07/ 20/ 2007
by Beth Gaudio, NFIB Legal Foundation
The Supreme Court concluded its 2006-2007 term on a divisive note with a number of 5-4 decisions on issues related to free speech, abortion and affirmative action. Less polarizing for the justices was many of the Court's rulings on business issues. The Court upheld important restrictions on employment discrimination claims, punitive damages and union dues. Its rulings in the business arena represented important wins for NFIB, which offered support in three critical cases.
While the Rehnquist Court was generally receptive to business interests, the Roberts Court has been even better, if only because of its willingness to review a greater number of business-related cases. Experts estimate that at least half of the 2006-2007 docket included cases with a substantial business interest. The Court's pro-business approach will benefit businesses of all sizes, since the impact of many decisions, as highlighted below, will be felt by small firms as well as corporate clients.
Court limits pay discrimination claims
In a landmark 5-4 decision, the court enforced the 180-day time limitation for filing a discrimination charge. In the case Ledbetter v. Goodyear, the threshold question was how many salary reviews the plaintiff could challenge given the requirement that a discrimination charge must be filed within 180 days "after the alleged unlawful employment practice occurred." The trial court had allowed the plaintiff Lilly Ledbetter to introduce evidence of sex discrimination in pay throughout her 19-year career at the company. A jury found for Ledbetter, however, the appeals court reversed the ruling.
After Ledbetter appealed to the Supreme Court, the NFIB Legal Foundation filed a friend-of-the-court brief in support of Goodyear. The brief warned that "an employer's ability to tell its story dissipates sharply as time passes. Memories fade; managers quit, retire or die."
The Supreme Court's determination that there is a limit as to how far back a plaintiff can reach for damages represented an important victory for NFIB and all employers. While small businesses are a major source of jobs in this country, they are also a major source of employment complaints. Allowing an employee to wait years before filing a disparate pay claim would have compounded small business' existing challenge of defending against discrimination claims without the benefit of in-house counsel.
Limits on union dues upheld
In an important constitutional victory, the Supreme Court ruled that a Washington law that requires unions to obtain nonmember's consent before using union fees for political purposes does not violate the First Amendment. In order to protect the rights of nonunion employees, the voters of Washington enacted the Fair Campaigns Practices Act, which requires unions to secure consent from nonunion employees before using their agency shop fees for political purposes. In essence, Washington has adopted an "opt-in" mechanism by which agency fee employees must affirmatively consent to the union's use of their fees for political purposes. NFIB has long worked to defend limitations that protect nonunion employees from unwittingly or unwillingly financially supporting political causes with which they do not agree and was a major advocate for the Washington state initiative.
The NFIB Legal Foundation filed an amicus brief with the court urging that this law be upheld. In its brief, NFIB pointed to a long judicial history that prohibits organizations from forcing nonmembers to support a union's political activities.
Tort reform prevails
Can juries impose damages suffered by people who are not parties to the case? To the relief of tort-reform advocates, including NFIB, the Supreme Court answered with a resounding no in the case Phillip Morris USA v. Williams. This question—whether defendants can be punished for harm to nonparties—arises in a number of other types of cases, including product liability and environmental litigation.
An Oregon jury had determined that Jesse Williams' death was caused by smoking and awarded his widow $79.5 million in punitive damages. The Oregon Supreme Court rejected Philip Morris' arguments that the trial judge should have instructed the jury that it could not punish Morris for injuries suffered by persons other than Williams. The Supreme Court reversed finding that "the constitution's due process clause forbids a state to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation."
The decision was an important victory for tort-reform advocates. "In recent years, punitive damages have exploded in both frequency and size, contributing to the out-of-control spiral of the legal system that continues to threaten the livelihood of many small businesses," says Karen Harned, executive director of NFIB's Legal Foundation. "Awarding punitive damages for harms caused to nonparties, would have set an extremely dangerous precedent. Businesses deserve the right to defend themselves against allegations of harm to nonparties. Punishing defendants for harms that have not been tried in court is simply unfair and should be ruled unconstitutional."
What's next: A preview of the 2007-2008 term
In the upcoming term, the NFIB Legal Foundation will again be filing briefs on several important cases. The Foundation is still waiting for a decision in a significant First Amendment case that involves a California prohibition against employers speaking to employees about union organizing. The Foundation will also be filing briefs in two upcoming employment law disputes, Sprint v. Mendelsohn and FedEx v. Holowecki. Given its propensity for business cases, NFIB is likely to have additional opportunities to advocate for small business at the court.
