By David S. Wilson  and Catherine M. Dacre  

Seyfarth Synopsis: On January 6, 2023, the U.S. Court of Appeals for the Seventh Circuit issued its opinion in Baro v. Lake County Federation of Teachers. The three-judge panel unanimously held that the Plaintiff’s mistaken agreement to join a labor union was not a violation of her First Amendment rights, as she voluntarily assented to the terms of the contract.

Background

Plaintiff Ramon Baro (“Plaintiff”) worked as an English-as-a-second-language teacher at the Waukegan Community School District in Northeastern Illinois. At the start of the 2019-20 school year, Baro attended a presentation by the Lake County Federation of Teachers Local 504 (“Defendant”). During this presentation, a union representative outlined how much dues would cost and gave each teacher a union membership application. Although the union representative did not claim that membership was mandatory, Plaintiff assumed that it was, and signed it accordingly.

In relevant part, the document read “[t]his voluntary authorization shall be irrevocable,” and that it was “signed freely and voluntarily and not out of any fear of reprisal.”

A few days after signing the application, Plaintiff realized that union membership was only optional. She then sent letters to the District and the union in an attempt to revoke her membership and recoup her dues. When the representative informed Baro that she would have to wait until the following year to resign, Baro filed a section 1983 civil rights suit, alleging a violation of her First Amendment rights.

The Court’s Decision

Plaintiff claimed that the District’s withholding of union dues from her paycheck amounted to a violation of the First Amendment. In doing so, she relied on the reasoning set forth by the Supreme Court in Janus v. AFSCME.

In Janus, the Court considered the constitutionality of “fee-agency” schemes for public sector employees. Under these arrangements, employees who opted out of union membership were not assessed full union dues, but were still required to pay a smaller fee. This meant that government employees were forced to subsidize the union in some way. The Court held that union subsidization schemes like this violate the First Amendment because they compel speech in the form of monetary support.

Specifically, Plaintiff based her claims on a particular paragraph in Janus, which states that “[b]y agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed. Rather, to be effective, the waiver must be freely given and shown by ‘clear and compelling’ evidence.” Baro took this passage to mean that once a nonmember signs a union contract, a “secondary waiver analysis” takes places and requires the court to look outside the four corners of the agreement for further evidence that the nonmember consented to join.

The panel rejected this argument for several reasons. First, it found that Janus’s reasoning “was limited to nonmembers who were being forced to subsidize union speech with which they had chosen not to associate.” As such, it does not apply when a union member freely joins a union and authorizes the deduction of union dues. Put simply, “[t]he voluntary signing of a union membership contract is clear and compelling evidence that an employee has waived her right.” Because Baro voluntarily signed a valid contract, her reliance on Janus was misplaced.

The court also held that under ordinary contract principles, Plaintiff’s voluntariness argument was untenable. Illinois follows the objective theory of intent, whereby a court looks first to the terms of the written agreement—not personal conceptions—to determine what the contract means. Since the membership application clearly said that it was a “voluntary authorization” and “signed freely,” the court refused to consider Baro’s subjective understanding of the contract. Further, the judges were not moved by Plaintiff’s argument that dismissing her claim would spur fraud and coercion, as these are common defenses which can ordinarily and independently void contracts.

The court pulled no punches in its conclusion, and unequivocally stated that “the First Amendment protects our right to speak. It does not create an independent right to void legal obligations when we are unhappy with what we have said.”

Implication for Employers The Seventh Circuit’s decision in Baro affirmed the fact that generally applicable laws don’t offend the First Amendment just because their enforcement has incidental effects on speech. While the case may seem like a win for organized labor, it is more accurately a win for contract law. Nonetheless, employers should be mindful that employee misunderstandings about union membership will not usually be enough to void a contract. If you have any questions, please do not hesitate to reach out to a Seyfarth attorney

By Edward V. Arnold and Jesse M. Coleman

Seyfarth Synopsis: On January 13, 2023, the United States Supreme Court granted certiorari on a pair of hotly contested Seventh Circuit decisions, paving the way for a decision that will dramatically impact the way in which courts determine liability under the False Claims Act (“FCA”).

Specifically at issue is whether the Court’s “objectively reasonable” scienter standard for reading a statute or regulation applies to FCA cases, thereby insulating defendants from liability (even when such a reading ultimately turns out wrong), or whether a defendant’s contemporaneous subjective understanding of the law or regulation, and its conduct, are relevant to whether it “knowingly” violated the FCA. At issue in particular is application of the Supreme Court’s 2007 Safeco decision (discussed infra) to FCA cases where the basis of the claim turns on the interpretation of a legal obligation, rather than a defendant’s factual understanding.

Background on FCA

The FCA applies to those who knowingly submit false or fraudulent claims for payment to the federal government.[1] To this end, the FCA creates liability for any person who, inter alia, “(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”[2] Thus, the party alleging an FCA violation must prove: (1) defendant made false statements or engaged in a fraudulent course of conduct; (2) with the requisite knowledge; (3) the statements or conduct were material; and (4) caused the government to pay out money or to forfeit monies due on a “claim.”[3] The FCA defines several of its terms — “claim,”[4] “knowingly,”[5] and “material”[6] — however, it does not define what is “false” or “fraudulent.”

Safeco scienter standard and its application to the False Claims Act

The scienter element of the FCA is established in three ways—actual knowledge, “acting in deliberate ignorance,” or “acting in reckless disregard.” Actual knowledge is “subjective knowledge,” while deliberate ignorance is “the kind of willful blindness from which subjective intent can be inferred” and reckless disregard is “an extension of gross negligence, or gross-negligence-plus.”[7] The Supreme Court noted in Universal Health Servs., Inc. v. United States, 579 U.S. 176, 136 S. Ct. 1989, 2001, 195 L. Ed. 2d 348 (2016) (“Escobar”) that the scienter element of the FCA is a “rigorous” requirement. Noting that, although the FCA defines “knowingly” to include actual knowledge, deliberate ignorance, and reckless disregard, the FCA does not provide guidance as to how these terms apply in situations where a defendant has the subjective belief that it complied with a statute or regulation.

