration Decisions

The Court found common ground in its arbitration decisions. Three were unanimous and the fourth had just one dissenting judge. Exercising its more traditional role, the Court interpreted the meaning of the Federal Arbitration Act (FAA).

• Badgerow v. Walters. In an 8-1 decision, Justice Kagan noted that federal courts are courts of limited jurisdiction. They hear suits between citizens of different States as to any matter valued at more than $75,000 (diversity cases) or suits arising under federal law (federal question cases). The Court already had found that the FAA itself does not confer federal jurisdiction, but that federal courts must find an independent basis for jurisdiction to resolve an arbitral dispute. The federal courts are directed to “look through” the arbitration petition to determine whether there are federal grounds for it to exercise subject matter jurisdiction. In Badgerow, SCOTUS found federal courts were not required to “look through” an arbitration petition to determine whether they had subject matter jurisdiction when considering an application to confirm or vacate an arbitral award. Distinguishing a prior decision, the Court noted that it was evaluating the application of different sections of the FAA. Section 4 of the FAA provides that a party to an arbitration agreement may compel arbitration in a federal district court which, save for the arbitration agreement, would have had jurisdiction over the controversy between the parties. Sections 9 and 10 of the FAA which govern the confirmation and vacation of arbitral awards do not contain the same language. In deciding, the Court noted that when Congress includes particular language in one section of a statute but omits it in another section of the same Act, a court should find Congress’ decision to be deliberate. With the statutory basis for look-through jurisdiction missing in Sections 9 and 10, the Court found the FAA did not require the action to be heard in federal court.
• Morgan v. Sundance, Inc. In this 9-0 decision again penned by Justice Kagan, the Court held a party does not have to show prejudice to find a party waived its right to compel arbitration. In most cases, a party can be found to have waived a contractual right if it knew of the right but acted inconsistently with that knowledge. Until this case, waivers of arbitration were treated differently. There had been an FAA specific rule that a party waived its contractual right to arbitration only if it knew of the right, but acted inconsistently with that right and prejudiced the other side by its inconsistent actions. In Morgan, an employer delayed filing a motion to dismiss a federal action to compel the case into arbitration until after an unsuccessful arbitration. The Supreme Court determined that prejudice to the other side did not need to be established. The Court stripped away the prejudice requirement to put contractual waivers of arbitration on the same footing as other waivers of contractual rights.
• Southwest Airlines Co. v. Saxon. This was an 8-0 decision written by Justice Thomas (Justice Barrett took no part in the consideration of this case). Using cannons of statutory construction, the Court found that Section 1 of the FAA (which exempts workers engaged in foreign and interstate commerce) exempted airplane cargo handlers from a requirement to arbitrate. In this case, Ms. Saxon brought a putative class action suit against Southwest Airlines under the Fair Labor Standards Act seeking unpaid overtime. Because Ms. Saxon’s employment contract required her to arbitrate wage disputes individually, the airline sought to send her case to arbitration. The Court found that Ms. Saxon was exempt from arbitration under Section 1 of the FAA because her cargo handling duties for the airline caused her to be engaged in foreign or interstate commerce.
• Viking River Cruises v. Moriana. This was an 8-1 decision authored by Justice Alito. It struck a blow for class and collective actions brought under California’s Private Attorneys General Act (PAGA). The Court found the FAA preempts a rule of the PAGA that would invalidate contractual waivers of the right to assert representative PAGA claims. Specifically, the Court held employers can enforce arbitration agreements to the extent they require employees to arbitrate individual claims, even those that arise under the PAGA. Once an employee’s individual claims are compelled to arbitration, the employee necessarily lacks standing to represent a class of aggrieved individuals under the PAGA.

Vaccine Mandate

On Nov. 5, 2021, the Secretary of Labor, acting through the Occupational Safety and Health Administration (OSHA), responded to the spread of COVID-19 and its variants by imposing a vaccine mandate on all employers with at least 100 employees. The mandate exempted workers who tested weekly and wore a mask. Immediately after it was issued, the mandate was challenged in several district courts and its application stayed. Appeals of the district court cases were consolidated before the Sixth Circuit Court of Appeals. In December 2021, SCOTUS Court granted an application for emergency relief after the Sixth Circuit lifted the stay. In National Federal of Independent Business v. Department of Labor, a 6-3 decision, issued per curiam, the Court reinstated the stay, finding the Secretary of Labor had overstepped Congressional authority granted by OSHA. The Court held that the power to deal with the pandemic rests with Congress and the states. OSHA subsequently withdrew the vaccine mandate.

Should you wish to discuss these decisions and their impact on employment law, please reach out to Jeralyn Baran or a member of HMB’s team.