Supreme Court decisions

Illinois Supreme Court Opens Door to Enormous Damages Awards for Violation of Biometric Privacy Law

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Authors: Peter Donati, Becky Canary-King

Illinois employers that use biometric timeclocks (such as finger, face, hand, or retina scan timeclocks or entry devices) or collect other biometric information should take action immediately to confirm they are in compliance with Illinois’s Biometric Privacy Act (BIPA). Although BIPA has been in effect in Illinois since 2008, its requirements continue to catch businesses off guard – most recently with the Illinois Supreme Court’s decision in Cothron v. White Castle, issued on February 17, 2023.

The case centered on White Castle’s use of fingerprint scans when employees logged onto their computers. White Castle argued that a BIPA violation only occurred the first time the law was violated by collecting employee biometric information. The plaintiff, on the other hand, argued that a separate violation occurred each time she and fellow employees logged onto their computers with their fingerprint scans. The Illinois Supreme Court agreed with the plaintiff.

For employers using biometric timeclocks, this means that it is a separate violation—and potentially a separate penalty—for each time an employee clocks in and clocks out. With penalties of $1,000 for negligent violations and $5,000 for intentional or reckless violations, liability for companies could be astronomical. As penalties compound, even small employers could face seven-figure damages awards if they have used a biometric timeclock for a number of years. 

In White Castle, the Court found that the company had repeatedly scanned fingerprints of nearly 9,500 employees. With each instance deemed a separate violation, the company estimates the penalties could be as much as $17 billion. The Court rejected the company’s argument that assessment of penalties for each scan would be “annihilative liability” for employers, noting that damages are not mandatory under the language of the statute and that lower courts will still have the discretion to fashion remedies that do not bankrupt defendants. The Court also suggested that it is up to the Illinois legislature to reform the statute if it intended a different outcome. However, these aspects of the ruling may be of limited comfort for employers seeking to negotiate settlements with plaintiffs’ attorneys armed with this decision.

The White Castle decision follows another major BIPA decision, in which the Illinois Supreme Court held in Tims v. Black Horse Carriers Inc. that the statute of limitations for BIPA claims is five years, rejecting the one-year limitations period advocated by the defendant.

These decisions will have significant implications for Illinois employers that use biometric information. If your company uses – or previously used – biometric information (such as finger, face, hand, or retina scan timeclocks or entry devices), it’s critical that you confirm that you are complying with BIPA’s requirements.

Attorneys from our Employment & Executive Compensation Group and Cybersecurity Team are available to help you ensure that your business is compliant with BIPA and help mitigate exposure from past violations.

Non-Coronavirus Related Activity in the Supreme Court

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While attentions have been focused elsewhere, the Supreme Court continues to operate remotely and release decisions. Here are recent highlights from the highest court:

Clarified Standards for federal ADEA and Section 1981 Claims

The Supreme Court has ruled on two cases recently regarding the standards for proving employment discrimination claims. Each case determined which of two standards was necessary to prove a claim:

  • The “but for” standard, which requires an employee to show that the employer would have reached a different decision if the protected characteristic wasn’t considered; or
  • The “motivating factor” standard, which requires employees to show that the protected characteristic was one of several factors that led to an adverse employment action.

In Babb v. Wilkie, the Court found that federal employees may prove age discrimination under the Age Discrimination in Employment Act (ADEA) using the more lenient “motivating factor” standard. For private sector employees, the Supreme Court has already ruled that employees must use the “but for” standard, but the court noted that the federal-sector provision in the ADEA is worded differently from its private-sector counterpart. However, federal employees will still need to show discrimination based on the stricter “but for” standard to receive remedies under the ADEA.

In Comcast Corp. v. National Association of African American-Owned Media, the Court held that the “but for” standard applies to claims under 42 U.S.C. 1981 (Section 1981). This means that employees bringing claims for employment discrimination on the basis of race or ethnicity under Section 1981 may only prove their case using the “but for” standard. This ruling did not impact the standards under Title VII, which allows employees to prove race discrimination using the “motivating factor” standard.