To compensate for this gap in the statute, many circuit courts confronted with this issue have turned to the Supreme Court’s scienter analysis in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) (“Safeco”), which, in interpreting the scienter requirement under the Fair Credit Reporting Act (“FCRA”), requires a finding that a defendant acted “willfully” to support a violation of the statute. The Supreme Court then determined that “willfully” under the FCRA includes both (1) knowing and (2) reckless violations of the statute.[8] The Supreme Court defined “recklessness” as “conduct violating an objective standard: action entailing ‘an unjustifiably high risk of harm that is either known or so obvious that it should be known,’” and notably determined that a defendant’s subjective intent was irrelevant—in essence, subjective bad faith could not defeat a defendant’s objectively reasonable reading of a statute.[9]

Thus, Safeco established a two-step analysis to determine reckless disregard. The first step examines whether defendant’s interpretation of the relevant statute was objectively reasonable. The second step examines whether authoritative guidance, i.e. guidance issued by the government to clarify a law, might have warned defendant away from that reading.[10] Thus, a defendant can defeat FCA liability by demonstrating the same—an objectively reasonable interpretation of a statute and no guidance suggesting its interpretation is incorrect.

Several circuit courts of appeals have considered whether Safeco’s holding, under which a defendant cannot be deemed a knowing or reckless violator of a legal obligation if the obligation allows for more than one reasonable interpretation and the defendant acted consistent with one such reasonable interpretation, applies to the FCA’s scienter provision in cases of legal falsity.[11] To date, no circuit has declined to apply Safeco’s objective standard to the FCA where the alleged falsity rested on unclear legal obligations as established by statute or regulation.

However, within these holdings, one outstanding issuewhich forms the basis of the Supreme Court’s agreement to resolve the issue—is that several of these decisions have indicated, with varying degrees, that a defendant’s subjective intent is not relevant to the question of whether a defendant can act “knowingly” so long as it bases its actions on an objectively reasonable interpretation of the relevant statute when it has not been warned away from that interpretation by authoritative guidance. The consideration of a defendant’s subjective intent in this analysis is what is at issue in SuperValu and Safeway, infra.

SuperValu

In United States ex rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) (“SuperValu”) the Relator brought qui tam action under FCA alleging corporate parent knowingly filed false reports of its pharmacies’ “usual and customary” (U&C) drug prices when it sought reimbursements under Medicare and Medicaid. The district court granted summary judgment for the parent corporation. The Seventh Circuit affirmed, finding that there is no scienter under the FCA where the defendant had an objectively reasonable reading of the statute or regulation and there was no authoritative guidance warning against its view. In reaching this holding, the court found that Safeco’s scienter standard applied with equal force to the FCA’s scienter requirement. Applying Safeco, the Seventh Circuit also held that it was objectively reasonable for defendants, a group of retail pharmacies, to charge the Medicare Part D and Medicaid programs their retail cash prices as their “usual and customary” prices for drugs rather than prices offered through competitor price-match discount programs. The Seventh Circuit found that defendant’s subjective intent is irrelevant to the scienter inquiry because “[a] defendant might suspect, believe, or intend to file a false claim, but it cannot know that its claim is false if the requirements for that claim are unknown.” The dissent argued that Safeco only defines the “reckless disregard” prong of the FCA’s scienter standard and does not preclude a finding of liability under the “deliberate ignorance” or “actual knowledge” prongs, which it thought Relators had presented sufficient evidence on to avoid summary judgment. The dissent also argued that the court was creating a “safe harbor for deliberate or reckless fraudsters whose lawyers can concoct a post hoc legal rationale that can pass a laugh test,” contending that a defendant’s subjective bad faith must be considered.

Safeway

In United States ex rel. Proctor v. Safeway, Inc., 30 F.4th 649 (7th Cir. 2022) (“Safeway”), the Seventh Circuit followed up on SuperValu and re-affirmed its holding that a defendant does not act with reckless disregard as long as its interpretation of the relevant statute or regulation was objectively reasonable and no authoritative guidance warned the defendant away from that interpretation.  In order to constitute “authoritative guidance,” the court held that the guidance must be come from a source with authority to interpret the relevant text (e.g., a governmental source reflecting the opinion of the relevant agency). Such guidance must also be sufficiently specific to put a defendant on notice that its conduct is unlawful. In Safeway, the court held that a single footnote in a lengthy CMS manual that was “in and out of the Manual during the relevant period,” was not authoritative guidance, nor were other sources proposed by the relator because they did not come from any government agency. Allowing for such a footnote to decide liability in this case (which included the risk of treble damages), the court declared, would raise serious due process concerns because defendants may not receive adequate notice of the agency’s shifting interpretation. Once again, however, the same judge as in SuperValu dissented, this time arguing that the majority’s opinion in both cases created “a deep and basic anomaly in the law” by eliminating subjective intent from the intentional element of fraud in the FCA. The dissent further noted that failing to consider the defendant’s state of mind might allow “[t]he ‘most culpable offenders’ … to craft their own get-out-of-jail-free cards whenever they like.”[12]

Key takeaways

The issue of a defendant’s subjective intent in contrast to its objective reading of law or regulation and its application to the FCA illustrates the ever evolving jurisprudence around interpretation of the various FCA elements, particularly in their application to legal falsity cases. For instance, the Supreme Court’s Escobar decision—the last high profile FCA case to be decided by the Supreme Court—has sparked much debate over the “materiality” provision of the FCA. Meanwhile, the notion that an “objective falsehood” be established to prove the “falsity” element of the FCA (an undefined term in the statute) has been called into question in the context of “medical necessity” cases, which involve examination of whether and when a physician’s medical opinions regarding the condition of a patient can be established as false.[13] When it comes to the scienter element of the FCA, evidence of subjective intent is still highly relevant where the claim turns upon defendant’s actual or constructive knowledge of facts that would make its claim false. However, when it comes to questions of ambiguous laws or regulations, whether an objective standard will govern defendant’s culpability is still up in the air. As it stands, every appellate court to consider the issue seems to agree that it does.

