Court Rejects FMLA Claim By Employee Who Tested Positive For Alcohol

When the plaintiff in this case was first hired by Home Depot in November 2001, she received a copy of Home Depot’s Code of Conduct, which listed “Major Work Rule Violations” that could lead to termination. One of these violations was having detectable levels of alcohol as determined by a blood alcohol test.

The plaintiff worked for Home Depot for almost five years without incident. According to the plaintiff, on September 15, 2006, she spoke with the store manager about the fact that she had an alcohol problem and needed assistance through Home Depot’s Employee Assistance Program (EAP). At this point, the plaintiff’s alcohol problem had not yet affected her work. In accordance with Home Depot’s policy, the plaintiff was put on paid administrative leave and was notified that she could return to work once she had received a treatment plan, obtained return-to-work authorization and passed a return-to-work drug and alcohol test. On September 23, the plaintiff signed Home Depot’s Employee Assistance Agreement, which enrolled her into Home Depot’s assistance program. The agreement stated in part that she would “be subject to periodic drug and/or alcohol testing” during the remainder of her employment at Home Depot whether the company had reasonable suspicion or not to believe drug or alcohol abuse occurred at work or had affected her work performance and that if she refused to take a required drug or alcohol test or failed a drug or alcohol test at any time during the course of her employment, she would be “immediately terminated.”

After a one month leave of absence with pay, the plaintiff passed a drug and alcohol test and obtained authorization to return to work. Soon thereafter, the plaintiff was pulled over by police and arrested for driving under the influence of alcohol. Although the plaintiff was scheduled to work that day, she called her store and took a personal leave day without penalty. After the DUI was reported in the local newspaper, the plaintiff’s case manager at Home Depot was informed of the arrest. He apparently attempted unsuccessfully to contact the plaintiff by telephone to notify her that the DUI arrest put her in noncompliance with the terms of the Employee Assistance Agreement. On December 6, 2006, he sent the plaintiff a letter informing her that she had until December 15 to schedule an appointment at an alcohol treatment facility for an evaluation, as required to restore her compliance with the agreement. He then spoke with the plaintiff on December 7 and gave her until December 18 to schedule her evaluation.

On December 8, the plaintiff asked her store manager for help rearranging her work schedule so that she could attend Alcoholics Anonymous (AA) meetings. The store manager asked the plaintiff for documentation from her doctor and for more information regarding her AA meeting schedule. A few days later, the plaintiff gave her store manager her AA meeting schedule and a note from her primary-care physician; the note stated that the plaintiff was under the doctor’s care but it did not say anything regarding whether the plaintiff required medical leave.

The plaintiff subsequently informed Home Depot that she had scheduled an appointment for her EAP-mandated evaluation in January. However, on December 23, the plaintiff reported for her scheduled work shift and an assistant store manager told the store manager that the plaintiff smelled of alcohol. The store manager observed that the plaintiff was less responsive to conversation than normal, that she smelled of alcohol, and that she slurred her words. The store manager called Home Depot’s human resources manager, who agreed that the plaintiff should have a blood alcohol test. She was driven to a testing facility and had her blood drawn; a few days later, the laboratory reported that her blood had tested positive for alcohol. Home Depot then decided to terminate the plaintiff for violating its substance abuse policy, and scheduled a meeting with her for January 2 to tell her.

Following the December 23 blood alcohol test, the plaintiff grew increasingly anxious that she would lose her job if the test result was positive and apparently began drinking more. On January 1, 2007, the plaintiff checked herself into the hospital. The next day, she was discharged from the hospital with instructions to start an outpatient alcohol-rehabilitation program. Because of her hospital stay, the plaintiff did not attend her scheduled January 2 meeting at Home Depot. On January 10, Home Depot mailed a letter to the plaintiff, which she received on January 11, that informed her that based on her violation of Home Depot’s substance abuse policy, her employment was terminated as of December 23, 2006 – the day she came to work under the influence of alcohol.

The plaintiff brought suit against Home Depot, claiming that it had violated the Family and Medical Leave Act (FMLA). The district court granted Home Depot’s motion for summary judgment, and the plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit.

In its decision, the Seventh Circuit observed that, to succeed on her FMLA claim, the plaintiff had to demonstrate, among other things, that she was entitled to FMLA leave – which required, among other things, that the plaintiff demonstrate that she was afflicted with a “serious health condition” and that condition rendered her unable to perform the functions of her job.

The circuit court observed that substance abuse could qualify as a serious health condition, if treatment involved “inpatient care” or “continuing treatment by a health care provider.” In this case, however, at no time before she was terminated did the plaintiff go into inpatient care for her condition – her decision to check herself into the hospital on January 1 occurred after she had violated Home Depot’s substance abuse policy. In addition, the circuit court found, the plaintiff could not establish that her substance abuse was a condition requiring “continuing treatment by a health care provider,” which must involve a period of incapacity of more than three consecutive calendar days; the Seventh Circuit pointed out that the plaintiff had testified in her deposition that her alcohol use neither incapacitated her nor affected her work performance. Finally, the court found no evidence the plaintiff’s condition rendered her unable to perform the functions of her job.

