SMALL BUSINESS AT THE COURT: 2007-2008 SUPREME COURT ROUNDUP

By Elizabeth Milito
Senior Executive Counsel for the National Federation of Independent Business Small Business Legal Center

There is no question that the U.S. Supreme Court’s decisions impact small business. In fact, studies have shown that more than 40 percent of the court’s cases deal with issues that directly affect the business community. Those issues include employment, civil rights, insurance, workplace injury, environmental regulations and product liability issues.

Unfortunately, the 2007-2008 term is likely to receive mixed reviews from the business community. The National Federation of Independent Business Small Business Legal Center participated in seven of the court’s most critical cases and scored two important victories for small business.

Victories:

Employers scored an important victory in Chamber v. Brown when the court rejected California’s attempt to restrict employers’ communication with employees during a union drive. This decision will allow California small business owners the rights provided to them under the National Labor Relations Act, and serves as a warning to other state legislatures considering regulating employers’ speech.

Small business owners deserve the right to communicate with their employees in a noncoercive manor during a union organization drive. NFIB’s friend-of-the-court brief argued for a balance of rights between labor and management, and the court’s decision highlighted the need to preserve that balance.

In a second critical employment law case, employers received another important victory. In Sprint v. Mendelsohn, the court ruled that courts are not required to admit “me-too” evidence testimony by non-parties in employment law discrimination cases. If trial courts were required to admit “me-too” evidence then, in every employment discrimination case, an employer would face litigating, not only the decision being challenged, but also the circumstances of every termination or other adverse employment action taken against each of the “me-too” witnesses.

For the most part, however, the court's employment law decisions proved disappointing and will make filing employment lawsuits against employers even easier. These rulings are particularly troublesome when one considers that on average 550 employment lawsuits are filed in the United States every day, and the cost to defend an employment case through trial can exceed $150,000.

Here is a brief summary of the rulings that went against employers:

The court’s 7-1 ruling in Meacham v. Knolls will make it easier for workers to pursue age discrimination lawsuits. The court determined that when older workers are disproportionately affected by employment decisions the employer bears the burden of showing that reasons other than age discrimination were responsible for the outcome.

In Federal Express Corp. v. Holowecki, the court sided with employees who had argued that the filing of a simple intake questionnaire is tantamount to filing a charge of discrimination. This decision may allow certain informal filings to be recognized as a charge for discrimination purposes.

Business groups were also disappointed in the court’s ruling in an important retaliation case. In CBOCS West v. Humphries, the court provided employees with another bite at the apple when it ruled that retaliation claims can be brought under both Title VII and Section 1981 of the Civil Rights Act.

“The court’s expansion of Section 1981’s authority will be detrimental to employers because Section 1981 lacks the safeguards contained in Title VII for employers to fairly defend their actions against a retaliation claim,” said Karen Harned, the center’s executive director.

“Safeguards such as time frames for when a claim must be filed and pre-suit dispute resolution strategies which are spelled out in Title VII protect employers from defending themselves against stale claims and give employers an opportunity to address alleged acts of discrimination prior to a lawsuit being filed. Theses provisions are not found in Section 1981.”

In the non-employment arena, two of the court’s business decisions are particularly disappointing for small business. The court’s decision in Hall Street Associates v. Mattel will preclude parties from contracting for expanded judicial review of arbitration decisions under the Federal Arbitration Act. NFIB’s brief argued that allowing parties the right to contract for expanded judicial review would have made arbitration a more attractive option for small business owners.

In a critical tax matter, U.S. v. Clintwood Elkhood Mining, the court sided with the Internal Revenue Service and ruled that taxpayers have just three years to file a claim for a refund of an unconstitutional tax assessment. NFIB had argued that taxpayers were entitled to six years under another federal law.

While this term did not produce as many small business victories as we’d hoped for, it does reaffirm how important it is for the justices on the Supreme Court to understand how their decisions will impact small businesses. The NFIB Small Business Legal Center will continue to serve as an advocate for small business in the courts and looks forward to convincing judges across the country to side with small business.

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