A common thread across these legal falsity cases, i.e. a claim premised on failure to comply with an applicable statute or regulation, is a defendant’s interpretation of a statute or regulation. This becomes increasingly difficult given the recent issuance of what is known as the Garland Memorandum, which grants permission to agencies to use “sub-regulatory guidance”—guidance that typically is not published through the notice and comment rulemaking process—in FCA prosecution for pursing false certification violations. Such permission naturally affords those agencies deference to their interpretation of their own self-promulgated guidance. Thus, in the context of SuperValu, Safeway and its predecessors, it will be interesting to see how courts continue to measure a defendant’s interpretation of a statute, regulation, or even sub-regulatory guidance for purposes of compliance in determining FCA liability.  If the Court follows the majorities in SuperValu and Safeway, such guidance will need to be clear, specific, potentially authoritative, and more than mere footnotes in vast tomes of government publications that can be changed at any time. Clarity in laws, regulations, and other government-issued guidance should always be the goal—and if the government wishes to continue to invoke the FCA in perusing violations of law and regulation, hopefully this current debate will move the needle towards greater clarity.

[1] 31 U.S.C. §§ 3729 – 3733.

[2] 31 U.S.C. § 3729(a)(1)

[3] United States ex rel. Rostholder v. Omnicare, Inc., 745 F.3d 694, 700 (4th Cir. 2014).

[4] “Claim” means any request or demand for money or property (regardless of whether or not the United States has title to the money or property) that: (i) “is presented to an officer, employee, or agent of the United States”; (ii) or “is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest,” and if the United States government either “provides or has provided any portion of the money or property requested or demanded”; (iii) or “will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded.” § 3729(b)(2)(A)

[5] “Knowingly” means that person: (i) has actual knowledge about the falsity of a claim, (ii) “acts in deliberate ignorance of the truth or falsity” of the claim, or (iii) acts with “reckless disregard of the truth or falsity” of the claim. The FCA does not require proof that the person specifically intended to defraud the government. 31 U.S.C. § 3729(b)(1).

[6] “Material” is defined as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” § 3729(b)(4).

[7] United States v. Speqtrum, Inc., 113 F. Supp. 3d 238, 249 (D.D.C. 2015).

[8] Id.

[9] Id.

[10] Id.

[11] See, e.g., United States ex rel. Olhausen v. Arriva Med. LLC, 2022 WL 1203023 (11th Cir. Apr. 22, 2022) (per curiam); United States ex rel. Streck v. Allergan, Inc., 746 F.App’x 101, 106 (3d Cir. 2018); United States ex rel. McGrath v. Microsemi Corp., 690 F.App’x 551, 552 (9th Cir. 2017), cert. denied, 138 S.Ct. 407 (2017); United States ex rel. Donegan v. Anesthesia Assocs. of K.C., 833 F.3d 874, 879-80 (8th Cir. 2016); United States ex rel. Purcell v. MWI Corp., 807 F.3d 281, 290-91 (D.C. Cir. 2015), cert. denied, 137 S.Ct. 625 (2017). But see United States ex rel. Sheldon v. Allergan Sales, LLC, 24 F.4th 340 (4th Cir.), reh’g en banc granted, No. 20-2330, 2022 WL 1467710 (4th Cir. May 10, 2022), and opinion vacated on reh’g en banc, 49 F.4th 873 (4th Cir. 2022) (affirming, by an equally divided court, the district court’s grant of dismissal with prejudice).

[12] Allergan Sales, 24 F.4th at 369 (Wynn, J., dissenting) (internal citation omitted), quoting Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93, 104–05, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016);

[13] See United States v. Care Alternatives, 952 F.3d 89, 96 (3d Cir. 2020), cert. denied, 141 S. Ct. 1371, 209 L. Ed. 2d 119 (2021); United States v. AseraCare, Inc., 938 F.3d 1278, 1282 (11th Cir. 2019); United States ex rel. Winter v. Gardens Regional Hospital & Medical Center, Inc., 953 F.3d 1108, 1113 (9th Cir. 2020), cert. denied sub nom. RollinsNelson LTC Corp. v. United States ex rel. Winter, 141 S. Ct. 1380, 209 L. Ed. 2d 124 (2021).

By Gillian B. Lepore, Sara Fowler, Megan P. Toth, Tracy M. Billows, and Joshua D. Seidman

Seyfarth Synopsis: A bill that would provide paid leave for all workers in Illinois is awaiting Governor Pritzker’s signature.  If signed into law, the bill would provide up to 40 hours of paid leave for eligible employees, effective January 1, 2024.

On January 10, 2023, the Paid Leave for All Workers Act (the “Act”), S.B. 208, passed both chambers in the Illinois Legislature, mere days into the new legislative session. If signed into law, the Act will require all employers in Illinois to provide up to 40 hours of paid leave per year to their workers, to be used for any reason. Illinois would join Maine and Nevada as the only states with such a mandate. This will make Illinois the seventeenth state to enact a statewide paid sick leave or general paid leave mandate. Governor Pritzker has publicly expressed his support for the measure and has said he will sign the Act.  The new statewide law would go into effect on January 1, 2024.

Here are the key highlights of the Act:

