For the week of March 31, 2008
The Department of Labor’s recent Notice of Proposed Rule Making has heightened interest in and awareness of the regulations that underpin the enforcement of the FMLA. However, employers also should be aware of a recent opinion issued by the 6th U.S. Circuit Court of Appeals that covers a number of important FMLA issues for companies that employ contract or temporary employees. Grace v. USCAR and Bartech Technical Services, LLC, 6th Cir., No. 06-2509, March 26, 2008.
In that case, a contract employee sued both the temp agency and the company to whom she was assigned, claiming that both entities violated the FMLA by not reinstating her to a position with the company after return from an FMLA leave. The Sixth Circuit overturned a lower court’s dismissal of the claim, allowing the case to go forward against both companies.
Rosalyn Grace was a contract employee who worked at USCAR for eight years, beginning in 1996. All individuals working for USCAR either are contract employees or are on "loan" to USCAR from Ford, DaimlerChrysler, or GM. USCAR is a general partnership of the three auto-makers, and was formed to facilitate research and development programs for those companies.
During the eight years of Grace’s employment, USCAR used various employment agencies. In 2003, Grace was employed by temp agency DGE and was being contracted to USCAR to do IT work. When DGE filed for bankruptcy in December 2003, USCAR interviewed four agencies about assuming the DGE contracts for USCAR’s employees. Bartech assumed those contracts in January 2004, and Grace continued to work at USCAR, through Bartech.
In November 2004, Grace was hospitalized for an asthmatic condition and requested an FMLA leave through Bartech, with an expected return date of January 3, 2005. On December 30, 2004, Bartech told Grace that because USCAR was restructuring its IT division, Grace’s position was being terminated, and that no position remained for her. Evidence ultimately showed, however, that the work being done by Grace continued to be done by another individual contracted for by USCAR.
Grace filed suit against both companies, alleging violation of the FMLA based on the companies’ failure to return her to work at USCAR. The lower court dismissed the claims against both defendants holding that: (1) USCAR was not an "employer" for purposes of the FMLA, since it had no real "employees" of its own; and (2) Bartech had not employed Grace for the requisite 12 months prior to her leave and that therefore, Grace was not entitled to FMLA protection.
The Sixth Circuit reversed the lower court in a detailed opinion that provides insight and direction to employers that regularly use contract employees.
First, the Court addressed the issue of "joint employers," finding that Bartech and USCAR both had some measure of control over Grace’s work or working conditions. Unlike "integrated" employers, which are treated as a single entity, joint employers can be distinct entities, each with some measure of FMLA liability. The regulations that interpret the FMLA specifically state that "joint employment will ordinarily be found to exist when a temporary or leasing agency supplies employees to a second employer."
While the Court found Bartech to be Grace’s "primary" employer, it held that USCAR also was directly liable for complying with the FMLA as Grace’s "secondary" employer. A secondary employer who interferes with an employee’s return to work after a qualified FMLA leave violates that Act. This liability occurs whether or not the secondary company has the 50 employees necessary to bring it within the FMLA definition of "employer." The Court’s decision to ignore the 50 employee requirement and replace it with an "employment relationship" test for secondary employees is especially noteworthy, and could become problematic if the rationale is applied to small employers in future decisions.
Bartech argues that because Grace only had been its employee fort 11 months after its replaced DGE as USCAR’s temp agency, Grace did not fulfill the eligibility requirement of 12 months of employment necessary to qualify for FMLA leave. However, the Sixth Circuit found that Bartech was a "successor in interest" to DGE, and that Grace’s periods of employment with both agencies could be conflated to satisfy the 12-month eligibility requirement.
This decision is of importance to employers that use contract/temporary employees. According to this case, a company that uses contract employees may be considered a secondary employer - with potential liability under the FMLA - by reason of its working relationship with an employee, whether or not it has the ability to hire and fire him or her. Such companies should be aware of this possibility and understand the Act’s interplay when considering reinstatement for individuals returning from FMLA leave.
