Sixth Circuit Addresses "Associational Discrimination" Under the ADA

A little used provision in the ADA prohibits "excluding or otherwise denying equal jobs or benefits to a qualified individual because of the known disability of an individual with whom the qualified individual is known to have a relationship or association." 42 U.S.C. § 12112(b)(4).  Under this provision, the EEOC has explained,

an employer may not treat a worker less favorably based on stereotypical assumptions about the worker’s ability to perform job duties satisfactorily while also providing care to a relative or other individual with a disability. For example, an employer may not refuse to hire a job applicant whose wife has a disability because the employer assumes that the applicant would have to use frequent leave and arrive late due to his responsibility to care for his wife.  

The Sixth Circuit appeal involved an employee, Stansberry, who managed the employer's, Air Wisconsin, operations at the Kalamazoo Michigan Airport from 1999 until he was fired on July 26, 2007.  In the mid-1990s Stansberry’s wife developed Polyarteritis Nodosa, a very rare and debilitating autoimmune disorder. The treatment for this condition "involves medications to suppress the immune system, including prednisone and cyclophosphamide."  It is expensive.  Costing Air Wisconsin's insurer some $4,000 every six weeks.

At some point in 2007, Air Wisconsin increased it operations in Kalamazoo, growing from eleven employees to twenty-five. Stansberry was responsible for ensuring all employees properly carried out their jobs and there were several significant problems with the new hires. Between February and May 2007, six different employees received a total of nine security violation letters from the Kalamazoo airport director. Stansberry failed to notify Air Wisconsin’s corporate headquarters about the violations, they learned about the violation only when the Transportation Security Administration sent a letter of investigation to Air Wisconsin’s headquarters.

Stansberry, already had issues with his boss, Mulder.  When Mulder reviewed the security violations, he let the TSA know he would be taking "severe disciplinary action" against Stansberry.  Air Wisconsin asserts that it terminated Stansberry for poor performance based on his failure to stay within budget, failure to report security violations, and improper supervision of employees, which led to the security violations in the first place. The prepared termination letter Mulder brought with him to the meeting, however, simply mentioned the security violations.

Relying on a Seventh Circuit decision, Larimer v. Int’l Bus. Machs. Corp., 370 F.3d 698, 700 (7th Cir. 2004), the Sixth Circuit decision summarized the types of theories under which an associational discrimination claim could be brought:

Several circuits, including this Court in an unpublished opinion, have relied on Larimer’s outline of three theories into which “association discrimination” plaintiffs generally fall: (1) “expense”; (2) “disability by association”; and (3) “distraction.” The “expense” theory covers situations where an employee suffers an adverse employment action because of his or her association with a disabled individual covered under the employer’s health plan, which is costly to the employer. The “disability by association” theory encompasses two related situations. Either the employer fears that the employee may contract the disability of the person he or she is associated with (for example the employee’s partner is infected with HIV and the employer fears the employee may become infected), or the employee is genetically predisposed to develop a disability that his or her relatives have. The “distraction” theory is based on the employee’s being somewhat inattentive at work because of the disability of someone with whom he or she is associated. Id. at 700.

Stansberry relied only on a “distraction” theory.  Stansberry, who lacked direct evidence, argued that the court should infer discrimination because he was discharged shortly after his wife's condition worsened.  The court rejected the argument:

although her condition grew worse immediately before Stansberry was terminated, Air Wisconsin had been aware of her illness for many years. Because Air Wisconsin knew of her disability for a long period of time, this undercuts the inference that Stansberry’s termination was based on unfounded fears that his wife’s disability might cause him to be inattentive at work.

While the court held Stansberry couldn't establish a prima facie case, it also held he could not show his discharge was because of his association with his wife:

Importantly, while Stansberry’s poor performance at work was likely due to his wife’s illness, that is irrelevant under this provision of the Act. Stansberry was not entitled to a reasonable accommodation on account of his wife’s disability. Cf., e.g., Larimer, 370 F.3d at 700. Therefore, because his discharge was based on actually performing his job unsatisfactorily, and not fears that his wife’s disability might prevent him from performing adequately, Air Wisconsin’s conduct is not prohibited by this section of the Act.

There is an important caveat to the decision.  While the ADA does not require an accommodation in these circumstances, the FMLA (which may not have applied to Stansberry) might require time off from work.  

The EEOC also points out that "an employer must avoid treating an employee differently than other employees because of his or her association with a person with a disability."   It gives two examples:

Example J:  Kyung, an employee at an accounting firm, requests a week of unpaid leave and is told by her supervisor that there will be no difficulty in granting the leave.  Kyung then mentions that she will be using the leave to care for her mother with a disability, who is coming into town for medical treatments.  The supervisor denies the leave request, telling Kyung that the firm's leave policy is not intended to cover this type of situation and that she should hire someone to look after her mother.  A few days later, the supervisor approves Diego's request for a week of unpaid leave to attend a father-son camp with his son.  If the firm grants requests for unpaid leave for certain personal or family reasons, it is a violation of the ADA's association provision to deny Kyung's request because she wishes to use the time to assist her mother with a disability.  

