Legislative Update July 2014

Supreme Court's Contraceptive Decision Not a One-Size-Fits-All Religious Exemption from the Affordable Care Act's Requirements

This past June the U.S. Supreme Court ruled 5-4 in Burwell v. Hobby Lobby that closely-held, for-profit corporations have standing under the Religious Freedom Restoration Act of 1993 (RFRA), and that while the government may have a compelling interest in providing contraceptive coverage to participants at no charge, there are less burdensome ways to provide such coverage other than the Affordable Care Act (ACA)'s Contraceptive Mandate.

The Court's decision applies to closely-held, for-profit entities that are owned by individuals whose "sincere" religious beliefs are in opposition to contraception, or certain forms of contraception. Further governmental regulations based on the Court's decision are expected.

The case dealt with the "Contraceptive Mandate" under the Affordable Care Act, which requires non-grandfathered employer-sponsored health insurance to provide cost-free coverage for all FDA approved contraceptive methods, sterilization procedures, and patient education and counseling. Employers sponsoring coverage that does not meet these requirements are subject to a penalty of $100 per employee per day.

The plaintiffs in this case, three closely-held corporations, objected to providing health insurance coverage that included certain drugs that prevent an already fertilized egg from developing into a viable pregnancy; the companies did not object to providing coverage for any other form of contraception. The companies contend that providing coverage that meets the HHS mandate would violate their religious belief that life starts at conception.

The Court held that a for-profit corporation has standing under the RFRA.  The RFRA generally prohibits the federal government from substantially burdening a person's exercise of religion unless that action constitutes the least restrictive means of furthering a compelling governmental interest. Previously, it was not clear whether a corporation could be considered a "person" for purposes of asserting a claim that the government violated its freedom to exercise religion.

The Court's decision applies to closely-held, for-profit companies.

The Court noted that there are numerous practical restraints that may prevent a publicly traded company from obtaining similar treatment, including the idea that unrelated shareholders – including institutional investors with their own set of stakeholders – would agree to run a corporation under the same religious beliefs.  However, the Court did not consider the RFRA's applicability to such companies.

As the Court noted, "The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs."

In addition, the Court held that the Contraceptive Mandate violates Hobby Lobby's (and two other corporations') owners' religious beliefs about the use of certain contraceptives.

Failure to comply with the Mandate would cost Hobby Lobby up to $1.3 million a day ($100 per employee per day).  The majority found this economic penalty to be a substantial burden and not the least restrictive means of providing employees with contraceptive coverage.  

The Court found that the least restrictive means of providing plan participants access to all FDA approved contraceptives at no cost was not to compel a company to cut benefits or impose significant financial penalties, but to provide closely-held for-profit companies with a similar accommodation that is currently offered to electing religious-based non-profit entities.

Specifically, in September 2013, the Department of Health and Human Services (HHS) issued regulations for certain religious-based non-profits to opt out of the Contraceptive Mandate.  Under these regulations, religious-based non-profit entities offering group health insurance can opt out of the Contraceptive Mandate by providing a certification to their third party service provider, who would then provide separate payments for contraceptive services for plan participants without cost-sharing with the eligible non-profit organization, its insurance plan, or the plan beneficiaries.  Similar treatment is afforded to self-insured plans.  In effect, electing religious-based non-profit organizations' employees would still receive contraceptive coverage, but payment for such services would not be made by the employer. 

Employers' Bottom Line:  The Court's decision is not a one-size-fits-all exemption from the ACA's minimum essential coverage, or other insurance requirements.  The Court's decision applies solely to closely-held for-profit corporations that can demonstrate sincere religious objections to providing mandated contraceptive services under the RFRA.  

Further regulations are expected to provide a procedure for for-profit corporations to use to obtain an exemption from providing contraceptive coverage, which will likely be similar to the non-profit entity exemptions allowed under current law.