Monday, March 31, 2008
Issue: Ninth Circuit holds that applicant drug testing policy violates 4th Amendment
For the week of March 24, 2008
Pre-employment drug testing by various types of employers has become commonplace over the years. Nearly 84% of employers last year required some form of pre-employment screening. However, in a March 13, 2008 ruling, the Ninth U.S. Circuit Court of Appeals ruled that an Oregon city violated the constitutional rights of a woman who had applied for a city library job when it withdrew its employment offer after the applicant refused a mandatory pre-employment drug and alcohol test. Lanier v. Woodburn, 9th Cir. No. 06-352622, 3/18/2008.
In 2004, the applicant, Janet Lanier, applied for employment with the city as a library page. The City offered Lanier a position, but conditioned the offer upon Lanier taking and successfully passing a pre-employment drug and alcohol test. While the city had no reason to believe Lanier was using drugs or alcohol, it required the test as a matter of policy; that policy was applied consistently to all applicants. When Lanier refused to take the test, the city withdrew its offer of employment.
Lanier filed a lawsuit against the city alleging that the mandatory drug test violated her right to privacy afforded under the 4th Amendment and Article 1, Section 9 of the Oregon Constitution. The district court granted summary judgment in favor of Lanier, finding that the policy was unconstitutional on its face. The 9th Circuit affirmed in part and reversed in part – ultimately finding while the policy was not facially invalid (as a set of circumstances could exist under which the policy could be valid), the policy, as applied to Lanier, was unconstitutional.
The city argued that it had a "substantial and important" interest in screening employees because: 1) drug abuse is a serious social problem; 2) drug use has an adverse impact on job performance; and 3) children must be protected from those who use drugs. The Court rejected the City’s argument, and reaffirmed its position that "suspicionless testing must be far more specific and substantial than the generalized existence of a social problem of the sort [the city] has posited."
The Court found that the city advanced no clear need to test library pages, as no evidence was submitted that would tend to show that Lanier would have extensive contact with children in the position for which she had applied or that she would have been in a position to exert influence over children by virtue of continuous interaction or supervision. The Court ruled that the need in suspicionless cases not involving high risk/safety sensitive work must be "special" and not merely "symbolic."
Pre-employment drug testing by various types of employers has become commonplace over the years. Nearly 84% of employers last year required some form of pre-employment screening. However, in a March 13, 2008 ruling, the Ninth U.S. Circuit Court of Appeals ruled that an Oregon city violated the constitutional rights of a woman who had applied for a city library job when it withdrew its employment offer after the applicant refused a mandatory pre-employment drug and alcohol test. Lanier v. Woodburn, 9th Cir. No. 06-352622, 3/18/2008.
In 2004, the applicant, Janet Lanier, applied for employment with the city as a library page. The City offered Lanier a position, but conditioned the offer upon Lanier taking and successfully passing a pre-employment drug and alcohol test. While the city had no reason to believe Lanier was using drugs or alcohol, it required the test as a matter of policy; that policy was applied consistently to all applicants. When Lanier refused to take the test, the city withdrew its offer of employment.
Lanier filed a lawsuit against the city alleging that the mandatory drug test violated her right to privacy afforded under the 4th Amendment and Article 1, Section 9 of the Oregon Constitution. The district court granted summary judgment in favor of Lanier, finding that the policy was unconstitutional on its face. The 9th Circuit affirmed in part and reversed in part – ultimately finding while the policy was not facially invalid (as a set of circumstances could exist under which the policy could be valid), the policy, as applied to Lanier, was unconstitutional.
The city argued that it had a "substantial and important" interest in screening employees because: 1) drug abuse is a serious social problem; 2) drug use has an adverse impact on job performance; and 3) children must be protected from those who use drugs. The Court rejected the City’s argument, and reaffirmed its position that "suspicionless testing must be far more specific and substantial than the generalized existence of a social problem of the sort [the city] has posited."
The Court found that the city advanced no clear need to test library pages, as no evidence was submitted that would tend to show that Lanier would have extensive contact with children in the position for which she had applied or that she would have been in a position to exert influence over children by virtue of continuous interaction or supervision. The Court ruled that the need in suspicionless cases not involving high risk/safety sensitive work must be "special" and not merely "symbolic."