  • Employer coverage: Employer coverage under the Act is broad. The definition of an employer is borrowed from Illinois’ Wage Payment and Collection Act and includes any individual, partnership, association, corporation, limited liability company, business trust, employment and labor placement agencies where wage payments are made directly or indirectly by the agency or business for work undertaken by employees under hire to a third party pursuant to a contract between the business or agency with the third party, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee, for which one or more persons is gainfully employed.  The definition of an employer also includes state and local governments.
  • Employee Definition: Employee is broadly defined using the definition from the Illinois Wage Payment and Collection Act and generally only excludes contractors, employees under the Railway Labor Act, and certain student employees or short-term higher education employees.
  • Accrual Rate: Employees will be entitled to accrue one hour of paid leave for every 40 hours worked, up to a total of 40 hours per year. Accrual must begin at the commencement of employment or January 1, 2024, whichever is later. 
  • Frontloading: Rather than permit employees to accrue paid leave, an employer can elect to grant employees a lump-sum grant of 40 hours of paid leave each year (or pro rata amount of what the employee would earn if accrued during the year).
  • Year-End Carryover: Employees will be allowed to carryover any accrued, unused paid leave at the end of the year. But, employers that frontload the minimum number of hours of paid leave are not required to allow employees to carryover any paid leave time from year to year.  If an employer provides for carryover of paid leave, it may limit an employee’s use of paid leave to 40 hours per year.
  • Usage Waiting Period: Employees will be able to begin using available paid leave under this Act either 90 days after beginning employment or 90 days after the effective date of the Act (presumably, March 31, 2024), whichever is later.
  • Calendar Year: The 12-month period may be any consecutive 12-month period designated by the employer in writing at the time of hire. Changes to the 12-month period may be made by the employer if notice is given to employees in writing prior to the change and the change does not reduce the eligible accrual rate and paid leave available to the employee.
  • Reasons for Use: The Act does not provide specific reasons for use and instead states that an employee may use leave for “for any reason of [their] choosing.” Further, an employee is not required to provide an employer a reason for the leave and may not be required to provide documentation or certification as proof or in support of the leave. 
  • Notice to Employer: If use of paid leave is foreseeable, an employer may require the employee to provide 7 calendar days’ notice before the date leave is to begin. If the leave is not foreseeable, the employee must provide notice as soon as practicable.  If an employer intends to require notice of leave under the Act when leave is not foreseeable, it must provide a written policy that contains the procedures for an employee to provide notice.
  • Leave for Reinstated Employees: If an employee is separated from employment, but rehired within a 12 month period, previously accrued, unused paid leave must be reinstated. Further, it appears that the employee will be entitled to use any such paid leave without a waiting period. 
  • Payment On Termination. Notably, the Act states that it will not require payout of earned, unused paid leave upon separation from employment. In contrast, Illinois law currently requires payout of earned, unused vacation time upon separation. Therefore, we expect forthcoming regulations and administrative guidance to address the interplay between these conflicting statutory provisions.    
  • Local Sick Leave Ordinances: The Act states that it will not apply to any employer covered by a municipal or county ordinance that requires employers to give any form of paid leave to their employees, including paid sick leave, and is already in effect. Both Cook County and Chicago have paid sick leave laws in place; therefore, it appears the Illinois Act would not apply to employers covered by these sick leave ordinances.[1] Any local ordinance that provides paid leave, including paid sick leave or other paid leave, enacted or amended after the effective date of the Act must comply with the requirements of the Act or provide benefits, rights and remedies that are greater than or equal to those of the Act.
  • Collective Bargaining Agreements: The Act will not affect any collective bargaining agreement in effect as of January 1, 2024. However, subsequent agreements will need to either comply with the Act or include a specific waiver of its terms, subject to certain industry-specific requirements.
  • Administration and Enforcement: The Act will be administered by the Illinois Department of Labor (the “Department”). Aggrieved employees may bring a complaint to the Department within 3 years of any violation. In addition to administrative penalties and the amount of any underpayment, employees can recoup compensatory damages, attorneys’ fees, and other costs.

The Act contains a number of additional substantive provisions that will impact employer administration of paid leave, including, but not limited to, rate of pay, increments of use, coordination with existing employer policies, notice and posting, recordkeeping, and prohibitions on retaliation, discrimination and interference.

Employer Takeaways:

We expect the Illinois Paid Leave for All Workers Act will be signed into law and  become effective January 1, 2024.  Before its effective date, employers should take the following steps:

  • Monitor the Illinois Department of Labor’s website for the release of further guidance.
  • Review leave or PTO policies and procedures to ensure that they meet at least the minimum requirements of the Act.
  • Develop an Illinois paid leave policy that complies with the Act for any employees who are not covered under the employer’s existing paid leave or PTO policies.
  • Review and, as necessary, revise anti-retaliation, attendance, conduct, and discipline policies to prevent retaliation against employees for taking time off under the Act.
  • Train supervisory and managerial employees, as well as HR, on the Act’s requirements.

With the paid leave landscape continuing to expand and grow in complexity, companies should reach out to their Seyfarth contact for solutions and recommendations on addressing compliance with  paid leave requirements. To stay up-to-date on Paid Sick Leave developments, click here to sign up for Seyfarth’s Paid Sick Leave mailing list. Companies interested in Seyfarth’s paid sick leave laws survey should reach out to sickleave@seyfarth.com.

[1] It is unclear at this time how the Act, if passed, will impact employers with operations in Cook County municipalities that have chosen to “opt out” of complying with the County’s paid sick leave ordinance.

By Minh N. Vu

Seyfarth Synopsis: We predict another busy year on all fronts as DOJ continues to push its regulatory and enforcement agenda.

Lawsuit Numbers. Last January, we predicted that roughly the same number of ADA Title III lawsuits would be filed in federal court in 2022 as in 2021, but halfway through 2022 it became apparent that the numbers would likely be substantially lower.  That downward trend continued, and while our diligent research department is waiting for the dust to settle for December numbers before we announce the total for 2022, we are certain that the final number for the whole year will be substantially less than the number of ADA Title III lawsuits filed in 2021.  We attribute that decrease in part to the fewer number of filings by one Southern California plaintiffs’ firm (the Center for Disability Access), after the Los Angeles and San Francisco District Attorneys filed a civil lawsuit against the firm alleging fraudulent conduct in connection with its lawsuit activities.  The trial court dismissed this lawsuit in August 2022, but the newly-elected San Francisco District Attorney filed an appeal in November 2022, so the matter is far from over.  Stay tuned for our final 2022 ADA Title III federal lawsuit count and more analysis in the coming weeks.

For 2023, we think the number of lawsuits filed in federal court will increase as certain plaintiffs’ firms regroup and new plaintiffs and firms continue to enter the scene.

Physical Barrier Lawsuits.  If the past is any indication, lawsuits concerning physical access barriers at public accommodations facilities will continue to be the most common type of ADA Title III lawsuit.  Hotels, shopping centers, restaurants, and retail stores continue to be the most popular targets, particularly for those serial plaintiffs.  We continue to see lawsuits and demands from some serial plaintiffs whose disabilities are highly questionable.  The most common barriers alleged in these lawsuits pertain to accessible parking, loading zones, public restrooms, sales counters, accessible tables, and aisle width.

Website-Related Lawsuits.  In 2022, we continued to see large numbers of private lawsuits filed in federal and state courts, as well as demand letters, about website accessibility. We also saw the beginnings of renewed efforts by DOJ on the regulatory (discussed here and here) and enforcement front concerning accessible websites. A few notable court decisions issued in 2022, including an unceremonious end to the Winn-Dixie and Domino’s sagas, a few pro-defendant standing, class cert, physical nexus, and anti “serial plaintiff” decisions. What does 2023 have in store?  

