Labor: U.S. Supreme Court Expands Employer Liability in Recent Decisions

In March 2011, the United States Supreme Court issued two decisions that created more employer liability for workplace discrimination and retaliation against employees.

In the first case, Staub v. Proctor Hospital, decided on March 1, the Supreme Court recognized for the first time the "cat's paw" theory of employer liability in employment discrimination cases whereby an employer may be blamed if the discriminatory act of a low-level supervisor (such as an unjustified poor performance evaluation or warning) motivates the ultimate employment decision of a higher-level executive who may have been unaware of the supervisor's bias and who may have acted with a pure heart and without any intent to discriminate.

In the second employment case decided by the Supreme Court this March, Kasten v. Saint-Gobain Performance Plastics Corp., the Court held in a 6-2 decision that oral complaints about violations of the Fair Labor Standards Act constituted conduct protected by the FLSA's anti-retaliation provision.

The Implications of Staub and Kasten

Some legal experts have said these two cases are inconsistent with the largely pro-employer and conservative approach to employment cases that the Supreme Court has taken since John Roberts became Chief Justice five years ago, but other legal commentators say that the Staub and Kasten decisions are useful reminders that the Court is not predictable, even though they may not necessarily reflect a fundamental change in the Supreme Court's attitude.

What remains to be seen is whether Staub and Kasten are signposts that indicate how the Supreme Court will decide the biggest employment case of them all: Dukes v. Wal-Mart, a nationwide gender discrimination class action involving between 500,000 and 1.5 million female plaintiffs. Dukes is before the Court solely on class action issues and is expected to be decided by the end of the current term in June.

"Cat's Paw" Liability After Staub v. Proctor Hospital

After years of contradictory rulings by lower courts on this issue of workplace discrimination law, on March 1, the Supreme Court ruled unanimously in a 8-0 decision in Staub v. Proctor Hospital that, under the Uniformed Services Employment and Re-employment Rights Act (USERRA), an employer can be held liable if a low-level supervisor takes action against an employee (such as giving a poor performance rating) because of bias, and the supervisor's action is a motivating factor in a higher-level executive's decision to discharge the employee, even if the executive did not intend to discriminate and did not know of the supervisor's bias.

"Cat's Paw" liability gets its name from a French fable from 1679 about a monkey who persuaded an unsuspecting cat to pull some chestnuts from a fire and then left the cat with only a burnt paw. In Staub, the plaintiff was a technologist at Proctor Hospital (Proctor) and a member of the Army Reserve. After he was terminated, he sued Proctor under USERRA. It was undisputed that Proctor's vice president of human resources, Linda Buck, made the decision to terminate Staub's employment and that she had no discriminatory animus toward Staub on account of his military status. However, Staub contended that his supervisors, Janice Mulally and Michael Korenchuk, were biased against him because of his military status as evidenced by their many anti-military comments. Staub also asserted that their anti-military bias influenced Buck's decision to terminate his employment and that under the "cat's paw" theory of liability, Proctor Hospital was liable for terminating him because of his military status in violation of USERRA.

Although Staub won in the district court, the 7th Circuit reversed and applied a test stipulating that unless the biased supervisor had "singular influence" over the ultimate decision-maker, "Cat's Paw" liability would not apply. Because the 7th Circuit held that because Buck did not base her decision solely on the input of the supervisors and instead exercised her independent judgment after conducting her own investigation into the facts relevant to the decision, Proctor Hospital was not liable.

The Supreme Court reversed, rejecting the 7th Circuit's test of "singular influence" as being too high a standard. Instead, the Supreme Court held that the appropriate standard was whether the discriminatory conduct by the lower-level supervisor was intended to be discriminatory and was also intended to affect the ultimate decision, and that the supervisor's conduct was in fact a "motivating factor" in the ultimate employment action taken by the decisionmaker. The Supreme Court did not discuss what circumstances might break the causal connection between the allegedly biased supervisor's actions and the ultimate decision, other than to state that the employer would avoid liability under the "Cat's Paw" theory if the ultimate employment decision was "entirely justified."