Monday, March 17, 2008
Employer can withdraw recognition of Union only if majority of Union members have withdrawn support at time of withdrawal
For the week of March 17, 2008
Under the National Labor Relations Act (NLRA), it is an unfair labor practice for an employer to refuse to bargain collectively with the union representing its employees. Once the employees comprising a particular bargaining unit have elected a union to represent them, the union enjoys a "rebuttable presumption" of majority support during the term of its collective bargaining agreement, if that agreement is for three years or less. An employer can rebut that presumption – and may unilaterally withdraw its recognition of the union – only on a showing that the union has lost the support of a majority of employees in that bargaining unit at the time of that withdrawal.
The 4th U.S. Circuit Court of Appeals has addressed one health care industry employer’s attempt to withdraw recognition of a union after a number of members signed a "disaffection petition" stating that they no longer wanted to be represented by the union. NLRB v. HQM of Bayside, LLC, 4th Cir., No. 06-2253, March 10, 2008. The issue came to the Court’s attention because the withdrawal became effective in spite of the fact that a second petition was filed a month after the first one, stating that a majority of the employees "DO NOT wish to withdraw recognition or representation" of the union.
HQM of Bayside owns and operates Bayside Care Center (Bayside), a nursing home in Lexington Maryland. In 1998, the National Labor Relations Board certified the United Food & Commercial Workers as the exclusive bargaining representative for Bayside employees other than nurses, clerical employees, managers, guards, and supervisors. Bayside and the Union entered into a collective bargaining agreement (CBA) effective from December 1, 2001 through November 30, 2002.
In September 2002, a majority (34) of Bayside’s 61 employees signed a petition stating that they no longer wanted to be represented by the Union. On October 30, Bayside informed the Union that it would withdraw its recognition on December 1, after the expiration of the CBA. In early November, another petition was filed, again signed by 34 of the employees, including 13 who had signed the original disaffection petition, who this time stated that they wanted continued representation by the Union. In spite of the subsequent petition, Bayside withdrew its recognition of the Union on December 1, 2002, and refused to bargain with them after that date.
The National Labor Relations Board issued a complaint and notice of hearing, based upon Bayside’s refusal to bargain. An Administrative Law Judge conducted the hearing, and found Bayside to be in violation of the NLRA, and imposed an affirmative bargaining order. Bayside filed exceptions, but the Board affirmed the ALJ’s findings. When Bayside continued its refusal to bargain with the Union, the Board petitioned the Fourth Circuit for enforcement of its order. That petition was granted.
Bayside could unilaterally withdraw recognition of the Union without violating the NLRA only if it was able to show that at the time of its withdrawal, the majority of employees in the bargaining unit no longer supported the Union as their bargaining representative. Both the ALJ and the Board determined that although Bayside had signatures from a majority of employees in the bargaining unit on the initial petition, Bayside was not entitled to rely on the signatures from the 13 employees who also signed the subsequent petition that supported the Union. The Fourth Circuit affirmed that decision, finding that those 13 employees "clearly manifest[ed] that [they] had changed their sentiments about the Union." Without those 13 signatures, Bayside was not able to show that a majority of employees in the bargaining unit no longer supported the Union, and therefore violated the NLRA by refusing to recognize the Union.
In its opinion, the Fourth Circuit stressed the fact that because an employer has the burden of showing, by a preponderance of the evidence, that a union has lost majority support at the time that the employer withdraws recognition of that union, the preferred method for resolving the question of that support is through "Board conducted elections." In this case, an election would clearly have settled the issue of the employee’s support, or lack thereof, for Union representation at the time of Bayside’s withdrawal of recognition, and would have avoided this lengthy litigation.