Supreme Court Invalidates Recess Appointments to NLRB


In a long-awaited decision, the U.S. Supreme Court has held that President Obama's recess appointments of Members Block, Griffin, and Flynn to the National Labor Relations Board (NLRB) on January 4, 2012, were unconstitutional. See NLRB v. Noel Canning (June 26, 2014).  Although the Court broadly interpreted the President's power under the Recess Appointments Clause, it held that the three-day recess during which the appointments were made was too short to fall within the Clause. Accordingly, the Court found that the President lacked the authority to make these appointments. Although the positions held by these members have since been filled by validly appointed members, the decision calls into question the validity of hundreds of Board opinions issued during the time these members served because the Board lacked a valid quorum during that time. 

Justice Breyer delivered the opinion of the Court, in which Justices Kennedy, Ginsburg, Sotomayor, and Kagan joined.  Justice Scalia concurred in the judgment only.  Chief Justice Roberts and Justices Thomas and Alito joined in the concurring opinion.

The Recess Appointments Clause creates an exception to the requirement that the President must obtain the advice and consent of the Senate before appointing officers of the United States.  The Clause provides that "the President may fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session." In analyzing the appointments, the Court noted that the Recess Appointments Clause is a subsidiary, not a primary, means of making appointments and that the Founders clearly intended most appointments to be made with Senate approval. Thus, the Court sought to interpret the Clause as giving the President the authority to make appointments during a recess but "not offering the President the authority routinely to avoid the need for Senate confirmation."

In finding the appointments invalid, the Court addressed three issues under the Clause: whether the phrase "recess of the Senate" includes both inter-session and intra-session recesses; whether the term "vacancy" refers only to vacancies that occur during a recess or also includes those that occur prior to a recess but continue into the recess; and whether pro forma sessions of the Senate must be considered in determining the length of a recess when evaluating whether a recess falls within the Clause.

The Court held that the term "recess of the Senate" refers to both inter-session breaks (breaks between formal sessions of Congress) and intra-session recesses (such as a summer recess in the midst of a Congressional session). Finding no dispute regarding whether inter-session recesses are covered, the Court addressed only intra-session recesses.  After examining historical practice and memoranda addressing the issue, the Court held that the Clause covers such recesses if they are "of substantial length."  Specifically, the Court held that a recess of more than three days but less than 10 days is presumptively too short to fall within the Clause.  According to the Court, "[i]f a Senate recess is so short that it does not require the consent of the House, it is too short to trigger the Recess Appointments Clause. ... And a recess lasting less than 10 days is presumptively too short as well."

The Court found no dispute that the term "vacancies that may happen" as used in the Recess Appointments Clause includes vacancies that first come into existence during a recess. It also held that this term includes vacancies that arise prior to a recess but continue to exist during the recess. The Court acknowledged that a literal reading of the language of the Clause "permits, though it does not naturally favor" this broader interpretation.  However, after examining the Clause's purpose and historical practice, the Court found that both support interpreting the term broadly to include both types of vacancies.

Finally, the Court addressed whether it should consider the Senate recess from December 17, 2011, through January 20, 2012, as one long recess or shorter recesses broken up by pro forma sessions during which no business was conducted.  The Senate had adopted a resolution that from December 20, 2011, through January 20, 2012, it would hold pro forma sessions every Tuesday and Thursday during which no business would be transacted.  At the end of each pro forma session, the Senate would adjourn until the following pro forma session. The President made the appointments in question on January 4, 2012, between the January 3 and January 6 pro forma sessions. The Court held that the pro forma sessions count as sessions, not as periods of recess, stating that "for purposes of the Recess Appointments Clause, the Senate is in session when it says it is, provided that, under its own rules, it retains the capacity to transact Senate business. The Senate met that standard here." Accordingly, since the recess during which these appointments were made was three days, it was too short to trigger the President's power under the Clause, making these appointments invalid.