Example K:  A law firm permits its attorneys to use 100 hours of administrative leave a year to provide pro bono legal services.  One attorney, Sylvia, wants to use these hours to work with a non-profit organization that provides legal and other services to individuals with psychiatric disabilities.  The law firm denies her request because it does not believe that this type of work will reflect well on its image.  If the firm allows attorneys to use administrative leave to provide pro bono legal services, it is a violation of the association provision of the ADA to deny Sylvia's request because she wishes to use the time to assist individuals with disabilities.

U.S. Supreme Court Reverses Wal-Mart Class Certification

The largest class action ever certified in a discrimination claim is history.  The decision is interesting if you like issues that arise under the federal rules of civil procedure class action but that makes it pretty wonkish from the employer's point of view.  At first read, the Court's decision (it was unanimous in part) will spell doom for large employment based class actions where the evidence does not present a policy or practice of intentional discrimination or a practice that unintentionally causes a disparate impact.

What really hurt the employees trying to get their claims certified was that they took inconsistent positions in trying to establish that their claims of discrimination had an important point in common.  They claimed Wal-Mart had a policy of providing store management with unchecked discretion.  The Court didn't buy it, saying the employees failed to identify "a common mode of exercising discretion that pervades the entire company:"

we have recognized that, “in appropriate cases,” giving discretion to lower-level supervisors can be the basis of Title VII liability under a disparate-impact theory—since “an employer’s undisciplined system of subjective decision making [can have] precisely the same effects as a system pervaded by impermissible intentional discrimination.” Id., at 990–991. But the recognition that this type of Title VII claim “can” exist does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common. To the contrary, left to their own devices most managers in any corporation—and surely most managers in a corporation that forbids sex discrimination—would select sex-neutral, performance-based criteria for hiring and promotion that produce no actionable disparity at all. Others may choose to reward various attributes that produce disparate impact—such as scores on general aptitude tests or educational achievements, see Griggs v. Duke Power Co., 401 U. S. 424, 431–432 (1971). And still other managers may be guilty of intentional discrimination that produces a sex-based disparity. In such a company, demonstrating the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s. A party seeking to certify a nationwide class will be unable to show that all the employees’ Title VII claims will in fact depend on the answers to common questions.

The decision reduces the risk that an employer will have a class action filed against it alleging all of its decisions are discriminatory.  This decision will require a pretty good showing that the discrimination claims have facts or decision making in common.  As I said earlier, employers that have discriminatory policies or who permit neutral practices to have a discriminatory effect are still at risk. 

A Reminder about Treating Employees Consistently

For some jobs, even private sector jobs, not getting (or maintaining) a government issued security clearance is a fundamental job requirement.  There are numerous court decisions upholding terminations from employment because the government revoked the clearance of the employee.  There is even a special provision in Title VII which states that it is not illegal to fire (or refuse to hire) an employee who cannot possess a clearance if the position requires the holding of a clearance.  42 U.S.C. 2000e-2(g).

A decision issued today (Zeinali v. Raytheon Co.) by the Ninth Circuit (which governs federal laws in the west coast states), serves as a reminder that even "sure things" have a catch, that being treating employees consistently. The court held that it could not review the government's clearance decision (in this case the government refused to grant a clearance).  It refused to go so far as to refuse to review the employer's decision to fire the employee because the employee failed to obtain a clearance.  There was no doubt, the decision stated, the employee was told the position required a clearance.

What went wrong was that there were two other employees (in jobs similar to that held by the plaintiff) who  had security clearances revoked but the employer had not terminated either employee.  So, for all the bluster and worry about whether or not courts may review decisions based upon the loss of a security clearance, the decision came down to whether or not the employer had treated the employee worse that it treated other, similarly situated, employees.

Constitutionalizing Title VII - Ricci v. DeStefano

Yesterday's decision in Ricci v. DeStefano probably received more publicity than it's due because Supreme Court nominee Sonia Sotomayor was on the panel that decided the appeal in the court of appeals. Nevertheless, the decision is an important one under Title VII for any employer who would avoid disparate impact liability.

In reading Ricci, I was reminded of a remark in Personnel Adm'r of Massachusetts v. Feeney, 442 U.S. 256, 277-79 (1979), that "Discriminatory intent is simply not amenable to calibration." Ricci demonstrates this point perfectly and the difference between intentional discrimination (also called "disparate treatment") and unintentional discrimination (called "disparate impact) continues to confound courts, lawyers and employers.