Website Accessibility Lawsuit Numbers.  We are still finalizing our count of lawsuits filed last year in federal court concerning websites that are allegedly not accessible to the blind, but a preliminary peek suggests that  over 3250 such lawsuits were filed —  a significant jump from 2021. As in prior years, the vast majority of these lawsuits were filed by only a handful of law firms, overwhelmingly based in New York.  We predict the number of these suits filed in 2023 will be comparable to 2022.  We will be taking a closer look at this increase in another post later this month.

“Tester” Standing.  “Does a self-appointed Americans with Disabilities Act ‘tester’ have Article III standing to challenge a place of public accommodation’s failure to provide disability accessibility information on its website, even if she lacks any intention of visiting that place of public accommodation?” This is the question the defendant hotel has asked the U.S. Supreme Court to decide in Acheson Hotels, LLC v. Laufer.   The First Circuit Court of Appeals in Acheson had answered this question in the affirmative, putting it at odds with other circuits which have reached the opposition conclusion.  The Second and Tenth Circuits, for example, have held that a plaintiff’s encounter with an ADA violation found on a website of a public accommodation does not automatically confer that plaintiff with standing to sue unless there are downstream consequences resulting from the violation.  These courts require a plaintiff to show that the plaintiff wanted to patronize the public accommodation but could not because of the ADA violation on the website.  

While Acheson is a case about the alleged lack of accessibility information on a website (i.e., a deficient content issue), the question presented is also relevant to lawsuits in which plaintiffs with disabilities claim they could not use/navigate a website due to digital barriers.  In the Second and Tenth Circuits, as noted above, these plaintiffs would have to show that they wanted to patronize the public accommodations but could not because of digital barriers on their websites.

The Supreme Court will decide whether it will hear the case in January 2023.

Online-Only Businesses.  Online-only businesses will likely see fewer ADA lawsuits in California in 2023 because in 2022, the California Court of Appeals agreed with the federal Ninth Circuit Court of Appeals that a “public accommodation” under the ADA must be a physical place where goods and services are offered.  (The California Supreme Court declined review of the decision.)  Thus, only websites that have a nexus to a business with a physical location where goods and services are offered to the public are subject to Title III of the ADA.  With both state and federal courts in California now aligned in their interpretation of the ADA on this issue, plaintiffs will face a significant barrier in suing online-only businesses in California for violations of the ADA or Unruh Act.  (In lawsuits based on disability discrimination, plaintiffs can establish violations of the Unruh Act by proving either a violation of Title III of the ADA or intentional discrimination.)

Hotel Reservations Websites.  In late 2020 and early 2021, the aforementioned Center for Disability Access filed over 550 lawsuits in federal court alleging that hotels had failed to disclose sufficient information about the accessibility of their hotels as required by ADA regulations.  After suffering over 90 defeats in district court and then in the Ninth Circuit Court of Appeals, the firm voluntarily dismissed nearly all of these suits in 2022.  In its decision, the Ninth Circuit endorsed the interpretation of the regulation that had been implemented by lodging industry leaders back in 2012 when the regulation became effective. While we saw a very small handful of these cases filed in 2022, new lawsuits of this type are unlikely because most U.S. hotels comply with the Ninth Circuit’s direction.

U.S. Department of Justice Enforcement Actions. Last January we predicted the DOJ would be busy enforcing the ADA in 2022, and we were right.  The DOJ filed two enforcement lawsuits under Title III:  One concerning architectural barriers at Wrigley Field in Chicago and another against a number of eyecare facilities for refusing to provide transfer assistance to patients who use wheelchairs.  The DOJ also entered into at least fifteen settlement agreements or consent decrees in 2022 resolving many different types of alleged ADA Title III violations. These resolutions included a multi-million dollar settlement with a rideshare app company to resolve claims that the company failed to waive wait time charges for passengers with disabilities, a settlement with a Rhode Island university regarding its student medical leave policies, a settlement with a New York university regarding accessible student housing, and settlements with three retailers concerning the accessibility of their vaccine appointment scheduling websites.  The DOJ also filed one Statement of Interest in which it maintained that plasma donation centers are places of public accommodation covered by Title III of the ADA.

The DOJ was equally busy enforcing Title II of the ADA, which imposes obligations similar to Title III of the ADA on state and local governments.  One of the most notable ADA Title II resolutions was the DOJ’s comprehensive agreement with UC Berkeley about its website and other online content.  Other universities, both public and private, should take note.

All of these enforcement activities are set out on the DOJ’s website.

Regulatory Developments.  We will see continued rulemaking activity by DOJ and the U.S Architectural and Transportation Barriers Compliance Board (Access Board) on website accessibility, medical diagnostic equipment, and kiosks in 2023.

Websites: As we previously reported, the DOJ announced in July 2022 that it would be issuing a Notice of Proposed Rulemaking (NPRM) (essentially, a draft regulation) in April 2023 setting forth the accessibility requirements for state and local government websites under Title II.  This has just been pushed back to May 2023.  Given its dismal track record of issuing any regulations on the subject of accessible website for the past decade (including many missed deadlines), it will be interesting to see if DOJ actually meets this revised target date.  If DOJ does issue proposed regulations for state and local government websites under Title II of the ADA, it is likely the agency will later using those as a framework for regulations covering public accommodations under Title III of the ADA.  

Medical Diagnostic Equipment: DOJ has also announced that it will be issuing a Notice of Proposed Rulemaking for Medical Diagnostic Equipment in April of this year.  This rule, if finalized, would make the Standards for Medical Diagnostic Equipment (MDE) previously issued by the Access Board into binding legal standards for health care providers covered under Title III of the ADA.  Health care providers should be on the lookout for this NPRM and be ready to comment on the proposed rule. 

Self-Service Kiosks: Meanwhile, the Access Board will be busy this year reading public comments filed in response to its Advance Notice of Proposed Rulemaking (ANPRM) on the accessibility of self-service kiosks.  It recently announced that a proposed rule will issue by November 2023.  As we explained in a prior post, the Access Board is responsible for issuing technical standards which are not legally binding on public accommodations until the DOJ incorporates them into its regulations through a separate rulemaking process.  Thus, the Access Board’s ANPRM, and subsequent proposed rule, for self-service kiosks is the first step of a lengthy regulatory process.