Under the National Labor Relations Act (NLRA), it is an unfair labor practice for an employer to refuse to bargain collectively with the union representing its employees. Once the employees comprising a particular bargaining unit have elected a union to represent them, the union enjoys a "rebuttable presumption" of majority support during the term of its collective bargaining agreement, if that agreement is for three years or less. An employer can rebut that presumption – and may unilaterally withdraw its recognition of the union – only on a showing that the union has lost the support of a majority of employees in that bargaining unit at the time of that withdrawal.
The 4th U.S. Circuit Court of Appeals has addressed one health care industry employer’s attempt to withdraw recognition of a union after a number of members signed a "disaffection petition" stating that they no longer wanted to be represented by the union. NLRB v. HQM of Bayside, LLC, 4th Cir., No. 06-2253, March 10, 2008. The issue came to the Court’s attention because the withdrawal became effective in spite of the fact that a second petition was filed a month after the first one, stating that a majority of the employees "DO NOT wish to withdraw recognition or representation" of the union.
HQM of Bayside owns and operates Bayside Care Center (Bayside), a nursing home in Lexington Maryland. In 1998, the National Labor Relations Board certified the United Food & Commercial Workers as the exclusive bargaining representative for Bayside employees other than nurses, clerical employees, managers, guards, and supervisors. Bayside and the Union entered into a collective bargaining agreement (CBA) effective from December 1, 2001 through November 30, 2002.
In September 2002, a majority (34) of Bayside’s 61 employees signed a petition stating that they no longer wanted to be represented by the Union. On October 30, Bayside informed the Union that it would withdraw its recognition on December 1, after the expiration of the CBA. In early November, another petition was filed, again signed by 34 of the employees, including 13 who had signed the original disaffection petition, who this time stated that they wanted continued representation by the Union. In spite of the subsequent petition, Bayside withdrew its recognition of the Union on December 1, 2002, and refused to bargain with them after that date.
The National Labor Relations Board issued a complaint and notice of hearing, based upon Bayside’s refusal to bargain. An Administrative Law Judge conducted the hearing, and found Bayside to be in violation of the NLRA, and imposed an affirmative bargaining order. Bayside filed exceptions, but the Board affirmed the ALJ’s findings. When Bayside continued its refusal to bargain with the Union, the Board petitioned the Fourth Circuit for enforcement of its order. That petition was granted.
Bayside could unilaterally withdraw recognition of the Union without violating the NLRA only if it was able to show that at the time of its withdrawal, the majority of employees in the bargaining unit no longer supported the Union as their bargaining representative. Both the ALJ and the Board determined that although Bayside had signatures from a majority of employees in the bargaining unit on the initial petition, Bayside was not entitled to rely on the signatures from the 13 employees who also signed the subsequent petition that supported the Union. The Fourth Circuit affirmed that decision, finding that those 13 employees "clearly manifest[ed] that [they] had changed their sentiments about the Union." Without those 13 signatures, Bayside was not able to show that a majority of employees in the bargaining unit no longer supported the Union, and therefore violated the NLRA by refusing to recognize the Union.
In its opinion, the Fourth Circuit stressed the fact that because an employer has the burden of showing, by a preponderance of the evidence, that a union has lost majority support at the time that the employer withdraws recognition of that union, the preferred method for resolving the question of that support is through "Board conducted elections." In this case, an election would clearly have settled the issue of the employee’s support, or lack thereof, for Union representation at the time of Bayside’s withdrawal of recognition, and would have avoided this lengthy litigation.
Company’s failure to follow its own written policy regarding wage payments during military leave violated the USERRA
For the week of March 10, 2008
Although employers are not obligated under the Uniformed Services Employment and Reemployment Rights Act (USERRA) to pay wages during absences caused by military leave, many employers include such policies in employee handbooks or procedural manuals. When a written policy is disseminated to employees, the company must follow that policy. In a recent unpublished opinion, the 6th U.S. Circuit Court of Appeals awarded unpaid wages, liquidated damages, and punitive damages against an employer that failed to follow its own written policy related to the payment of wages during military leave. Koehler v. PepsiAmericas, Inc., 6th Cir., No. 07-3093, March 6, 2008.