The facts in Ricci can be simply stated. The city gave a test to those who wanted to be promoted in the fire department. While the test was constructed to be racially neutral, it ended up favoring whites over blacks to a statistically significant degree. After deliberations, the city junked the test results. (This is an oversimplification. Other relevant facts will be added when the discussion warrants.)

The first question the Court decided was whether the City's rejection of the test results was "because of race." The majority got straight to the point and held that it was:

The City rejected the test results solely because the higher scoring candidates were white. The question is not whether that conduct was discriminatory but whether the City had a lawful justification for its race based action.

Slip op. at 19-20

Having decided the city's action amounted to overt racial discrimination, the only other issue was whether the decision was nevertheless justifiable because the city feared a disparate impact lawsuit from the black employees who fared worse than whites on the exam.

Employers take action based upon the fear of lawsuits all the time. Nor is the subject a new one for the Court. One of the statutory defenses in Title VII lets an employer make a decision because of sex but it is nevertheless a lawful on if sex is a bona fide occupational qualification ("BFOQ") for the job. Successful BFOQ defenses are rare, however, as Johnson Controls found out a number of years ago when it unlawfully prohibited females (unless they were infertile) from working on an assembly line making car batteries. UAW v. Johnson Controls, 499 U.S. 187 (1991). One of the more commonly permitted BFOQs is to require guards who have contact with male prisoners to be male. Dothard v. Robinson, 433 U.S. 321 (1977). But Title VII limits the BFOQ defense to sex, religion and national origin. It is not available for race discrimination claims. 42 U.S.C. § 2000e-2(e).

Without any statutory authority to guide it, the Court had to hold that the employer's fear of a disparate impact lawsuit could only justify a decision when (1) the city would be actually liable for a disparate impact or (2) under some lesser threshold than actual liability. It chose the latter, adding to Title VII a standard the Court had adopted in constitutional challenges. Government decisions based upon race, the Court explained, "are constitutional only where there is a 'strong basis in evidence' that the remedial actions were necessary." Slip op. at 22 (citing Richmond v. J. A. Croson Co., 488 U. S. 469, 500 (1989)). There is much that could be said about the reasoning behind this part of the Court's decision – I won't go into it here.

Under the Court's adopted standard, caving to political pressure is not a defense to a Title VII lawsuit. Carried to its logical conclusion, the decision means that an employer (public or private) cannot reject results derived from validly established criteria simply because the results show a statistically significant disparity. The Court explained: "The problem for [the City] is that a prima facie case of disparate-impact liability—essentially, a threshold showing of a significant statistical disparity, Connecticut v. Teal, 457 U. S. 440, 446 (1982), and nothing more—is far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results." Slip op. at 28. What the City had to do was honestly analyze whether it had (or lacked) a valid defense to a disparate impact lawsuit. While the City argued it had a valid concern, the Court rejected these arguments as being "based on a few stray (and contradictory) statements in the record." (The Court's reasons for rejecting the City's arguments are interesting but I won't go into those because they are case specific and any employer who needs to determine whether it has a valid defense to a disparate impact claim should hire qualified counsel.)

From the standpoint of advising employers, what is most troubling about the Ricci is the lack of protection it gives employers who face the difficult choice of being sued no matter what the employer does. (The Court did say that because New Haven should not have thrown out the test results, it could not be liable when the results are implemented. Slip op. at 34. That is a small consolation to New Haven and no help at all to other employers). So, an employer that concludes it lacks a "strong basis in the evidence" for refusing to throw out a test cannot prevent the filing of a disparate impact lawsuit nor can it be assured it will win that lawsuit. Nothing in Ricci requires any court or a jury to defer to an employer's findings. The best (and perhaps only) thing an employer can do is to accurately and honestly assess the merits of the disparate impact claim.

To be sure, Ricci does not invalidate "an employer's affirmative efforts to ensure that all groups have a fair opportunity to apply for promotions and to participate in the process by which promotions will be made." Slip op. at 25. Nor does Ricci preclude so called "voluntary compliance efforts."

Many Tennessee employers will never have to be concerned about the impact of Ricci. At its foundation, the decision means that Title VII does not permit an unfounded fear of a lawsuit to justify an otherwise discriminatory decision. As I said, that is not a new concept. The decision could, however, invalidate any employment decision that is intended to alleviate a statistical imbalance within a hiring pool or other employee population "absent a strong basis in evidence of an impermissible disparate impact." So, any employer that develops a pool of applicants (or employees) and makes a decision (or avoids making a decision) based upon the perceived statistical impact of the decision should consult with counsel before taking any action.

Preparing for Fair Pay Legislation - Part 5

Compensation discrimination claims are no different than any other employment decision. The problem is that this is a doubled-edge sword. An employer need not treat a compensation decision any differently than it treats any other employment decision – conversely, however, an employer that does not treat compensation decisions with the care it treats other employment decisions is needlessly exposing itself to liability.