Takeaway: The difference between these standards can be significant in practice. The motivating factor test requires employees to show that the protected characteristic was one of several reasons that led to the action. The but-for test requires the employee to show that the decision would not have happened, but for the protected characteristic.

Justice Clarence Thomas, in his dissent in Babb, cautioned that applying this more lenient standard could result in the federal government facing more ADEA lawsuits. Meanwhile, civil rights groups have raised concerns that the Comcast decision disadvantages victims of race discrimination, who are “in the least advantageous position to know” whether race was the but for cause of a decision, rather than one of several factors.

EEOC Investigatory Powers

The Supreme Court declined to review a decision from the Ninth Circuit ruling that the Equal Employment Opportunity Commission (EEOC) may continue to investigate a charge of discrimination after it has issued a right-to-sue letter.

In VF Jeanswear v. EEOC, Lori Bell, a former salesperson for VF Jeanswear filed a gender discrimination charge with the EEOC—a required administrative step before filing a federal lawsuit. The EEOC issued Bell a notice of right to sue, and she subsequently filed a lawsuit against VF. Nevertheless, more than a year after issuing the notice of right to sue, the EEOC sent VF a subpoena requesting information about its employees. When VF refused to comply with the subpoena, the EEOC went to court to enforce it. The Ninth Circuit found that the subpoena was enforceable, because it was relevant to the allegations in Bell’s charge, even though the information requested was about practices that did not affect Bell.

Although the Ninth Circuit’s decision conflicted with a previous Fifth Circuit holding that issuing a right to sue notice terminates the EEOC’s ability to investigate, the Supreme Court declined to weigh in on the Ninth Circuit’s decision.

Takeaway: Employers should be aware that—although rare—the EEOC may continue to investigate a charge, even after a notice of right to sue has been issued. Outside of the Fifth Circuit, the employer may be required to comply with such a subpoena. At some point in the future, the Supreme Court hopefully will resolve this circuit split.

Supreme Court Permits Class Action Waivers In Arbitration Agreements

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As a follow up to our post last year, this week, in a 5-4 decision, the Supreme Court rejected the National Labor Relations Board’s position that class waivers in arbitration agreements violate federal labor law. The Court held that employers can legally require their employees, as a condition of employment, to agree that they will not pursue class action claims against their employers, but rather address legal issues through individual arbitration.

Writing for the majority, Justice Neil Gorsuch stated simply that, “The [Federal] Arbitration Act requires courts to enforce agreements to arbitrate, including the terms of arbitration the parties select.” In support of the decision, he compared the “simplicity and inexpensiveness” of arbitration to “slower, more costly” class actions, which are, in the view of the majority, “more likely to generate procedural morass than final judgment.”

The effects of the decision remain to be seen – Justice Ginsberg read her dissent from the bench, calling for Congress to address the matter. For now, though, employers with arbitration agreements in place will want to add a class-action waiver, and those that do not use arbitration agreements at all may want to reconsider that approach.

 

Supreme Court To Determine Permissibility of Class Waivers In Employment Arbitration Agreements

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pillarsLast month, the Supreme Court agreed to resolve a circuit split over whether class action waivers — mandating that any claims brought against the employer be brought individually rather than as a class — contained in employment arbitration agreements violate employees’ rights under the National Labor Relations Act. The Court recently announced that it would decide the highly-anticipated case in its 2017 term, beginning in October. Both the Seventh and Ninth Circuits have struck down class action waivers in arbitration agreements. The Fifth, Second, and Eighth Circuits have held the opposite. We will update when the Supreme Court has made its decision. In the meantime, companies should consider the rule in their circuit before rolling out new employment arbitration agreements.

 

What Does The Supreme Court’s Same-Sex Marriage Ruling Mean For You?

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On June 26th, in a ground-breGay_flag_svgaking decision, the Supreme Court ruled that same-sex couples have a constitutional right to marry. Full text of the Court’s decision in Obergefell, et al. v. Hodges, et al. can be found here.

