The U.S. Supreme Court on Monday issued two decisions that impact employers. One decision will make employers more vulnerable to charges of disparate impact discrimination claims; the other makes it easier for fee claimants in ERISA actions to seek attorneys’ fees. In the first case, Lewis v. City of Chicago, (pdf) the Court held that a disparate impact employment discrimination charge filed with the Equal Employment Opportunity Commission (EEOC) within 300 days of a discriminatory practice’s application – not merely the announcement of its adoption – will be deemed timely. The practical effect of this decision is that employers will now be subject to disparate impact lawsuits years after initially unchallenged policies are implemented.

In this case, the City of Chicago had created a hiring list for its firefighters based on the results of a written exam. The results of this test were divided by score into three levels: “well qualified,” “qualified,” and “not qualified.” Only about 11 percent of the 1,782 applicants who fell into the “well qualified” category were African American. Although applicants whose scores landed them in the “qualified” tier would be placed on the eligible list for the jobs, over the next six years the City drew upon the “well qualified” pool in selecting candidates for employment before proceeding to the “qualified” applicants.

A class of approximately 6,000 African American applicants who fell into the “qualified” category filled suit against the City more than two years after the test was administered and the scores announced, claiming that the test had a disparate impact on minority candidates. A federal judge in Chicago initially ruled in favor of the plaintiffs. The Seventh Circuit reversed this decision, finding that the plaintiffs failed to file a claim with the EEOC within the statutorily-prescribed 300 days of the announcement of the test results. The City had argued that if anything, its use of the test results to create a hiring list was the discriminatory event, triggering the limitations period. The appellate court agreed, stating “[t]he first injury in this case was the classification of the black applicants as merely ‘qualified’ on the basis of a test that they contend was discriminatory.” The court therefore rejected the plaintiffs’ argument that the discriminatory event was the application of the test results – i.e., the failure to hire the affected African American candidates. The Seventh Circuit also rejected the plaintiff’s “continuing violation” theory, explaining that “the statute of limitations begins to run upon injury (or discovery of the injury) and is not restarted by subsequent injuries.”

In reversing and remanding this decision, the Supreme Court first ruled that the exclusion of most of the applicants deemed “qualified” from the possibility of advancement constituted a cognizable disparate impact claim under Title VII. As for the timeliness issue, the Court distinguished disparate treatment from disparate impact claims: “For disparate-treatment claims—and others for which discriminatory intent is required—that means the plaintiff must demonstrate deliberate discrimination within the limitations period. . . . But for claims that do not require discriminatory intent, no such demonstration is needed.”

In arriving at this conclusion, the Court recognized that:

Employers may face new disparate-impact suits for practices they have used regularly for years. Evidence essential to their business-necessity defenses might be unavailable (or in the case of witnesses’ memories, unreliable) by the time the later suits are brought. And affected employees and prospective employees may not even know they have claims if they are unaware the employer is still applying the disputed practice.

The Court, however, explained that it is its job to “give effect to the law Congress enacted. . . . Congress allowed claims to be brought against an employer who uses a practice that causes disparate impact, whatever the employer’s motives and whether or not he has employed the same practice in the past. If that effect was unintended, it is a problem for Congress, not one that federal courts can fix.”

In the second case released today – Hardt v. Reliance Standard Insurance Co. (pdf)  – the Court unanimously held that under the Employee Retirement Income Security Act (ERISA), workers covered by an employee benefit plan are entitled to recover attorneys’ fees in lawsuits over benefits even if they are not “prevailing parties,” so long as they have achieved “some degree of success on the merits.” According to the Court, ERISA’s fee-shifting provision entitles courts to award attorneys’ fee to either party at their discretion.

In this case, the Fourth Circuit, in an unpublished opinion, held that an employee who filed a claim in district court alleging that her denial of long-term disability benefits was unlawful was not entitled to an award of attorney’s fees. The lower court had agreed with the claimant and remanded the matter back to the insurance underwriter for reconsideration, which eventually granted her the benefits sought. The Fourth Circuit reasoned that only enforceable judgments on the merits and court-ordered consent decrees render a claimant a “prevailing party” for attorney’s fees purposes.

The Supreme Court disagreed, finding that section 1132(g)(1) of ERISA – the provision that governs attorney’s fees – “unambiguously allows a court to award attorney’s fees ‘in its discretion . . . to either party.’” The Court further pointed out that “the words ‘prevailing party’ do not appear in this provision.” Moreover, the Court determined that because the claimant “achieved far more than ‘trivial success on the merits’ or a ‘purely procedural victory,’” the lower court properly exercised its discretion in awarding her fees.