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continuing Commentary and
Review on Employment Law and Cases Fired Because of A Sick Family Member: Protection Against "Association Discrimination" One of the most important benefits most people get from their jobs is health care insurance for themselves and their families. This health insurance becomes of vital importance when a family member falls into a prolonged illness. From the employer's perspective, especially where the employer is self-insured, a prolonged illness for an employee's family member becomes a cost liability which can create an incentive for the employer to rid itself of both the employee and their sick family member. Where this occurs the Americans With Disabilities Act (ADA) may provide some protection for the employee and their family. The ADA prohibits discrimination against an employee "because of the known disability of an individual with whom the [employee] is known to have a relationship or association." This is commonly referred to as protection against association discrimination. Two recent cases, one decided by the United States Court of Appeals for the Seventh Circuit, DeWitt v. Proctor Hospital, and Trujillo v. Pacificorp decided by the United States Court of Appeals for the Tenth Circuit illustrate this protection and in both cases the employer was self-employed. In Dewitt, the employee's husband became ill with prostrate cancer. The employer paid medical costs up to $250,000 per year before a "stop loss" policy kicked in. Each quarter the employer had compiled a roster of all employees whose claims had exceeded $25,000. When the bills for the employee's husband's treatment began mounting she was confronted about them and asked what type of treatment he was receiving and whether less expensive alternatives had been considered. The hospital became concerned about the costs, its own overall financial situation and resolved to be "creative" in cutting costs. And so the employee was fired. The Court ruled that a jury should consider the employee's claim of "association discrimination" in violation of the ADA. It noted that the firing followed close in time expressions of concern to the employee regarding the costs of her husband's medical care and the employer's resolution to be "creative" in cutting costs. Therefore, the court ruled that a reasonable juor could conclude the employer was concerned that the husband's illness could linger for years and at great cost to the employer and so therefore the employee was fired in violation of the ADA. Trujillo v. Pacificorp presents a similar sad story. The Trujillos, husband and wife, both worked for Pacificorp and had for many years, he for 25 and she for 8 years. Their son developed a brain tumor that metasized into his spine. Aggressive and costly (in excess of $62,000) experimental chemotherapy was undertaken but was unsuccessful. Pacificorp designated claims exceeding $50,000 as high-dollar and healthcare costs for each employee were factored into the plant's budget line item for labor costs. Eleven days after the Trujillos' son suffered a relapse and began the final chemotherapy regiment the employer began an investigation into alleged time theft by the Trujillos. The evidence showed that the company did not use a time clock, that supervisors usually approved employees' time sheets based on their observations during the work day, that time sheets were somtimes filled out in advance, that supervisors sometimes allowed employees to leave early but to record a full shift, and that employees frequently used a "piggyback" procedure to pass through a security gate in which one employee would use his security card to get the gate to open and other employees would walk in as well. Nonetheless, Pacificorp accused both of the Trujillos with time theft and terminated them. The court ruled that evidence that Pacificorp had general concerns about the rising cost of healthcare, that the claims for the Trujillos' child were considered "high dollar," that there was only one other "high dollar" claim during the relevant time frame on which the employer kept close tabs, that insurance costs were factored into the budget line item for labor costs of each employee, and that the investigation regarding the Trujillos' alleged time theft was one-sided and incomplete was enough for a jury to find in their favor at trial. The DeWitt and Trujillo cases also illustrate general problems that arise from the United States' system of employer-based healthcare insurance. It seems reasonable for employers to be concerned about rising healthcare costs and the effects those costs have on their ability to compete in their business fields. And yet it is horribly unfair to fire an employee because they have an ill family member that is generating substantial insurance costs for the employer. The current system and the ADA mandate that cost be borne solely by the employer who is unlucky enough to employ an individual unlucky to have a family member suffering from a serious illness. One might reasonably suggest that a single-payer system in which the costs were borne more widely would be more equitable and fair to both the employer and the employee. It may also eliminate the impulse for "association discrimination" behind both of these cases. Robert L. Abell Release of Discrimination Claims Valid In Absence of Duress, Fraud or Bad Faith A somewhat common occurrence when an employee is discharged is the presentation of a severance and release agreement under which the employer will provide some salary continuation and/or benefits in exchange for the employee's agreement not to file an employment discrimination or related lawsuit. Where this occurs and there is no duress, fraud or bad faith, the release operates as a bar to any later filed lawsuit requiring its dismissal the Kentucky Supreme Court recently held in Humana, Inc. v. Blose, No. 2006-SC-000783 (available at Kentucky Court of Justice website). Robert L. Abell