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October Term, 2013

January 27, 2014

Today the Supreme Court issued two decisions, described below, of interest to the business community.

Aviation and Transportation Security Act—Qualified Immunity For Voluntary ATSA Reporting

Air Wisconsin Airlines Corp. v. Hoeper, No. 12–315 (previously discussed in the June 17, 2013, Docket Report

To encourage airlines to report actual and potential security threats, Section 125 of the Aviation and Transportation Security Act (“ATSA”) provides that airlines and their employees who make a “voluntary disclosure” to specified law-enforcement agencies “of any suspicious transaction relevant to a possible violation of law or regulation, relating to air piracy, a threat to aircraft or passenger safety, or terrorism ... shall not be civilly liable to any person under any law or regulation ... for such disclosure.” 49 U.S.C. § 44941(a). Section 125 does not, however, confer immunity for any disclosure made with “actual knowledge that [it] was false, inaccurate, or misleading,” or with “reckless disregard as to [its] truth or falsity.” Id. § 44941(b). Today, in Air Wisconsin Airlines Corp. v. Hoeper, No. 12-315, the Supreme Court held that the ATSA requires courts to make “a determination that [the] disclosure was materially false” before denying immunity to a reporting entity; a determination that the entity was reckless as to the truth or falsity of the disclosure, standing alone, is not sufficient. Slip op. 1.

Respondent William Hoeper, the plaintiff below, was an airline pilot employed by petitioner Air Wisconsin, the defendant below, until Hoeper failed to pass a required flight-proficiency test. Shortly after failing in his final attempt to pass the test, Hoeper accused Air Wisconsin of sabotaging his performance. While Hoeper waited for his flight home, Air Wisconsin reported to the Transportation Security Administration that a “disgruntled employee” who had just been terminated and “may be armed” was about to board a commercial flight, and that Air Wisconsin employees were “concerned about his mental stability.” Based on that report, the TSA arrested Hoeper and searched him for weapons, but none were found.  When he learned of the report that led to his arrest, Hoeper sued Air Wisconsin in Colorado state court for defamation, among other claims. The trial court denied Air Wisconsin immunity under the ATSA, and a jury subsequently awarded Hoeper approximately $1.4 million in damages and costs.

The Colorado Supreme Court upheld the verdict after finding that statements in Air Wisconsin’s report had been “made with reckless disregard as to their truth or falsity.” __ P.3d __, 2012 WL 907764, at *6 (Colo. 2012). The court thus found it unnecessary to determine whether the statements about Hoeper that Air Wisconsin had made in its report actually “were true or false” for purposes of denying it immunity under Section 125 of the ATSA. Id. at n.6.

In an opinion by Justice Sotomayor, the Supreme Court reversed the judgment of the Colorado Supreme Court and remanded the case with instructions to enter judgment in Air Wisconsin’s favor. Reasoning that “Congress patterned the exception to ATSA immunity after the actual malice standard of New York Times Co. v. Sullivan, 376 U.S. 254 (1964),” the Court held that “a statement otherwise eligible for ATSA immunity may not be denied immunity unless the statement is materially false.” Slip op. 7. The Court reasoned that such an interpretation “also serves the purpose of” the ATSA immunity provision, which was created to “ensure that air carriers and their employers would not hesitate to provide the TSA with the information it needed. . . . It would defeat this purpose to deny immunity for substantially true reports, on the theory that the person making the report had not yet gathered enough information to be certain of its truth.” Id. at 9.

The Court then examined whether any allegedly false statement in Air Wisconsin’s disclosure to the TSA also was “material,” such that “a reasonable security officer would consider it important in determining a response to the supposed threat.” Id. at 13. While recognizing that Air Wisconsin could have tempered statements in its report regarding Hoeper’s perceived mental state and the concern—later proven unfounded—that he could be armed, the Court held that any “minor differences” between the account of Hoeper’s altercation with Air Wisconsin established by the record evidence and its description in the report that Air Wisconsin made to the TSA were “immaterial as a matter of law.” Id. at 18.  The Court concluded that “[t]o hold Air Wisconsin liable for minor misstatements or loose wording would undermine” the ATSA and “disregard [its] statutory text.” Id.