But beyond the general public response, employers need to consider how the ruling will impact employment policies and practices — especially in states that previously have not recognized same-sex marriages.  Following are some of the areas where employers might see Obergefell’s impact:

Employee Benefit Plans

If you offer any employee benefit plans through a separate insurance company, all “spousal” benefits must now be extended equally to same-sex spouses as they are to opposite-sex spouses. You may not be under the same restraints if you are self-insured, but if you deny benefits to same-sex spouses in this instance, you run a high risk of discrimination lawsuits.

It’s a good time to review your employee benefit plans and the costs associated with these plans. You should anticipate that the Court’s ruling may add some new couples — and associated costs — to your plans, especially if you did not previously offer benefits to domestic partners or same-sex spouses.

Equal Employment Opportunity

Marital status is a protected class under many state and local laws. These laws now protect all married people, including those in same-sex marriages.

Family and Medical Leave Act

As we discussed in a previous post, the FMLA has recently been amended to include same-sex spouses in the definition of “spouse.” Given the heightened publicity of the Court’s ruling, be sure to review your FMLA policies and practices to ensure that same-sex spouses are included.

Additional Policies and Practices

We recommend reviewing your employee handbook and any other employment policies to make sure that the policies as written – and in practice – apply equally to employees in same-sex marriages or rely on a qualification other than marriage.

Supreme Court Speaks on Religious Accommodation

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supreme court sealYesterday, the Supreme Court handed down its decision in EEOC v. Abercrombie & Fitch Stores, Inc., ruling in favor of a Muslim woman who claimed that she was denied employment at an Abercrombie & Fitch (A&F) store because she wore a headscarf.  With this decision, the Supreme Court sent a clear message: an employer may not make a hiring decision based on an applicant’s need for a religious accommodation, regardless of whether the employer had actual knowledge of such a need.

Samantha Elauf (Elauf) is a practicing Muslim who wears a headscarf for religious reasons. Elauf claims that she applied for a job at an A&F store and that, although she was otherwise qualified to be hired, she was ultimately denied employment because her headscarf would violate A&F’s “Look Policy.” The Look Policy prohibits “caps” because they are too informal for A&F’s desired image. Elauf never identified her headscarf as religious to anyone at A&F, nor did she ever communicate a need for any religious accommodation.  The EEOC sued A&F on Elauf’s behalf, claiming that A&F’s refusal to hire her violated Title VII.  In response, A&F argued that it could not be found to have discriminated against Elauf by failing to priovide a religious accommodation unless it had “actual knowledge” of Elauf’s need for a religious accommodation.  The district court disagreed with A&F’s argument and held in favor of Elauf the EEOC.  However, the Tenth Circuit reversed, agreeing with the “actual knowledge” standard put forth by A&F.

The Supreme Court reversed the Tenth Circuit and remanded the case for further consideration, holding that, under Title VII, an applicant only needs to show that her need for an accommodation was a “motivating factor” in the employer’s decision — she need not show that the employer had actual knowledge of the need for an accommodation. In other words, an “employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions” [emphasis added]. The Court gave as an example a situation where an employer thinks (but doesn’t know for sure) that a job applicant may be an orthodox Jew who will observe the Sabbath and thus unable to work on Saturdays. If the applicant actually does require accommodation of that religious practice and the employer’s wish to avoid the accommodation is a motivating factor in its decision to not hire the applicant, the employer violates Title VII. The Court was clear in its decision that its ruling only applies to accommodation under Title VII, and not to accommodation under the Americans with Disabilities Act (ADA), which follows a different framework.

The take away here?  Employers need to avoid basing employment decisions on any protected characteristic — whether confirmed or suspected. Although this case centered on a hiring decision and the anticipated need for an accommodation, it should apply equally to other terms and conditions of employment.

We recommend that managers, supervisors and those involved in the hiring process be trained on the legal requirements surrounding equal employment opportunity and on how to appropriately respond to requests for  — or other information suggesting that there is a need for — an accommodation.

