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Year in Review: 2018 risk management legal rulings

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In 2018, the U.S. Supreme Court issued rulings impacting age discrimination law, arbitration, class actions, overtime pay and whistleblowers. But for the second year in a row, it failed to deal squarely with the issue of transgender and gay rights. Lower courts, meanwhile, forged ahead with their own rulings on sex reassignment surgery benefits, transgender rights and age discrimination.

Important court rulings include:

Age discrimination and small government entities: The Supreme Court on Nov. 6 held in a unanimous ruling that the Age Discrimination in Employment Act applies to small government entities that have fewer than 20 workers. An attorney who represents employers said the ruling will increase these entities’ exposure and lead to higher employment practices liability rates.

Sex reassignment surgery: A federal jury on Oct. 11 awarded two workers, a University of Wisconsin-Madison employee and a teaching assistant, $780,500 in damages for the state’s refusal to pay for costs associated with general reassignment surgery and sex hormones based on an exclusion in Wisconsin’s state employee coverage. The ruling states the exclusion triggered the protection of Title VII of the Civil Rights Act of 1964 and the Affordable Care Act’s anti-discrimination provision. Other courts have also held transgender employees are protected under Title VII. 

Same-sex rights: The Supreme Court on June 4 ruled in favor of the bakery in the closely watched Masterpiece Cakeshop Ltd. v. Colorado Civil Rights Commission et al. case, which involved the bakery owner’s refusal to prepare a wedding cake for a same-sex couple. But experts pointed out the ruling was narrowly written and case-specific, and did not give employers substantive guidance on the issue of gay rights. 

Transgender students’ bathroom rights: A federal court in Virginia on May 22 refused to dismiss litigation involving a transgender student’s bathroom use, holding he was protected by Title IX of the Education Amendments Act of 1972. The case, Gavin Grimm v. Gloucester County School Board, was remanded from the Supreme Court after the Education and Justice departments issued a joint memorandum revoking the Obama administration’s federal guidelines on transgender students’ bathroom use. The case raises the issue of whether employers as well as schools should consider implementing policies that allow transgender employees to use the bathroom of their choice. 

Arbitration agreements: In a 5-4 ruling on May 21 in National Labor Relations Board v. Murphy Oil USA, Epic Systems Corp. v. Lewis, and Ernst & Young v. Morris, the Supreme Court said employers can force employees to sign arbitration agreements waiving their right to bring class action claims on issues such as overtime wages or gender-based pay disparities. In a dissenting opinion, Justice Ruth Bader Ginsburg said the high court’s decision was “egregiously wrong,” but a policyholder attorney said it “means employers can eliminate their single biggest employment law risk.”

Age discrimination: In a ruling on April 26 that disagreed with another circuit court, a federal appeals court held in Dale E. Kleber v. CareFusion Corp. that the Age Discrimination in Employment Act of 1967 applies to outside job applicants. The case, filed by a 58-year-old, involved an ad seeking applicants for an attorney’s position who had no more than seven years of experience. However, the 11th U.S. Circuit Court of Appeals held in an en banc 2016 ruling in Richard M. Villareal v. RJ. Reynolds Co. Pinstripe Inc. that the ADEA does not allow an unsuccessful job applicant to sue an employer for using a practice that has a disparate impact on other workers. The U.S. Supreme Court subsequently refused to consider an appeal of that ruling. Observers have said, however, the high court may eventually decide whether the ADEA prohibits employer policies that have a disparate impact on older job applicants now that two circuit courts disagree on the issue.

Overtime pay: In a 5-4 ruling on April 2, the Supreme Court held in Encino Motorcars LLC v. Navarro et al. that car dealership service advisers are exempt from being paid overtime, which could apply to other occupations as well. But depending on local law, employers in some jurisdictions, including California, may still be obligated to pay overtime. The ruling nevertheless has been described as “enormously far-reaching.”

Class actions in state courts: The U.S. Supreme Court held March 20 in Cyan Inc. et al. v. Beaver County Employee Retirement Fund that class actions related to initial public offerings can be heard in state court. The ruling has led to increased directors and officers liability rates for IPOs and higher retentions, experts say.

Transgender rights: A federal appeals court ruling on March 7 held a person’s transgender status is protected from discrimination under Title VII in a case involving a funeral home worker who was fired shortly after telling her employer and co-workers she was undergoing a gender transition to female from male. The ruling agrees with two other appeals court rulings on the issue and disagrees with a third, with some experts predicting the issue will eventually be heard by the Supreme Court. Meanwhile, the EEOC and the Justice Department published conflicting briefs on the issue, with the EEOC stating Title VII applies. Separately, an appeals court on Feb. 26 held in Melissa Zarda et al. v. Altitude Express, a case involving a gay skydiver, that sexual orientation discrimination violates Title VII.

Whistleblowers: The Supreme Court on Feb. 21 ruled whistleblowers are not protected from retaliation under the Dodd-Frank Wall Street Reform and Consumer Protection Act if they only report wrongdoing internally. Although the business community had urged the court to issue this ruling, it could undermine firms’ opportunity to first address any issues themselves, before attracting the SEC’s regulatory scrutiny, experts say.