Justice Scalia wrote an opinion concurring in part and dissenting in part, in which Justices Thomas and Kagan joined. Although he joined Justice Sotomayor’s articulation of the standard for immunity under Section 125 of the ATSA, he thought that the application of that standard was better left for remand.

The Court’s decision in Hoeper clarifies that airlines and their employees are entitled to immunity for reporting potential security threats in accordance with the ATSA unless the report contains statements that are both materially false and made with actual knowledge or reckless disregard as to their falsity. Because the Court’s ruling today limits the extent to which airlines can be held liable for voluntarily reporting suspicious activity to appropriate law-enforcement agencies, it should be of interest to all airlines that operate in the United States.

Any questions about the case should be directed to Lauren Goldman in (+1 212 506 2647) in our New York office.

Fair Labor Standards Act—“Changing Clothes”

Sandifer v. United States Steel Corp., No. 12417 (previously discussed in the February 19, 2013, Docket Report)

The Fair Labor Standards Act (“FLSA”) exempts employers from having to compensate employees for off-the-clock “time spent in changing clothes ... at the beginning or end of each workday” if a collective bargaining agreement so provides. 29 U.S.C. § 203(o). Today, in Sandifer v. United States Steel Corp., No. 12-417, the Supreme Court held that the donning and doffing of safety gear does not constitute changing clothes within the meaning of 29 U.S.C. § 203(o).

The plaintiffs, petitioners in the Supreme Court, claimed that time spent donning and doffing safety equipment, including fire-retardant jackets and pants, steel-toed boots, goggles, ear plugs, hard hats, a flame-retardant head covering (a “snood”), and a flame-retardant “wristlet” (which covers the forearm), was compensable under section 203(o), despite the fact that the applicable collective bargaining agreement provides that such time is not compensable. The district court held that most of the protective equipment constituted “clothes” under section 203(o) and that the remainder was de minimis, so that the time was not compensable. The Seventh Circuit affirmed.

In an opinion by Justice Scalia that was unanimous except as to a single footnote, the Court held that “clothes,” for purposes of the FLSA, denotes “items that are both designed and used to cover the body and are commonly regarded as articles of dress.” Slip op. 6. The Court noted that its definition excludes many accessories and tools, which are not designed and used to cover the body or normally regarded as articles of dress, a departure from the position embraced by some courts of appeals.

The Court further held that “changing,” for purposes of the FLSA, includes all time spent in altering dress, whether or not protective clothes are substituted for or supplemental to a worker’s ordinary dress. An alternative definition requiring substitution of clothing, the Court concluded, would risk inconsistent application based on purely personal choices of workers regarding street clothes. Such an approach would risk allowing workers to opt into or out of section 203(o) coverage at random or at will.

The Court determined that all items worn by the petitioners constituted “clothes,” with the exception of safety glasses, ear plugs, and respirators. While it rejected the applicability of a de minimis doctrine in this context, the Court concluded that when the vast majority of time is spent donning and doffing clothes, the entire period qualifies as time spent “changing clothes,” even if workers must also spend a small amount of time putting on other protective equipment.

Justice Sotomayor joined all of the opinion but a single footnote, and did not file a concurring opinion. The footnote noted that, while exemptions from the FLSA are to be narrowly construed against employers, the narrow-construction principle is limited to provisions appearing in 29 U.S.C. § 213, entitled “Exemptions,” and does not apply to provisions appearing in section 203, entitled “Definitions.”

Today’s decision is of interest to the business community, and is of particular interest to those who have entered into collective bargaining agreements that do not require compensation for time spent donning and doffing safety equipment or clothing, as it clarifies when such time is compensable. Under the Court’s decision, time spent donning or doffing protective gear that is designed and used to cover the body and commonly regarded as an article of dress, including hard hats, protective jackets, and protective coverings for the arms and legs, is exempt if the employees collective bargaining agreement so provides. Minimal time spent donning and doffing other protective gear during this time is likewise exempt.

Any questions about this case should be directed to Andrew S. Rosenman (+1 312 701 8744) in our Chicago office or Dan Himmelfarb (+1 202 263 3035) in our Washington office.

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