Kevin Koehler began his employment with PepsiAmericas, Inc. in 2000 as a route salesman based in Cincinnati, Ohio. In 2002, Koehler entered into an eight-year enlistment with the Army Reserve. After returning to Pepsi from a six-month military training conducted from March through August 2002, Koehler began to experience attendance-related disciplines, some of which were related to subsequent military duty absences. Although Koehler made attempts to address and resolve these issues, Pepsi was not responsive until Koehler sent an e-mail to Pepsi’s corporate website threatening to publicize how Pepsi treats its employees who serve in the armed forces.
The company then set up a meeting with Koehler, and provided to him a copy of the company’s Military Active Leave Policy and Procedures, which included a payment to "bridge the gap between Military Pay and normal pay received, so that employee is kept whole and does not lose money by going into military duty." At the pre-arranged meeting with Pepsi, which included HR managers, union representatives, and Koehler’s military unit commander, Koehler was told that the attendance disciplines related to military absences would be reversed. Further, in response to Koehler’s claim for differential pay under the policy, Koehler was told that he would be paid under the company’s policy.
After the meeting, Koehler withdrew a complaint that he had filed with the Department of Labor, as he had agreed to do in exchange for Pepsi’s promise to pay him. Two weeks later, Pepsi directly deposited the net pay owed into Koehler’s bank account. However, a month later, Pepsi withdrew the same amount from the account, without prior notice to or permission from Koehler. When Koehler asked for a reason for that action, he was told that Pepsi had "changed our minds" and that he should "let your attorney speak to our attorney." Koehler then retained counsel and filed a lawsuit under the USERRA, also claiming violation of a verbal contract to pay the wages, and claiming conversion of the amount originally deposited to his account.
At a non-jury trial, Koehler was awarded his unpaid wages. The court also awarded an equal amount of liquidated damages for Pepsi’s "willful" violation of the USERRA, and awarded punitive damages under Koehler’s state law conversion claim. On appeal, the Sixth Circuit affirmed the entire award.
Much of the outcome of the case – including the liquidated and punitive damage awards, both of which require "willful" violations of law – stemmed from the lower court’s determination regarding the credibility of the witnesses. Primarily, the court found that the company’s HR witness was not credible when she failed to acknowledge her familiarity with the company’s policy, and when she refused to admit that someone from Pepsi had initiated the original deposit into Koehler’s account. Here, Pepsi obviously knew that it had established a benefit related to military leave pay, and actually had paid the amount into Koehler’s account. The company had sufficient information to know that it was violating the USERRA when it withdrew the funds from that same account one month later.
The Sixth Circuit also supported the lower court’s imposition of punitive damages on Koehler’s state law conversion claim, specifically finding the "ill will" required for such damages in Pepsi’s failure to respond effectively to Koehler’s grievances and complaints regarding his attendance-related discipline.
Employers must recognize that once a written policy is disseminated, managers – especially HR personnel - must be trained to understand, implement, and consistently enforce such a policy. Failure to do so can lead to the events that occurred here, including the imposition against the company of both liquidated damages under the USERRA and punitive damages under related state-law claims.
Although employers are not obligated under the Uniformed Services Employment and Reemployment Rights Act (USERRA) to pay wages during absences caused by military leave, many employers include such policies in employee handbooks or procedural manuals. When a written policy is disseminated to employees, the company must follow that policy. In a recent unpublished opinion, the 6th U.S. Circuit Court of Appeals awarded unpaid wages, liquidated damages, and punitive damages against an employer that failed to follow its own written policy related to the payment of wages during military leave. Koehler v. PepsiAmericas, Inc., 6th Cir., No. 07-3093, March 6, 2008.
Kevin Koehler began his employment with PepsiAmericas, Inc. in 2000 as a route salesman based in Cincinnati, Ohio. In 2002, Koehler entered into an eight-year enlistment with the Army Reserve. After returning to Pepsi from a six-month military training conducted from March through August 2002, Koehler began to experience attendance-related disciplines, some of which were related to subsequent military duty absences. Although Koehler made attempts to address and resolve these issues, Pepsi was not responsive until Koehler sent an e-mail to Pepsi’s corporate website threatening to publicize how Pepsi treats its employees who serve in the armed forces.