Needless to say, the Supreme Court's decision left open many questions that will have to be answered in subsequent cases, such as:

  • Will the Staub decision apply to other employment laws, such as Title VII, the Americans with Disability Act, the Family Medical Leave Act, the Age Discrimination in Employment Act, and others that do not contain the "motivating factor" language found in the USERRA?
  • When will a higher-level decision-maker's independent investigation break the causal connection between the low-level supervisor's discriminatory intent and the ultimate employment action, so as to render it "entirely justified"?
  • What effect will an employer's complaint procedures have on "Cat's Paw" liability if the plaintiff failed to complain about the low-level supervisor's discriminatory acts?
  • How much influence must a biased supervisor have over the ultimate decision-maker in order for the employer to be liable under the "Cat's Paw" theory?

The Protection of Oral Complaints under the FLSA after Karsten

On March 22, the United States Supreme Court issued a 6-2 decision in the case of Kasten v. Saint-Gobain Performance Plastics Corp. holding that oral complaints about violations of the Fair Labor Standards Act are protected conduct under the FLSA's anti-retaliation provision.

The facts of the case are that Kasten worked for Saint-Gobain and orally complained that because the time-clocks were located in the area between where Kasten and other workers put on and took off their work related protective gear, and the area where they carried out their assigned tasks, which prevented him and his co-workers from being compensated for the time they spent donning and doffing work clothes. After Kasten was discharged, he alleged that it was in retaliation for his repeated oral complaints about the location of the time clock by using Saint-Gobain's internal grievance resolution procedure. Kasten alleged that he reported the problem to his shift supervisor, an HR employee, his lead operator and the HR manager. Saint-Gobain maintained that Kasten was terminated because, after repeated warnings, he failed to record his comings and goings on the time-clock.

The federal district court granted summary judgment in favor of the employer Saint-Gobain based, in part, on its conclusion that the FLSA's anti-retaliation provisions did not cover oral complaints. The 7th Circuit affirmed. The Supreme Court took the case to decide the sole question presented on appeal: "whether an oral complaint of a violation of the Fair Labors Standards Act is protected conduct under the [Act's] anti-retaliation provision." The Court held that the answer was yes.

The FLSA's anti-retaliation clause, Section 215(a)(3), forbids employers "to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee." (emphasis added). The Court examined a number of factors to determine if the FLSA's use of the word "filed" included oral complaints. The Court looked at dictionary definitions, legislative history of both the FLSA and other employment laws that contain anti-retaliation provisions, and the position espoused by the U.S. Department of Labor and EEOC that complaints can be filed orally. Finally, the Court noted that requiring written notice would prevent employers from using hotlines, interviews and other oral methods to receive complaints.

In so holding, the Supreme Court in Kasten stressed the importance of employers' complaint procedures as an additional reason for holding that even oral complaints are protected under the FLSA (despite the Act's use of the term "filed any complaint"), even though the Supreme Court did not address the effect of company complaint procedures on an employer's liability under the "Cat's Paw" theory in its decision in Staub.

Significantly, however, the Supreme Court in Kasten gave great deference to the positions held by the Department of Labor (DOL) and the EEOC, the two federal agencies that enforce federal employment laws. This continued a trend of Supreme Court deference to federal administrative agencies that was reiterated in another March 2011 Supreme Court decision in Mayo Foundation v. U.S., where the Court adopted the DOL's position that medical residents were not students exempt from the payment of federal payroll taxes.

In the wake of the Supreme Court's decision in Kasten, FLSA cases undoubtedly will continue to be one of the most commonly filed employment lawsuits. FLSA retaliation claims will become more difficult for employers to deal with because they can now be based on oral complaints, not just written reports of wage & hour violations.

The Bottom Line

After Staub and Kasten, employers will have to take employees' oral complaints even more seriously. Employers will need to review oral complaints carefully. This is especially true if workers orally complain about supervisors' allegedly discriminatory conduct (even if it does not involve ultimate employment decisions, such as discharges, promotion denials, etc.), but it also is true of oral complaints about wage & hour violations. Complaint procedures and policies will have to be reviewed and rewritten if they required employees to submit written complaints. Supervisors and front-line managers will need to be trained to recognize oral complaints of possible FLSA violations that can lead to employer liability under Kasten. HR personnel and upper-level management will need to be trained to be on the look-out for signs of supervisory bias (especially oral complaints by other employees) that can taint the decision-making process after Staub. Employers will also have to make sure that their decision-makers do not rely solely on performance evaluations, written warnings and other input from supervisors who are accused of being racist and having other discriminatory motivations.

Read Paul Starkman's previous column.

Contributing Author

Paul E. Starkman

Paul Starkman is one of the leaders of the labor and employment law practice group at Pedersen & Houpt.

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