Employer's Retaliation Against Fiancee of Employee Charging Discrimination Violates Title VII Does Title VII prohibit employers from taking retaliatory action against employees not directly involved in protected activity, but who are so closely related to or associated with those who are directly involved, that it is clear that the protected activity motivated the employer's action? "Yes" answered the Sixth Circuit Court of Appeals in its decision Thompson v. North American Stainless, LP (decided March 31, 2008). This case appears to the first decision by a court of appeals holding unambiguously that a victim of third-party retaliation has a cause of action under Title VII. The plaintiff, Thompson, was engaged to a co-worker, Regalado, an engagement well-known throughout the workplace, and she filed a gender discrimination charge with the EEOC. Slightly more than three weeks after the employer learned of Regalado's charge, it fired Thompson, her fiancee. The Sixth Circuit reversed a summary judgment granted by the district court reasoning that allowing such third-party retaliation would undermine the purposes of Title VII. The court conceded that a literal reading of the applicable statutory language may not authorize a cause of action for third-party retaliation. However, the court likewise and correctly recognized that courts are charged, as the Supreme Court has observed on numerous occasions, to go beyond a statute's literal language when necessary to avoid a result at odds with its plain purpose. The purpose of Title VII's anti-retaliation provision, the court reasoned, was to prohibit employer actions that would dissuade a "reasonable worker" from filing a charge of or reporting on discrimination. Since firing a family member or other close association would likely have such effect, the court concluded that Title VII must be construed to authorize a direct cause of action for third-party retaliation. As a practical matter, the Sixth Circuit's holding should not open a new avenue of potential liability for employers. Title VII's anti-retaliation provision prohibits conduct likely to deter a "reasonable worker" from making a charge or report of discrimination. An employee who has made a charge of discrimination and then has their spouse fired in retaliation would certainly have a cause of action for retaliation. It would seem to make little, if any, different then in terms of potential employer liability whether the cause of action for retaliation is by the third-party spouse or the employee who has made the discrimination charge. Robert L. Abell Employer's Toleration of Co-Worker Retaliation Can Lead to Liability Employees who report to their employer harassing conduct or a hostile work environment created by the misconduct of a co-worker can find themselves the target of retaliation by those responsible for the misconduct or other employees that consider themselves allies of the offender. The United States Court of Appeals for the Sixth Circuit recognized in Hawkins v. Anheuser-Busch, Inc., No. 07-3235 (6th Cir. February 19, 2008), that toleration of such co-worker retaliation could lead to liability under Title VII for the employer. The threshold for unlawful retaliation, the Court noted, was whether the retaliatory act would "dissuade a reasonable worker from making or supporting a charge of discrimination." The Court established a three-part test for employer liability to arise: (1) whether the co-worker's retaliatory conduct is sufficiently severe so as to dissuade a reasonable worker from making or supporting a charge of discrimination; (2) whether supervisors or members of management have actual or constructive knowledge of the co-worker's retaliatory behavior; and, (3) whether supervisors or members of management have condoned, tolerated, or encouraged the acts of retaliation, or have responded to the employee's complaint so inadequately that the response manifests indifference or unreasonableness under the circumstances. Robert L. Abell Retirement Funds In Defined Contribution 401(k) ERISA Plan Lost Due to Investment Manager's Failure to Follow Directions or Failure to Notify May Be Recovered Two recent court decisions, one by the United States Supreme Court and the other by the United States Court of Appeals for the Sixth Circuit, which covers Kentucky, offer and allow badly-needed avenues for relief to employees whose retirement accounts have suffered losses or diminution in value due to the negligence or wrongdoing to those responsible for managing the accounts. First, the Supreme Court ruled in LaRue v. DeWolff, Boberg and Associates, Inc., (decided by the Supreme Court on February 20, 2008), that an employee who claimed that the value of his retirement account had been diminished by approximately $150,000 because of a failure to follow his investment directions could sue to recover this diminution in value. The employee participated in an ERISA-covered defined contribution 401(k) retirement savings plan, which allowed him to direct the investments of his contributions. In accordance plan-specified procedures and requirements, he directed certain changes to the investment in his individual account be made but his directions were never followed and, as a result, the value of his account was diminished by approximately $150,000. In an attempt to recover this loss, he filed suit under ERISA claiming that the failure to follow his directions constituted a breach of fiduciary duty. The employee’s lawsuit was thrown out first by the district court and that ruling was affirmed by the United States Court of Appeals for the Fourth Circuit. Both relied on an earlier Supreme Court decision, Massachusetts Mutual Life Ins. Co. v. Russell, claiming it established that individuals could not sue under ERISA to recover money for themselves and that only the entire ERISA plan itself could bring a suit to recover its lost assets. The Supreme Court distinguished Russell by reasoning that an individual bringing