Full text of the EEOC v. Abercrombie & Fitch Stores, Inc. decision can be found at:  http://www.supremecourt.gov/

Supreme Court Rules Amazon’s Workers Don’t Have to be Paid for Security Checks

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iStock_000006056297SmallYesterday, the Supreme Court ruled 9-0 (in a rare, labor and employment law unanimous decision) that workers supplied by a staffing agency for positions in Amazon’s warehouses do not have to be paid for time spent in security screening lines, reversing a federal appeals court ruling that found workers should be paid because the screenings were a necessary part of their jobs and benefited their employer. The Supreme Court disagreed. “The security screenings at issue are noncompensable postliminary activities,” the Justices wrote. “The workers were employed not to undergo security screenings, but to retrieve products from warehouse shelves and package them for shipment.”

The case is Integrity Staffing Solutions, Inc v. Jesse Busk and Laurie Castro, U.S. Supreme Court, No. 13-433.

Supreme Court Rules on Affirmative Action

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iStock_000006056297SmallYesterday’s Supreme Court decision in Schuette v. Coalition to Defend Affirmative Action is attracting a fair amount of attention in the news media. From an employment law perspective, the case likely will have little impact. In a decision drafted by Justice Kennedy, the Court held that states are free (in this circumstance, through a ballot referendum) to decide that they will not take race or gender into consideration in making admissions decisions to public universities.  The Court’s decision did not affect the legality of voluntary affirmative action programs maintained by private employers or the federal government’s affirmative action rules. Indeed, coverage of the decision often treats all “affirmative action” as meaning either explicit quotas or overt consideration of race or gender in decision-making. However, the type of affirmative action carried out by private employers (except in cases where the affirmative action is ordered as a remedy for past discrimination) typically involves only increased efforts to reach out to underrepresented minorities and eliminate obstacles to their hiring and advancement. This type of affirmative action is likely to continue regardless of the increasing number of decisions and state laws limiting the use of quotas and preferences.  The full Supreme Court’s decision in Schuette can be read here.

Supreme Court Rules Severance Payments Are Wages Subject to Payroll Taxes

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gavelpictureOn March 25, 2014, the U.S. Supreme Court ruled that severance payments made to workers who were terminated as part of a Chapter 11 bankruptcy were “wages” subject to Federal Insurance Contributions Act (FICA) taxes (United States v. Quality Stores).

This ruling likely will not be news to most employers that have been paying FICA on severance payments for years.  However, the issue was thrown into doubt by various rulings in connection with the Quality Stores bankruptcy.  The lawyers involved in that case hit on a theory, based on a close reading of the statutory language, that severance payments are not “wages” for purposes of FICA.  They then sought a refund of FICA taxes that had been paid in connection with various layoffs.

Somewhat surprisingly, the bankruptcy court, the district court, and the 6th Circuit all agreed with Quality Stores’ arguments. Though a legally narrow issue, it is one with substantial revenue implications. If the lower court decisions had stood, the IRS would have been flooded with refund filings (to the tune of $1 billion according to court documents).  However, the Supreme Court shot the theory down 8-0.

For most employers, this decision won’t change anything about the way they handle severance payments and FICA.  For those that were hoping they could piggyback off of Quality Stores and seek their own FICA refunds, that hope is now over.

A Big (Bad?) Week for Employers Under the FLSA

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overtimeIt was a big week for the Fair Labor Standards Act.

On March 7th, the Supreme Court let stand a decision that the owner, president and CEO of a supermarket chain in New York is personally liable for his company’s failure to make required payments on a FLSA settlement agreement.  The owner argued that to be held personally liable he had to be responsible for the violations (rather than just have general control over corporate operations). However, the Supreme Court refused to hear his arguments against the court of appeals’ decision, which can be interpreted broadly to suggest that an individual may be held personally liable for FLSA violations by virtue of general control of over corporate affairs.

On March 10th, the Supreme Court declined to review an appeals court decision finding that undocumented workers can sue — and recover wages owed — under the FLSA.

Then, on March 13th, President Obama directed the Secretary of Labor to update the FLSA’s overtime exemptions to provide more employees with overtime pay.  Some have speculated that the change will be to significantly raise the minimum weekly salary for an employee to be considered exempt under most exemptions (currently $455/week), but changes could also include rewrites of the job duties tests for the frequently used “white collar exemptions” or other limitations on current exemptions.  It remains to be seen what changes will be proposed by the administration and whether they can be implemented before the end of the President’s term.  We will keep you posted as we learn more.