by Jackson Lewis

A number of decisions by the U.S. Supreme Court in its 2003-2004 term had a significant impact on workplace law and litigation. They dealt with issues such as the sexual harassment affirmative defense in constructive discharge cases, "reverse" age discrimination, benefits plan administrator discretion, neutral no-rehire policies, and direct evidence in "mixed motive" discrimination cases, among others. In its new term, the Court will deal with more important questions in cases involving, among other issues, claimants' tax liability for attorneys' contingency fees and the ability of individuals to sue for age discrimination resulting from the "disparate impact" caused by employer policies or practices.

The Year in Review

Pennsylvania State Police v. Suders:

In its 2003-2004 term, the Court examined whether the Faragher/Ellerth affirmative defense in sexual harassment cases is available to an employer where the employee claims to have been constructively discharged. In reversing a decision against the employer, the Court held the affirmative defense can apply to constructive discharge cases, but only where the constructive discharge is triggered by conduct which does not constitute "official acts." Where official acts, such as demotion or cuts in pay, create an intolerable working environment that forces the employee to quit, the defense is not available.

Black & Decker Disability Plan v. Nord:

The Court found that a benefits plan administrator had the discretion to decide not to give preference to the opinion of a treating physician in determining whether to award disability benefits to a former employee with a degenerative disc disease. Rejecting the "treating physician rule" standard used in Social Security Administration disability determinations, the Court found the rule not applicable to a decision by an administrator of a benefit plan under the Employee Retirement Income Security Act.

Cline v. General Dynamics Land Systems, Inc.:

The Court concluded an employee could not bring an action under the Age Discrimination in Employment Act for "reverse" discrimination. The Court held the ADEA's structure, purpose, history and relationship to other federal statutes demonstrated it was not meant to preclude an employer from favoring older employees over younger employees. The employer did not violate the ADEA, therefore, when it enforced a provision in a collective bargaining agreement permitting the employer to eliminate post-retirement health benefits for all subsequently-retired employees except those who were 50 years or older.

Raytheon Company v. Hernandez:

The Court held an employer's application of a neutral "no-rehire" policy banning the reemployment of all workers who were terminated or forced to resign always initially defeats a claim of "disparate" and unlawful discrimination based on disability by a rejected applicant. To prevail on the claim under the Americans With Disabilities Act, the applicant must then show the employer used the policy as a "pretext" for intentionally discriminating against him.

Desert Palace Inc. v. Costa:

The Court ruled that Title VII of the Civil Rights Act of 1964 does not require an individual to show direct evidence of sex discrimination when seeking damages for discriminatory discharge if the employer had a "mixed motive" for the termination. The language of Title VII is clear, and there is no such statutory requirement in Title VII as amended by the Civil Rights Act of 1991.

Preview of the Coming Term

The Supreme Court has granted review in several important employment cases; among them are the following:

Smith v. City of Jackson, No. 03-1160:

The Court will determine whether an age discrimination claim can be based on an allegation that the offending action had a disparate impact on a protected category of employees. The plaintiffs, police officers and dispatchers employed by a city, claimed a performance compensation plan discriminated against older workers because it resulted in larger pay increases to younger employees with less tenure. The trial and appeals court denied the claims.

Commissioner of Internal Revenue v. Banks and Commissioner of Internal Revenue v. Banaitis:

The Court will consider whether the portion of a settlement paid to the plaintiff's attorney must be included in the plaintiff's gross income. The federal court of appeals in both of these cases rejected the Internal Revenue Service's contention that all amounts paid in settlement must be included in a plaintiff's gross income, including amounts paid to attorneys as part of contingency fee agreements. The IRS's position has resulted in higher settlement demands based on concerns the entire amount is taxable.