The company then set up a meeting with Koehler, and provided to him a copy of the company’s Military Active Leave Policy and Procedures, which included a payment to "bridge the gap between Military Pay and normal pay received, so that employee is kept whole and does not lose money by going into military duty." At the pre-arranged meeting with Pepsi, which included HR managers, union representatives, and Koehler’s military unit commander, Koehler was told that the attendance disciplines related to military absences would be reversed. Further, in response to Koehler’s claim for differential pay under the policy, Koehler was told that he would be paid under the company’s policy.
After the meeting, Koehler withdrew a complaint that he had filed with the Department of Labor, as he had agreed to do in exchange for Pepsi’s promise to pay him. Two weeks later, Pepsi directly deposited the net pay owed into Koehler’s bank account. However, a month later, Pepsi withdrew the same amount from the account, without prior notice to or permission from Koehler. When Koehler asked for a reason for that action, he was told that Pepsi had "changed our minds" and that he should "let your attorney speak to our attorney." Koehler then retained counsel and filed a lawsuit under the USERRA, also claiming violation of a verbal contract to pay the wages, and claiming conversion of the amount originally deposited to his account.
At a non-jury trial, Koehler was awarded his unpaid wages. The court also awarded an equal amount of liquidated damages for Pepsi’s "willful" violation of the USERRA, and awarded punitive damages under Koehler’s state law conversion claim. On appeal, the Sixth Circuit affirmed the entire award.
Much of the outcome of the case – including the liquidated and punitive damage awards, both of which require "willful" violations of law – stemmed from the lower court’s determination regarding the credibility of the witnesses. Primarily, the court found that the company’s HR witness was not credible when she failed to acknowledge her familiarity with the company’s policy, and when she refused to admit that someone from Pepsi had initiated the original deposit into Koehler’s account. Here, Pepsi obviously knew that it had established a benefit related to military leave pay, and actually had paid the amount into Koehler’s account. The company had sufficient information to know that it was violating the USERRA when it withdrew the funds from that same account one month later.
The Sixth Circuit also supported the lower court’s imposition of punitive damages on Koehler’s state law conversion claim, specifically finding the "ill will" required for such damages in Pepsi’s failure to respond effectively to Koehler’s grievances and complaints regarding his attendance-related discipline.
Employers must recognize that once a written policy is disseminated, managers – especially HR personnel - must be trained to understand, implement, and consistently enforce such a policy. Failure to do so can lead to the events that occurred here, including the imposition against the company of both liquidated damages under the USERRA and punitive damages under related state-law claims.
Wednesday, March 12, 2008
Issue: The ADA prohibits “association discrimination” against employees
For the week of March 3, 2008
Under the Americans with Disabilities Act, an employer is specifically prohibited from "association discrimination," which the statute defines as discriminating against an employee on the basis of a "known disability of an individual with whom [that employee] is known to have a relationship or association." Although this issue is not litigated as frequently as other sections of the ADA, the 7th U.S. Circuit Court of Appeals recently raised this provision to reverse the dismissal of a nurse-employee’s claim against her hospital-employer. Dewitt v. Proctor Hospital, 7th Circ., No. 07-1957, February 27, 2008. In that case, the nurse claimed that her employment termination was based upon the fact that the cost of her husband’s cancer treatment was viewed by the self-insured hospital as inordinately high. The 7th Circuit’s decision will allow the claim to go forward to a jury.
Phillis Dewitt, a registered nurse, was hired by Proctor Hospital in Peoria, Illinois in September of 2001. After working on an as-needed basis for a month, Dewitt was promoted to the permanent position of clinical manager, where she supervised nurses and other hospital staff members. Dewitt’s performance was rated as "outstanding" by her supervisor, Mary Jane Davis.