Employers' Bottom Line:  The Court's decision has potentially far-reaching repercussions because it calls into question hundreds of decisions issued and other actions taken by the Board during the time these invalidly appointed members served. According to the Supreme Court's 2010 decision in New Process Steel, the Board cannot act without a validly appointed quorum. After the New Process Steel decision, only about 100 of the approximately 550 cases decided without a proper quorum were returned to the Board for new decision to be issued, with the rest resolved without further litigation. 

The Court's decision today means the Board lacked a valid quorum when it issued over 700 decisions, a number of which will have to be reconsidered. Many of the Board's decisions in 2012 were decided against employers and some were very high profile, including Costco Wholesale Corp., 358 NLRB No. 106 (Sep. 7, 2012), where the Board struck down an employer's social media policy, and Banner Health System, 2012 NLRB LEXIS 466 (July 30, 2012), where the Board adopted a new approach, holding that an employer commits an unfair labor practice if it asks an employee, who is the subject of an internal investigation, to refrain from discussing the matter while the employer conducts its investigation.

This process may well delay the Board's momentum in issuing other controversial decisions unfavorable to employers.  With a pro-labor majority, however, the Board likely will uphold its earlier decisions that it must reconsider under Noel Canning.

Healthcare Employers Must Be Consistent When Restricting

Union Buttons and Other Insignia


The National Labor Relations Board ("NLRB" or "Board") recently held that a healthcare employer violated the National Labor Relations Act (NLRA) by prohibiting employees from wearing union protest stickers.  See HealthBridge Mgmt., LLC, 360 N.L.R.B. No. 118 (June 22, 2014). In the 2-1 decision, the Board found that HealthBridge could not prohibit employees from wearing union protest stickers inside or outside patient care areas because its rules were only selectively enforced, and HealthBridge could not establish "special circumstances" to justify the ban. 

 In response to an earlier complaint issued against HealthBridge, the union prepared flyers and stickers stating that HealthBridge had been "busted" by the NLRB for violating federal labor law. The "busted" flyers subsequently were posted on the union's bulletin boards at each of HealthBridge's six Connecticut health care facilities, and employees at each of the facilities wore the "busted" stickers. HealthBridge immediately removed the flyers from the union bulletin boards and instructed employees at four of the six facilities to remove the stickers when in patient care areas or while providing patient care. Employees at the remaining two facilities were prohibited from wearing the stickers in all areas. 

It is well-established that employees, including nonunion employees, have the right to wear union pins, stickers, buttons and other union insignia at work in the absence of "special circumstances." In healthcare facilities, however, the NLRB and the courts have refined that rule because of concerns about the possibility of disruption to patient care. In non-patient care areas, restrictions on wearing union pins, stickers, buttons and other union insignia are presumptively invalid, and it is the employer's burden to establish special circumstances justifying such decisions. Restrictions on wearing insignia in patient care areas are presumptively valid; however, that presumption does not apply if the restriction is a selective ban on only certain pins, buttons and other union insignia. In those circumstances, it remains the employer's burden to establish special circumstances to justify its action and prove that the action was "necessary to avoid disruption of health-care operations or disturbance of patients." Beth Israel Hospital v. NLRB, 437 U.S. 438, 507 (1978). 

Employers' Bottom Line:  Consistent application of workplace rules is critical. An employer cannot prohibit employees from wearing union buttons – even when "special circumstances" exist – if the employer permits employees to wear political or other buttons or stickers in the workplace. Moreover, according to the Board, healthcare facilities must establish "special circumstances" with specific evidence, not general or speculative testimony regarding how patients may be affected. In the end, absent "special circumstances," it is an unfair labor practice for employers to prohibit employees from wearing union pins, stickers, buttons and other union insignia.  

Is Telecommuting as a Reasonable Accommodation

Under the ADA the New Norm?


The Sixth Circuit recently held that a four day per week telecommuting arrangement could be a reasonable accommodation for a disabled employee, even though the employer determined, in its business judgment, that teleconferencing was an insufficient substitute for in-person work. The court noted that, given the state of modern technology, the class of cases in which an employee can fulfill all requirements of the job while working remotely has greatly increased, and it is no longer the case that jobs suitable for telecommuting are "extraordinary" or "unusual."  See EEOC v. Ford Motor Co., No. 12-2484 (6th Cir. Apr. 22, 2014).  