suit to recover losses to his account in the ERISA plan was still bringing suit to recover losses for the plan. The court, therefore, concluded that ERISA does “authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account.” Some weeks prior to the Supreme Court’s decision in LaRue, the United States Court of Appeals for the Sixth Circuit, in commendable anticipation of the Supreme Court’s subsequent decision on LaRue, ruled in Tullis v. UMB Bank that two physicians could sue to recover losses from a bank that allegedly failed to notify them of fraudulent activities affecting their ERISA-governed pension plans. The doctors were participants in a defined contribution pension plan, more specifically a 401(k) profit sharing plan available to them through the clinic where they were employed. They claimed that the defendant bank, which served as the trustee for the plan, knew of fraudulent activities engaged in by the plan’s investment advisor and failed to inform them. Consequently, the doctors alleged, their investment accounts had suffered losses exceeding $500,000 and $1 million, respectively. They alleged that the bank had breached its fiduciary duty to them by failing to inform them of the investment advisor’s fraudulent activities. The Sixth Circuit used the same reasoning later in LaRue, observing that “although the number of affected participants differs, the nature of the relief – the payment of money to the plan – is the same regardless of the number of participants to whom the recovered assets are allocated.” Therefore, the court reinstated the lawsuit. LaRue and Tullis represent a substantial evolution in ERISA law by granting employees a means to obtain redress when persons charged with managing their retirement accounts breach their duties. These decisions serve the overriding purpose of ERISA: the preservation of retirement account funds. Employees who suffer losses from breaches of fiduciary duties, whether because of a failure to follow their directions or a failure to notify them of wrongdoing, may now seek and hopefully obtain full recovery of their vital retirement accounts. Robert L. Abell Appeals Court Takes Away Benefits By Crediting Opinion of Nurse Who Never Examined the Insured Over the Opinion of Her Treating Doctors The United States Court of Appeals decision in Iley v. Metropolitan Life Insurance Company (Case No. 06-2589 decided on January 18, 2008 and available on the Sixth Circuit website) illustrates just how easy it is for insurance companies to get out of paying benefits to disabled persons on long-term disability insurance policies that they received through their employment. Iley was employed by the Kroger company and through Kroger was covered by a long-term disability insurance policy issued by Met Life, which was also the benefit administrator. Iley hurt her back, underwent two back surgeries and was paid benefits for 24 months. Met Life then terminated Iley's benefits, although Iley's doctor had just reported that Iley suffered from the precise condition -- radiculopathy -- that Met Life asserted there was no medical evidence that she suffered from. Iley appealed the termination of her benefits "and her physicians submitted statements regarding Iley's disability in conjunction with her appeal." Met Life denied Iley's appeal, claiming that her claim file had been reviewed by a "health care professional." Iley then filed suit and a federal district court ruled that she was entitled to benefits. The appeals court criticized the district court for not giving "any deference to Met Life's decision" and for conducting an "in-depth review of the record." In addition, even though Met Life, as both the insurer and the benefits administrator, was responsible for deciding whether Iley qualified for benefits that it would then have to pay her, a dual role that is ordinarily considered a "conflict of interest," the appeals court ruled that "it was improper to find that Met Life acted under a conflict of interest." Finally, when it turned out the "health care professional" that reviewed Iley's claim file on appeal was a nurse, the appeals court failed to consider whether a nurse's opinion based on only a review of Iley's claim file not an actual examination of her could or should be given more weight than the opinion of her doctors who had performed two surgeries and treated her for many years and instead asserted that "this court has never held that a file review by a nurse is an insufficient form of review." This case is a disturbing illustration of how empty is the promise of long-term disability insurance that many workers obtain through their employment. These insurance policies are almost always governed by ERISA. And under ERISA insurance companies, as the Iley case shows, can disregard the opinions of doctors who have performed multiple surgeries and treated an insured for many years in favor of an opinion from a nurse based only on a review of the claim file, not an actual examination. Robert L. Abell |
ROBERT L.
ABELL 866-578-5302 TOLL FREE
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Robert L. Abell is a
Personal Injury and Accident lawyer for Lexington, Winchester, Paris,
Georgetown, Frankfort, Versailles, Nicholasville, Richmond, Lancaster, Stanton,
London, Corbin, Shelbyville, Danville, Lawrenceburg, Williamstown,
Jeffersontown, Louisville, Harrodsburg, Campbellsville, Liberty, Bardstown,
Covington, Columbia, Elizabethtown, Newport, Pikeville, Ashland, Morehead,
Jackson, Cynthiana and other communities located in central and eastern Kentucky
and Fayette County, Scott County, Clark County, Madison County,
Laurel County, Powell County, Morgan County, Breathitt County,
Harrison County, Woodford County, Bourbon County, Jessamine County,
Mercer County, Boyle County, Anderson County, Shelby County,
Jefferson County, Owen County, Franklin County, Grant County, Boone
County, Kenton County and elsewhere in Kentucky. |
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