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2023 will likely be another busy year in the ADA Title III space.  We will be here to provide our insight into the latest developments.  Happy 2023 from The Seyfarth ADA Title III Team! Edited by Kristina Launey

By Michelle Shamouilian, Daniel I. Small, Courtney S. Stieber, and Robert S. Whitman

Seyfarth Synopsis: A bill pending in the New York City Council would prohibit employers from discharging employees absent just cause or a bona fide economic reason.  The bill would also ban employers from relying on data collected through electronic monitoring when discharging or disciplining an employee unless certain conditions are met.

In 2021, employment at-will effectively ended in the fast-food industry in New York City with the enactment of a new law that required just cause or a bona fide economic reason for the discharge of certain employees (see here and here).  Ever since, employers in other industries have wondered if they would be targeted next.

On December 7, 2022, the New York City Council answered this question with the introduction of Int. No. 837.  If adopted, the legislation would amend the fast-food law, N.Y.C. Admin. Code § 20-1271 et seq., to apply to all employers, and would prohibit them from discharging New York City employees without just cause or a bona fide economic reason.  The legislation would also limit employers’ ability to rely on data collected through electronic monitoring when discharging or disciplining employees.

Under this new bill, in order for a termination to be based on just cause, the employer must (1) use progressive discipline and (2) have provided to the employee and posted at the workplace or job site its written policy on progressive discipline.  Additionally, the employer must provide 14 days’ notice of any qualifying discharge and, within five  days of such notice, give the employee a written explanation of the precise reasons for discharge.  If the employer fails to timely provide the written notice, according to the bill, “the discharge shall not be deemed to be based on just cause.”  

None of these requirements would be applicable when the termination is based on an employee’s egregious misconduct or egregious failure to perform their duties.  The bill does not provide any detail or further explanation of these exceptions.

A fact-finder evaluating whether the employee has been discharged for just cause would be tasked with considering the following seven (7) factors:

  1. whether the employee knew or should have known of the employer’s policy, rule, practice or performance standard that is the basis for progressive discipline or discharge;
  2. whether the employer provided relevant and adequate training to the employee;
  3. whether the employer’s policy, rule, practice or performance standard, including the utilization of progressive discipline, was reasonable and applied consistently;
  4. whether the employer impermissibly relied on electronic monitoring;
  5. whether the employer disciplined or discharged the employee based on that employee’s individual performance, irrespective of the performance of other employees;
  6. whether the employer undertook a fair and objective investigation into the job performance or misconduct; and
  7. whether the employee violated the policy, rule or practice, failed to meet the performance standard or committed the misconduct that is the basis for progressive discipline or discharge.

For a discharge to be based on a bona fide economic reason, the decision must be supported by the employer’s business records showing that the termination was the result of technological or organizational changes, or a permanent shutdown of the business, in response to reduced production or sales volume.  

If enacted, the bill would also prohibit employers from relying on data collected through electronic monitoring when discharging or disciplining an employee, unless the employer can show, prior to using the data gathered through electronic monitoring, that (1) there is no other practical method of tracking or assessing employee performance, (2) it is using the least invasive available form of electronic monitoring, and (3) it previously provided the employee with the required notice of the monitoring.  Even when these conditions are met, the employer may not rely solely on the data from electronic monitoring in making such employment decisions, except in cases of egregious misconduct or involving threats to others’ health or safety.  And, employers would need to file in advance with the Department of Consumer and Workforce Protection “an impartial evaluation from an independent auditor that said electronic monitoring is effective in undertaking its designed task.”

Under the proposed legislation, anyone alleging a violation of the law may bring an administrative proceeding to challenge their discharge.  The employer would bear the burden of proving just cause or a bona fide economic reason by a preponderance of the evidence.  An employer found to have violated the law would have to pay the employee’s attorneys’ fees and costs, pay the City for the costs of the administrative proceeding, and reinstate the employee, among other potential remedies.  The proposed bill also provides for a  private right of action, such that affected employees may alternatively bring a civil action within two years of the date the employee knew or should have known of the alleged violation.

Excepted from the bill are employees within a probation period or short-term position (as defined by the legislation), construction employees, government employees, and employees covered by a collective bargaining agreement, if the agreement meets certain criteria. 

The bill is under consideration by the City Council’s Committee on Consumer and Worker Protection.  If the bill passes the Council and is signed by the Mayor, it would take effect 180 days after signature.

Seyfarth will continue to monitor developments in this space and provide updates when available.

By A. Scott Hecker, Adam R. Young, Patrick D. Joyce, James L. Curtis, and Craig B. Simonsen

Seyfarth Synopsis: On its website, OSHA is highlighting the hazards of working in winter weather and providing resources for employers to help protect their workers. 

Employers must remember that weather-based hazards exist not only in the heat and humidity of summer, but also in the dead of winter. OSHA has reminded employers of their duties to plan, equip, and train their workers for jobs impacted by winter weather in an effort to “[p]revent injuries, illnesses, and fatalities during winter storms.” The U.S. has already experienced significant winter weather events during 2022-2023, with much of the country having been impacted by heavy snowfalls, icy conditions, arctic cold, and/or brutal winds. Indeed, it seems instances of extreme weather continue to increase with each passing season. But – particularly with the 2022 holiday season in the review mirror – workers continue to perform their jobs in difficult conditions.

To that end, OSHA provides information on hazards – beyond cold stress – associated with operating in winter, including:

Employers should also consider appropriate winter clothing and personal protective equipment (PPE) to protect employees from cold weather hazards and ensure only appropriate equipment is used in wintry environments.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team.

By Elizabeth L. Humphrey and Jennifer L. Mora

Seyfarth Synopsis: Nevada, like most states, has legalized cannabis for medicinal use. Although permitted under state law, a Nevada employee may still face discipline under a company’s drug policy. To address that concern, the Nevada Legislature passed a law requiring employers to attempt to make reasonable accommodations for its employees’ use of medical cannabis outside of the workplace. As a matter of first impression, the Nevada Supreme Court recently decided that employees may sue employers who violate that law.

The plaintiff accepted a journeyman position with an exhibit management company, dispatched through a union. While the plaintiff was tearing down a convention exhibit, a large piece of plexiglass fell and shattered. Following the incident, the employer required the plaintiff to take a drug test, and he tested positive for cannabis. A collective bargaining agreement provision relating to drug and alcohol use provided for zero tolerance. The employer terminated the plaintiff and prohibited the union from dispatching him to company worksites. At the time, the plaintiff held a valid medical cannabis registry identification card issued by the State of Nevada. The plaintiff sued his employer for: (1) deceptive trade practices; (2) violation of NRS 678C.850(3), a law requiring an employer to attempt to make reasonable accommodations for the medical needs of employees who use medical cannabis outside of work while possessing a valid registry identification card; (3) unlawful employment practices under NRS 613.333, a law providing employment protections for the lawful use of products outside of the workplace; (4) tortious discharge; and (5) negligent hiring, training, and supervision. The employer filed a motion to dismiss all claims, which the district court granted but only as to the deceptive trade practices claim.