No federal or Tennessee law imposes any obligation on an employer other than the obligation to not discriminate against an employee because of the employee’s race, sex, national origin, religion, creed, age or disability. So, the very term "fair pay" is misleading. Fair pay isn't required (nor it is an absolute defense), what is required is non-discrimination.

The fundamental complication that compensation discrimination claims raise – a concern not present in any other aspect of the employment relationship – is caused by the sheer number of compensation decisions made each year. Most employers make compensation decisions at least annually with respect to almost every employee. By comparison, some employers are fortunate enough to make only an “occasional” (comparatively speaking) termination or promotion decision.

Think of it this way. How many employees do you know who believe they deserve to earn a higher salary? Now, how many employees do you know who, in your mind, are overpaid? These are the number of potential compensation discrimination claims you could, in theory, face on an annual basis.

When we talk in terms of “compensation discrimination” most employers think about the Equal Pay Act (EPA), 29 U.S.C. § 206(d). This statute, incorporated into the Fair Labor Standards Act, was passed in 1963, a year before Congress passed the Civil Rights Act that includes Title VII, 42 U.S.C. § 2000e-2.

In the decades since these statutes were passed, courts have continued to dispute the interplay between Title VII and the EPA. E.g., Korte v. Diemer, 909 F.2d 954, 957 (6th Cir. 1990) (jury verdict on EPA claim required finding for plaintiff on Title VII claim); contra Fallon v. State of Illinois, 882 F.2d 1206, 1213-18 (7th Cir. 1989) (requiring employee to establish discriminatory intent through the traditional Title VII allocation of proof even if the employee could prove an EPA claim). Some courts (including the Sixth Circuit) generally treat the two statutes as being essentially identical. Other courts have recognized that there are important differences between the two statutes but it is still not clear how these differences will affect employers.

The most notable distinction between the EPA and Title VII is that the EPA only prohibits sex-based discrimination while Title VII prohibits discrimination because of race, sex, religion or national origin. Of course, the prohibitions in the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 636, and the Americans with Disabilities Act (ADA), 42 U.S.C. § 12101, would also cover discriminatory compensation claims under their respective prohibitions.

The second important distinction is in how the statutes allocate who has to prove whether an employee’s pay is or is not discriminatory. An employee in an EPA case must establish that the employee received lower wages than paid to the opposite sex for equal work on jobs requiring substantially equal skill, effort, and responsibility. See Buntin v. Breathitt Cty. Bd. of Educ., 134 F.3d 796, 799 (6th Cir. 1998) “Whether the work of two employees is substantially equal ‘must be resolved by an overall comparison of the work, not its individual segments.’”

If so, the employer must then prove that the differential is caused by: (1) A seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (3) a differential based on a factor other than sex.

As mentioned previously, the last defense (any other factor other than sex) has generated considerable controversy among the courts and is the current target of a proposed amendment ( a prior post discussed one of the principal effects of HR 11/12 and S.182). The Sixth Circuit adheres to the proposition that the fourth defense “does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason.” Beck-Wilson v. Principi, 441 F.3d 353, 365 (6th Cir. 2006). While some courts also impose this requirement, other courts do not. See Wernsing v. Ill. Dept. of Human Servs., 427 F.3d 466 (7th Cir. 2005).

In contrast, under Title VII and all other federal statutes, the employee must prove either (1) that the employer’s illegal motive was the reason for the discriminatory compensation (the traditional “disparate treatment” method) or (2) that a neutral policy had the result of causing discriminatory compensation and that the policy was cannot be justified by a legitimate business reason (the traditional “disparate impact” method).

Under federal law, a disparate impact is found only after the employee has proven a neutral practice causes a disparity between classes of employees that is not justified by legitimate business necessity. Bacon v. Honda of America Mfg., Inc., 370 F.3d 565, 576 (6th Cir. 2004). Once a disparity has been shown to exist, a violation may be proven with evidence that an “alternative employment practice” would have eliminated or resulted in less of a disparity. Compare 42 U.S.C. § 2000e-2(a)(1) (disparate treatment) with 42 U.S.C. § 2000e-2(k) (disparate impact).

This blog is necessarily general. For more specific guidance, employers and their counsel should consult the two sources from the EEOC and the Office of Federal Contract Compliance Programs (or “OFCCP”) have each published guidelines addressing compensation discrimination. The EEOC’s “compliance manual” and the OFCCP’s “interpretive standards.” Each agency states how it will analyze compensation discrimination charges. And while not everything the agencies say on the subject is entirely accurate, it is always helpful to know the agencies' position(s).

Future posts, interspersed around other issues, will address the ways employers can maximize their chances of prevailing in compensation discrimination litigation.