Jane Harris worked as a resale buyer for Ford Motor Company from 2003 to 2009. Her role required some individual tasks, but the essence of her job required group problem-solving. Ford utilized a telecommuting policy that authorized employees to work up to four days per week from a telecommuting site, and several resale buyers tele-commuted one day per week.   

Throughout her employment, Harris suffered from irritable bowel syndrome ("IBS"). As her condition worsened, she began taking intermittent FMLA leave when she experienced severe symptoms. Harris was eventually permitted to work a flex-time telecommuting schedule on a trial basis. However, the company found this arrangement problematic as Harris was unable to establish regular and consistent work hours. Harris requested she be allowed to telecommute up to four days per week as an accommodation for her IBS. In response Ford offered her two alternative accommodations: moving her cubicle closer to the restroom or finding an alternative position. Harris rejected these offers and filed a charge of discrimination with the EEOC. The EEOC later filed suit on her behalf in federal court, claiming Ford violated the Americans with Disabilities Act (ADA). The trial court granted summary judgment in favor of Ford; however, on appeal the Sixth Circuit reversed the trial court. 

In a 2-1 decision, the Sixth Circuit held that Harris had presented evidence that she was a qualified individual with a disability on two alternative bases: (a) she was qualified for the position after the elimination of the requirement that she be physically present at work, or (b) she was qualified for the position with a telecommuting accommodation. The burden then shifted to Ford to prove either (i) the physical-presence requirement was an essential function of Harris's job or (ii) the telecommuting arrangement would create an undue hardship. The court found that Ford failed to prove either. 

With regard to the physical-presence requirement, the court held that physical presence at the workplace could be considered an essential job function for positions that required face-to-face interactions with customers or other objects at the workplace, but noted that "the world has changed since the foundational opinions regarding physical presence in the workplace were issued. . .Therefore, we are not persuaded that positions that require a great deal of teamwork are inherently unsuitable to telecommuting arrangements." The court further held that, while leave on a sporadic or unplanned basis may be an unreasonable accommodation, telecommuting does not raise the same concerns as flex-time scheduling because an employer can still rely on an employee to be working during scheduled hours while working remotely. Accordingly, the court rejected  Ford's concern that Harris be available for meetings or to handle urgent matters during the workday finding that her ability to engage in those activities did not depend on her physical presence in the office, but rather on her being consistently available during "core" business hours. In support of its rejection of Ford's business judgment, the court stated:

Courts routinely defer to the business judgment of employers because courts are not equipped with the institutional knowledge to sit as "super personnel department[s]." However. . . while we do not allow plaintiffs to redefine the essential functions of their jobs based on their personal beliefs about job requirements, neither should we allow employers to redefine the essential functions of an employee's position to serve their own interests. Rather, we should carefully consider all of the relevant factors, of which the employer's business judgment is only one.

The court also declined to find the alternative accommodations offered by Ford reasonable.

Employers' Bottom Line:  This decision is troubling for employers because it shows that a court may reject the employer's business judgment in managing its workforce. Employers, particularly those with existing telecommuting policies, are now cautioned to seriously consider telecommuting as a reasonable accommodation under the ADA where an employee's disability affects his or her ability to be physically present in the workplace, but does not ostensibly affect the employee's ability to work during normal working hours. An important distinction must be made regarding whether the employee is seeking a flex-time or a telecommuting arrangement. Additionally, in the Sixth Circuit, courts cannot be expected to defer to an employer's business judgment that physical presence in the workplace is an essential job function:  the employer must be able to demonstrate why physical presence is required and must be able to do so by relying on reasons beyond generalized concepts such as "team work" and "interoffice interaction." Carefully crafted job descriptions and narrowly defined telecommuting policies will be of the utmost importance.