The employer petitioned the Nevada Supreme Court for a writ of mandamus directing the trial court to dismiss the remaining claims. The Supreme Court granted the petition for mandamus relief in part and directed the trial court to grant the employer’s motion to dismiss with respect to the claims for tortious discharge; unlawful employment practices under NRS 613.333; and negligent hiring, training, and supervision. However, the Court denied the petition with respect to dismissal of the plaintiff’s claim for violation of NRS 678C.850(3).

The Court held that, although NRS 678C.850 did not expressly provide a private right of action, the Nevada Legislature implied a right of action to enforce violations of the statute. Looking to the Legislature’s intent, the Court noted that the plaintiff is part of the class that the statute was intended to benefit because he (1) held a valid medical cannabis registry card and (2) sought to use medical cannabis. The Court then reviewed the statute’s legislative history, which explained that the statute was modeled after an Arizona law that implied a cause of action. Finally, the Court found that implying a cause of action to enforce NRS 678C.850 is consistent with the underlying purposes of the broader statutory scheme. Specifically, the Court noted that NRS Chapter 678C was enacted to enable Nevadans who suffer from certain medical conditions to obtain medical cannabis safely and conveniently. The Court noted that there is no Nevada statute that provides a mechanism to redress employment issues arising out of NRS 678C.850. The Court also found it persuasive that courts in Arizona, Pennsylvania, and Connecticut had implied a private cause of action to enforce statutes similarly directing employers to accommodate employees using medical cannabis.

The Court also found that the lower court should have dismissed the plaintiff’s tortious discharge claim because the public policy set out in NRS 678C.50(3) is not so strong and compelling as to support a claim for tortious discharge. The Court noted that the statutory prohibition against employment discrimination is qualified and does not mandate a particular response by employers – only that the employer attempt reasonable accommodation. Moreover, the implied private cause of action under NRS 678.850(3) cut against permitting a claim for tortious discharge.

In contrast to the cause of action it implied under NRS 678.850, the Court found that the plaintiff could not state a claim under NRS 613.333, a statute making it unlawful for an employer to discharge an employee for engaging in the “lawful use” of any product outside the premises of the employer. Because cannabis possession remains illegal under the federal Controlled Substances Act, the Court reasoned that medical cannabis use cannot constitute “lawful use.” Thus, the plaintiff failed to state a claim because an employee’s discharge for medical cannabis use is not an unlawful employment practice under this statute.

Takeaways

Although the Court found that an employee could sue an employer for failing to attempt to make reasonable accommodations for an employee’s use of medical cannabis, the Court did not define what an employer must do to satisfy its obligation in that regard. A company in a state with laws requiring an employer to consider accommodation of medical cannabis use may find it helpful to evaluate such requests under the same framework and using the same interactive process that is used in assessing other accommodation requests for a disability under the Americans with Disabilities Act. This includes determining whether (1) the employee can continue to perform his or her essential job functions while using medical cannabis off the premises and (2) the employee’s use of medical cannabis places an undue hardship on the company. While a company may be able to accommodate off-duty medical cannabis use for some, it may be hard pressed to do the same for employees whose jobs impact the safety of others, i.e. commercial drivers and heavy machine operators.

Litigation over employee off-duty use of medical cannabis is on the rise. As a result, if a company, after engaging in the interactive dialogue and obtaining appropriate medical documentation, determines that it cannot reasonably accommodate an employee’s request to use medical cannabis outside of the workplace, the company would be wise to consult legal counsel to ensure that it has valid business reasons for denying the accommodation request. For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team.  

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By Giovanna A. Ferrari and David S. Wilson

Seyfarth Synopsis: On November 30, 2022, the U.S. Court of Appeals for the Third Circuit reversed the trial court’s dismissal of Plaintiff’s claim in Ascolese v. Shoemaker Const. Co. The case involved a retaliation claim brought under the federal False Claims Act, and it forced the Third Circuit to consider the effects of Congress’ 2009 and 2010 amendments to the statute. Ultimately, the court held that an employee may be protected by the FCA’s anti-retaliation provision if they are acting outside of their normal duties in trying to remedy a violation of the FCA.

Background

In 2014, the Philadelphia Housing Authority (“PHA”) received a $30 million grant from the U.S. Department of Housing and Urban Development for the construction of public housing in North Philadelphia. This grant was contingent on the PHA’s compliance with the applicable construction standards and regulations. The project’s general contractor hired a subcontractor to handle quality control, and this subcontractor hired the Plaintiff, Don Ascolese, to detect and report any project “deficiencies.”

The number of alleged deficiencies was large. Among other shortcomings, Plaintiff noticed that the concrete had not been allowed to fully cure, and that the contractors had failed to use the required type of rebar. Bringing this to his supervisor’s attention, Ascolese stated that it would be “wrongful and fraudulent” for the project to receive government funds, and that “certification of their contract compliance would necessarily be false and fraudulent.”

Defendant failed to correct the mistakes, and in response, Plaintiff went outside his chain of command to inform PHA’s engineers of the deficiencies. When Defendant learned of this extraneous communication, it advised Ascolese to “just put [his feet] up on the desk and take it easy” and to “not relay [his concerns] to PHA.” Plaintiff ignored these commands, and his employment was terminated.

FCA Retaliation Standard

For an FCA retaliation claim to succeed, the plaintiff must show that their employer had notice that the plaintiff engaged in “protected conduct.” Prior to 2009, protected conduct included only “lawful acts done by the employee . . . in furtherance of an action under this section.” In other words, the pre-amendment FCA required a retaliation plaintiff to show that their employer had notice of the “distinct possibility” of False Claims Act litigation.

However, Congress amended the Act in both 2009 and 2010 to broaden the definition of “protected conduct.” After the amendments, “protected conduct” now includes either (1) the pursuit of a qui tam action or (2) “other efforts to stop one or more violations” of the FCA. This means that an employer need not be aware that FCA litigation is likely. Instead, it is enough that they have notice of their employee’s attempt to remedy the violation.