Dewitt and her husband were covered under Proctor’s health insurance plan, which was largely self-funded – the hospital paid for members’ covered medical costs up to $250,000 each year, with costs in excess of that amount covered by the Standard Security Life Insurance Company of New York. Throughout Dewitt’s employment at the hospital, Dewitt’s husband suffered from prostate cancer. His medical treatment was continuous and expensive, and was paid for through the hospital’s self-coverage.
Proctor reviewed medical coverage costs periodically, and documented medical claims in quarterly "stop-loss" reports, which listed all employees whose recent medical claims had exceeded $25,000 within the quarter. Dewitt’s claims were listed on reports in 2003, 2004, and 2005.
In September 2004, Dewitt was confronted by Davis, her supervisor, who told her that a committee was reviewing Anthony’s medical expenses, which the hospital felt were unusually high; Davis then asked Dewitt about the type of treatment being received by Anthony for his cancer. When Dewitt responded that her husband was receiving both chemotherapy and radiation, Davis asked whether she had considered hospice care, a less expensive alternative. Dewitt responded that her husband’s doctor considered hospice care to be premature. In February 2005, Davis again raised the treatment issue with Dewitt, and was told that Anthony’s status had not changed.
At a meeting of clinical managers in May of 2005, Davis informed employees that the hospital was facing financial troubles and would take "creative" efforts to cut costs. On August 3, 2005, Dewitt was fired from her job, and was designated as "ineligible for rehire" by Proctor. The hospital continued to provide medical benefits through the end of August; after that, Dewitt paid for COBRA coverage. Anthony Dewitt died on August 6, 2006.
Dewitt filed a lawsuit against Proctor, alleging age, gender, and disability discrimination claims. The district court granted summary judgment to the hospital on all three claims. On appeal, the Seventh Circuit upheld the dismissal of the age and gender claims, but reversed it as to the ADA claim, finding a factual dispute on the issue of whether the hospital’s action was based on "association discrimination."
The uncontroverted evidence showed that: (1) Proctor was concerned about its financial status; (2) Dewitt’s medical claims were paid under the hospital’s self-insured limits; (3) Anthony Dewitt’s medical expenses regularly were included on the quarterly stop-loss reports; (4) Proctor informed its clinical managers that the hospital had to be "creative" in its cost cutting; (5) Davis asked Dewitt specifically about Anthony’s treatments, and suggested less expensive hospice; and (6) Dewitt was terminated (with an unexplained "no re-hire" designation) within months of her discussions with Davis. The Court found that these facts constituted evidence that association discrimination may have motivated Proctor to fire Dewitt, and that a jury should be allowed to decide the claim.
While Dewitt’s case seems compelling, the concurring opinion by Judge Posner raises an interesting issue, and one that may have changed the outcome of the case. Posner points out that the hospital failed to produce any evidence of a non-discriminatory reason for terminating Dewitt. If, in fact, that information had been available to the Court, it may have allowed the case to be reviewed under the often used "shifting burden" analysis. In that instance, had the hospital been able to provide a legitimate business reason for Dewitt’s termination, the burden would shift back to Dewitt to prove that the proffered reason was simply a pretext for discrimination.
This case is another example of why complete and objective documentation is critical as a basis for employment decisions. Had the hospital produced documentation of performance-related issues (or another valid non-discriminatory basis) for its decision regarding Dewitt’s discharge, and had Dewitt been unable to provide evidence that the hospital’s proffered reason was untrue or that her alleged "association discrimination" motivated the firing, the Seventh Circuit may have affirmed dismissal of the claim.
Under the Americans with Disabilities Act, an employer is specifically prohibited from "association discrimination," which the statute defines as discriminating against an employee on the basis of a "known disability of an individual with whom [that employee] is known to have a relationship or association." Although this issue is not litigated as frequently as other sections of the ADA, the 7th U.S. Circuit Court of Appeals recently raised this provision to reverse the dismissal of a nurse-employee’s claim against her hospital-employer. Dewitt v. Proctor Hospital, 7th Circ., No. 07-1957, February 27, 2008. In that case, the nurse claimed that her employment termination was based upon the fact that the cost of her husband’s cancer treatment was viewed by the self-insured hospital as inordinately high. The 7th Circuit’s decision will allow the claim to go forward to a jury.
