Introduction

The U.S. Supreme Court is poised to decide several cases this term that could significantly impact employment law. These cases address complex issues ranging from government contractor immunity, pension plan withdrawal liability, to statutory protections for federal agency commissioners. Below is a brief review of the major cases under consideration and their potential implications for employers, employees, and federal agencies.

GEO Group, Inc. v. Menocal: Derivative Sovereign Immunity and the Collateral Order Doctrine

On Nov. 10, the Supreme Court heard oral arguments in The GEO Group, Inc. v. Menocal,[1] a case that centers on whether government contractors can immediately appeal a court order denying a claim of derivative sovereign immunity under the collateral order doctrine. The plaintiffs filed a class action lawsuit in 2014, alleging that immigrant detainees who performed janitorial services and other low paying work for the Aurora Immigration Processing Center's (AIPC) were in essence forced labor in violation of the Trafficking Victims Protection Act (TVPA)[2], among other claims.

GEO, the government contractor operating AIPC, asserted that its actions were authorized and directed by Immigration and Customs Enforcement (ICE) through a government contract, and therefore it should be shielded by derivative sovereign immunity. The plaintiffs countered that GEO’s broad discretion in facility operations removed this protection. The district court sided with the plaintiffs, granting their motion for summary judgment and denying GEO’s. GEO appealed, but the 10th Circuit dismissed the appeal for lack of a final judgment.

A circuit split currently exists: the 2nd, 6th, and 11th circuits hold that denial of derivative sovereign immunity is an appealable collateral order, whereas the 9th, 4th, 5th, 7th and 10th circuits disagree. The Supreme Court’s forthcoming decision will clarify whether such denials are immediately appealable, impacting how government contractors defend themselves in employment-related litigation.

M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund: Withdrawal Liability under ERISA

Another significant case is M & K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, [3] which addresses how withdrawal liability is calculated when employers exit multiemployer pension plans under the Employee Retirement Income Security Act (ERISA).[4] The petitioners withdrew from the IAM National Pension Fund in 2018. ERISA prescribes that withdrawal liability calculations should be based on actuarial assumptions coinciding with the “end of the plan year.”[5]

In this case, the plan year ended on Dec. 31, 2017, and actuarial assumptions were set before that date. However, when calculating the withdrawal liability, a different discount rate was applied after the measurement date, significantly increasing the petitioners’ liability. The core question is whether ERISA mandates the use of year-end actuarial assumptions or allows for post-measurement changes.

This issue has created a circuit split: the 2nd Circuit requires calculations as of the last day of the prior year using assumptions in effect on that day,[6] while the D.C. Circuit permits using assumptions calculated after the measurement date.[7] The Supreme Court’s decision will affect employers participating in multiemployer pension plans, potentially altering withdrawal liability expectations and influencing future participation and exit strategies.

Trump v. Slaughter: Statutory Removal Protections and Separation of Powers

Perhaps the most closely watched employment law case this term is Trump v. Slaughter.[8] Earlier this year, President Trump removed two Federal Trade Commission (FTC) commissioners, Rebecca Slaughter and Alvaro Bedoya, with the plaintiffs arguing that these actions failed to meet the statutory “cause” standard required for removal.[9] Bedoya later resigned, leaving Slaughter as the sole plaintiff. Slaughter’s motion for summary judgment was granted, ordering her reinstatement, but the Supreme Court stayed this ruling pending review.

Slaughter relies on Humphrey's Executor v. United States,[10] a 1935 Supreme Court case which established that Congress could constitutionally restrict the president's removal power for officials of independent agencies like the FTC. The government contends that Humphrey’s Executor should be overturned on the grounds that it conflicts with the Vesting Clause of Article II of the Constitution, as interpreted under the unitary executive theory. The Supreme Court’s taking of this appeal appears to signal that the court is now re-examining whether these legislative removal protections are constitutional and if Humphrey's Executor should be overruled. The court will also consider whether federal courts may prevent a person’s removal from public office through equitable or legal relief.

Oral arguments in this case were presented before the court on December 8 with Solicitor General Sauer referring to Humphrey’s Executor as a “decaying husk.” During the proceedings, several justices expressed questions and concerns, particularly about the potential disruptions that might result from overturning Humphrey's Executor. Justice Sotomayor notably remarked that granting the petitioner’s request would fundamentally “destroy the structure of government.” Many of the justices’ inquiries focused on distinguishing between purely executive, purely legislative, and hybrid agency functions, in order to evaluate how the decision could affect different government agencies depending on their roles. Justice Barrett may have tipped her hand by commenting that Humphrey's Executor has been "eroded" over the years. The oral arguments in this case were notably contentious, a dynamic likely fueled by the significant political undertones inherent in the question before the court and the heightened polarization between political parties at present.

This case has broad implications for employment law and the independence of federal agencies. The outcome could affect not only the FTC but also other independent agencies such as the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB).

Nawara v. Cook County [11]: Can an Employee Without a Disability Recover Under the ADA?

In this case, the plaintiff was placed on a leave of absence after a series of confrontations with co-workers, pending completion of a fitness-for-duty examination. At trial, the jury determined that requiring the plaintiff to undergo a fitness-for-duty test was a violation of 42 U.S.C. §12112(d)(4) of the Americans with Disabilities Act (ADA),[12] but did not award any damages. Upon post-trial motions of both parties, the district court ruled that, despite the jury’s finding of a violation of §12112(d)(4), the employer was not obligated to provide back pay to the plaintiff, reasoning that the fitness-for-duty requirement was not based on the plaintiff’s actual or perceived disability.[13] According to the court, use of unlawful medical examinations only constitutes unlawful discrimination subject to back pay damages when it is done in such a way that it discriminates against a qualified individual on the basis of disability. Both parties then appealed.

The 7th Circuit disagreed with the district court on the issue of back pay.[14] It concluded that the plaintiff was entitled to back pay due to the employer’s violation of the ADA, even though the plaintiff did not have, nor was perceived to have, a disability.

On Sept. 12, the Cook County Sheriff’s Office filed a petition asking the Supreme Court to clarify whether the ADA is violated — and whether damages are appropriate — when an employer requires an unsupported medical examination of an employee, regardless of whether the employee has or is perceived to have a disability. Currently, the 2nd, 3rd, 5th and 10th circuits hold that an employee cannot recover damages under the ADA without an ADA-defined disability, whereas the 6th and 7th circuits allow recovery regardless of whether the employee has a disability or perceived disability.

As of now, the court has not yet decided whether it will hear the case.

Conclusion

The Supreme Court’s decisions in these cases are likely to reshape key aspects of employment law. Whether addressing the appealability of immunity denials, clarifying pension withdrawal calculations, redefining statutory protections for federal agency commissioners or appropriate construction of the ADA, the outcomes will have lasting effects on employers, employees, and the operations of government agencies.

Richard D. Bennett is a partner at Phelps Dunbar LLP in it's Memphis office. He is a member of the Labor and Employment and Employment Litigation Practice Groups at Phelps and a graduate of the University of Memphis Cecil C. Humphreys School of Law. He may be reached at rick.bennett@phelps.com or 901-259-7121. 

Rachel Ducker is an associate with Phelps Dunbar LLP in its Memphis office. She works with the firm’s Employment Litigation Practice Group at Phelps and is a graduate of the University of Alabama School of Law. She may be reached at rachel.ducker@phelps.com or 901-259-7136.