Third Circuit Reverses District Court

The appellate panel reversed the trial court’s decision and allowed the case to proceed. In doing so, it framed the issue as “whether Ascolese pled facts that plausibly showed [Defendant] was on notice he tried to stop [Defendant’s] alleged FCA violations.” The court further clarified that this question has two prongs: first, whether an employee was engaging in protected conduct, and second, whether the employer had notice of this conduct.

Regarding the first prong, the court relied on the legislative intent behind the 2009 and 2010 amendments in finding that Plaintiff was in fact engaged in protected conduct. While an employee “must do more than [their] job responsibilities to trigger FCA protection,” Ascolese’s outward reporting of the project’s deficiencies to PHA was over and above his normal duties as a compliance officer. Put simply, his breaking of the chain of command amounted to an “effort to stop one or more violations” of the FCA.

Similarly, the “notice” prong was satisfied both by Plaintiff’s external reporting as well as his communications within the chain of command. The court highlighted the fact that Plaintiff “directly advised [Defendant] that receiving government funds for the project was fraudulent.” These statements, coupled with Defendant’s insistence that Plaintiff refrain from further inspection, gave rise to a “plausible inference that [Defendant] was on notice of Ascolese’s efforts to stop FCA violations in the project.”                                                                                         

The court was also careful to distinguish this case from Reed v. KeyPoint Gov’t Sols., a post-amendment retaliation case with similar facts. While both cases involved the reporting of compliance analysts, the plaintiff in Reed “did not plead facts regarding her specific job description nor define the scope of her duties such that the court could discern the contours of her chain of command.” Without that information, the court reasoned, there was no reasonable inference that the Plaintiff was engaged in protected conduct.

Implication for Employers

Employers that accept federal dollars or receive governmental approval should be mindful of this case and its implications, especially those subject to suit in the Third Circuit. The 2009 and 2010 amendments to the False Claims Act greatly expand the bounds of “protected activity,” and courts are updating their guidance to reflect this new standard. Further, employers should continue to comply with federal regulations and treat employees in a fair, respectful fashion.

By Andrew L. Scroggins and Nicolas A. Lussier

Seyfarth Synopsis: Couriers who transport goods from restaurants and grocers who have connected to consumers via the Postmates app are not “engaged in foreign or interstate commerce,” according to a recent decision by the First Circuit Court of Appeals. As a result, the couriers don’t satisfy the “transportation worker” exception to the Federal Arbitration Act (FAA), and they can be compelled to have their claims heard in arbitration on an individual basis rather than court on potentially a class basis. The decision distinguishes a U.S. Supreme Court opinion from the last term that held ramp agents who load cargo on and off planes, but who do not themselves cross state lines, nevertheless satisfy the exemption, as we wrote about here.

Background

Postmates, Inc. (“Postmates”) provides an app that works as a multisided platform. The app facilitates connections between consumers who want to buy things; local merchants, such as restaurants and grocery stores, who went to sell things; and couriers willing to deliver orders from one to the other. The Postmates app also facilitates payment between the customer, merchant, and courier.

Anyone may sign-up to be a courier. When one enrolls, they are presented a “fleet agreement” that specifies the courier is being engaged as an independent contractor. The agreement also includes a Mutual Arbitration Provision by which both Postmates and the courier “mutually agree to resolve any disputes between them exclusively through final and binding arbitration instead of filing a lawsuit in court.” Couriers have the option to opt-out of the Mutual Arbitration Provision but must do so within 30 days.

In Immediato, et al. v. Postmates, Inc., the named plaintiffs are couriers in the Boston area who signed the fleet agreement on multiple occasions and did not opt-out of the arbitration provision. The driving services provided by the plaintiffs rarely took them across state lines.

The couriers filed a complaint in state court alleging that they and a putative class of couriers in Massachusetts should have been treated as employees, not independent contractors, and thus entitled to certain wage protections and reimbursement of business expenses, among other things. Postmates removed the case to federal court, then moved to compel the claims to arbitration. The plaintiffs argued that they are engaged in interstate commerce and therefore exempt under the FAA. The district court disagreed, and compelled the claims to arbitration. This appeal by the couriers ensued.

What did the First Circuit Hold?

On appeal, the plaintiffs reiterated their argument that couriers belong to a “class of workers engaged in foreign or interstate commerce” who are exempt under Section 1 of the FAA. The couriers largely relied on a recent First Circuit decision that delivery drivers who served as the final leg, “or last mile,” in a larger interstate delivery chain are engaged in interstate commerce and thus cannot be compelled to arbitration under the FAA. The panel stood behind its previous holding, but cautioned that for the exemption to apply, the work “must be a constituent part of that movement, as opposed to a part of an independent and contingent intrastate transaction.”

That test was not satisfied in this case because a whopping 99.66% of orders placed in Massachusetts are fulfilled by couriers within the state, with couriers traveling an average distance of just four miles to complete their deliveries. Concluding the couriers fell outside the exemption, the appellate court explained that “Although the appellants transport goods, qua couriers, they do so as part of separate intrastate transactions that are not themselves within interstate commerce.” Put another way, “To be ‘engaged in interstate commerce’ is a ‘practical concept’ that excludes intrastate transactions that bear only a ‘casual’ or ‘incidental’  relationship to the interstate movement of goods or people.”

In this respect, the First Circuit’s decision tracks with the Supreme Court’s decision in Saxon v. Southwest Airlines. In that case, the Supreme Court delved deep into the facts to conclude that “one who loads cargo on a plane bound for interstate transit is intimately involved with the commerce (e.g., transportation) of that cargo.” The Supreme Court declined, however, to let such determinations be made on more sweeping grounds, for example by merely considering the industry in which the company is engaged.

Implications for Employers

District courts and courts of appeal continue to define the counters of the FAA’s transportation worker exemption in light of the Supreme Court’s guidance. This decision by the First Circuit delivers businesses additional authority to support that merely tangential relationships to interstate and foreign commerce will not suffice, and that a greater number of purported class or collective claims by workers instead must be heard in arbitration on an individual basis. Expect plaintiffs’ counsel to continue to test where exactly the line may be drawn in their efforts to avoid arbitration and litigate collective and class claims in court.