Phillis Dewitt, a registered nurse, was hired by Proctor Hospital in Peoria, Illinois in September of 2001. After working on an as-needed basis for a month, Dewitt was promoted to the permanent position of clinical manager, where she supervised nurses and other hospital staff members. Dewitt’s performance was rated as "outstanding" by her supervisor, Mary Jane Davis.
Dewitt and her husband were covered under Proctor’s health insurance plan, which was largely self-funded – the hospital paid for members’ covered medical costs up to $250,000 each year, with costs in excess of that amount covered by the Standard Security Life Insurance Company of New York. Throughout Dewitt’s employment at the hospital, Dewitt’s husband suffered from prostate cancer. His medical treatment was continuous and expensive, and was paid for through the hospital’s self-coverage.
Proctor reviewed medical coverage costs periodically, and documented medical claims in quarterly "stop-loss" reports, which listed all employees whose recent medical claims had exceeded $25,000 within the quarter. Dewitt’s claims were listed on reports in 2003, 2004, and 2005.
In September 2004, Dewitt was confronted by Davis, her supervisor, who told her that a committee was reviewing Anthony’s medical expenses, which the hospital felt were unusually high; Davis then asked Dewitt about the type of treatment being received by Anthony for his cancer. When Dewitt responded that her husband was receiving both chemotherapy and radiation, Davis asked whether she had considered hospice care, a less expensive alternative. Dewitt responded that her husband’s doctor considered hospice care to be premature. In February 2005, Davis again raised the treatment issue with Dewitt, and was told that Anthony’s status had not changed.
At a meeting of clinical managers in May of 2005, Davis informed employees that the hospital was facing financial troubles and would take "creative" efforts to cut costs. On August 3, 2005, Dewitt was fired from her job, and was designated as "ineligible for rehire" by Proctor. The hospital continued to provide medical benefits through the end of August; after that, Dewitt paid for COBRA coverage. Anthony Dewitt died on August 6, 2006.
Dewitt filed a lawsuit against Proctor, alleging age, gender, and disability discrimination claims. The district court granted summary judgment to the hospital on all three claims. On appeal, the Seventh Circuit upheld the dismissal of the age and gender claims, but reversed it as to the ADA claim, finding a factual dispute on the issue of whether the hospital’s action was based on "association discrimination."
The uncontroverted evidence showed that: (1) Proctor was concerned about its financial status; (2) Dewitt’s medical claims were paid under the hospital’s self-insured limits; (3) Anthony Dewitt’s medical expenses regularly were included on the quarterly stop-loss reports; (4) Proctor informed its clinical managers that the hospital had to be "creative" in its cost cutting; (5) Davis asked Dewitt specifically about Anthony’s treatments, and suggested less expensive hospice; and (6) Dewitt was terminated (with an unexplained "no re-hire" designation) within months of her discussions with Davis. The Court found that these facts constituted evidence that association discrimination may have motivated Proctor to fire Dewitt, and that a jury should be allowed to decide the claim.
While Dewitt’s case seems compelling, the concurring opinion by Judge Posner raises an interesting issue, and one that may have changed the outcome of the case. Posner points out that the hospital failed to produce any evidence of a non-discriminatory reason for terminating Dewitt. If, in fact, that information had been available to the Court, it may have allowed the case to be reviewed under the often used "shifting burden" analysis. In that instance, had the hospital been able to provide a legitimate business reason for Dewitt’s termination, the burden would shift back to Dewitt to prove that the proffered reason was simply a pretext for discrimination.
This case is another example of why complete and objective documentation is critical as a basis for employment decisions. Had the hospital produced documentation of performance-related issues (or another valid non-discriminatory basis) for its decision regarding Dewitt’s discharge, and had Dewitt been unable to provide evidence that the hospital’s proffered reason was untrue or that her alleged "association discrimination" motivated the firing, the Seventh Circuit may have affirmed dismissal of the claim.
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