The plaintiff therefore could not establish that she was entitled to FMLA leave, and the circuit court affirmed the district court’s decision in favor of Home Depot. [Ames v. Home Depot U.S.A., Inc., 2011 U.S. App. Lexis 250 (7th Cir. Jan. 6, 2011).]

Voluntary Setoff Against Wages For Damages Caused While Driving Employer’s Trucks Found To Violate Massachusetts Law

ABC Disposal Service, Inc., is a Massachusetts company that provides curbside collection and disposal of solid waste and recycling for participating households and small businesses. Because ABC employees driving company trucks on occasion caused damage to the trucks and to personal property of third parties, ABC established a policy whereby drivers determined to be at fault were given an option of either accepting disciplinary action or entering into an agreement to set off the damages against their wages. The determination of fault was made after an ABC safety officer reviewed records related to the incident and reported to the safety manager. If the safety manager, in consultation with ABC management, determined the incident was a “preventable accident,” the driver would be offered a choice of making payment for the damages or accepting discipline. The findings of the safety manager as to whether an accident was preventable and the amount of damages were final and not subject to any appeal process. A driver determined by ABC to be at fault could enter into a written agreement with ABC for the payment of the cost of the damage by way of a setoff against wages due to the employee. Some drivers chose to accept disciplinary action instead of paying damages. Of the employees who agreed to permit a setoff by ABC, the average setoff was $15 to $30 per week. In no instance did a driver’s pay, net of setoffs for driver fault, fall below minimum wage standards. Between 2003 and 2006, ABC’s costs attributable to damage done to vehicles and personal property was reduced by 78 percent, which ABC attributed to its implementation of this policy.

The fair labor standards division of the Massachusetts Attorney General’s office conducted an audit of the deductions made by ABC from June 2004 through March 2006. The audit revealed that ABC deducted $21,487.96 from the wages of 27 employees during this time period in accordance with the ABC policy. In February 2007, the Attorney General issued a civil citation against ABC for an intentional violation of the provisions of the Massachusetts Wage Act that require prompt and full payment of wages and that prohibit any “special contract” altering that requirement; the citation required payment of $21,487.96 in restitution and assessed a $9,410 civil penalty against ABC. The Attorney General interpreted the “special contract” language in the Wage Act as generally prohibiting an employer from deducting, or withholding payment of, any earned wages. She argued that this prohibition could not be overcome by an employee’s assent. In her view, regardless of an employee’s agreement, there could be no deduction of wages unless the employer could demonstrate, in relation to that employee, the existence of a valid attachment, assignment or setoff.

The dispute reached the Supreme Judicial Court of Massachusetts, which ruled in favor of the Attorney General, finding her interpretation of the Wage Act provision “to be a reasonable one” and consistent with the statute’s purpose of protecting employees and their right to wages. Moreover, the court continued, even if the arrangement was voluntary and assented to, it still represented a “special contract” forbidden by the Wage Act.

The court rejected ABC’s argument that it had not violated the Massachusetts law because all wages were properly credited to each affected employee and the deductions conferred an “immediate benefit” in the form of reduced liability for the employee. The court explained that the affected employees had in fact “received lower pay under ABC’s policy, directly as a consequence of the policy’s provisions” that applied only to certain employees and only in certain circumstances. This arrangement fit squarely within the concept of a special contract, the court found, regardless of whether the affected employees received any “immediate benefit” from it.

Moreover, the court also observed that ABC had not shown that any of the employees were legally liable for damages or that, with respect to third parties, ABC was legally required to make payments on an employee’s behalf. ABC’s policy, the court found, provided for a setoff against ABC’s employees’ wages “based on an entirely unilateral and untested judgment by the employer of fault and amount of damage.” This procedure did “not come close to providing an employee the protections granted a defendant in a formal negligence action,” the court concluded. [Camara v. Attorney General, 458 Mass. 756 (2011).]

EEOC’s “Conciliation Agreement” With Employer Deemed Insufficient To Entitle Employee To Attorney’s Fees As “Prevailing Party”

The plaintiff in this case worked for JetBlue Airways as an in-flight supervisor. In 2005, the plaintiff underwent back surgery and took administrative leave. She alleged that in or around July 2006, JetBlue terminated her pursuant to a policy of administratively terminating employees out on disability leave for at least 52 weeks over a two year period. The plaintiff filed a Charge of Discrimination with the Equal Employment Opportunity Commission on behalf of herself and other similarly situated JetBlue employees, alleging that JetBlue’s alleged policy violated the Americans with Disabilities Act. The EEOC conducted an investigation and issued a determination, surmising that there was reasonable cause to believe that JetBlue had discriminated against the plaintiff – a finding that JetBlue disputed. Subsequently, the EEOC reached a conciliation agreement with JetBlue that addressed its leave policy, although the parties disputed whether the provisions agreed upon in the conciliation agreement differed from JetBlue’s actual practice and policy. The plaintiff and JetBlue were unable to agree on individual relief and she brought a lawsuit against JetBlue in federal court. In her lawsuit, the plaintiff moved for an award of interim attorney’s fees and costs, arguing that because JetBlue and the EEOC entered into a conciliation agreement that allegedly modified JetBlue’s policy, she was a “prevailing party” as contemplated by the ADA and was entitled to have JetBlue pay the attorney’s fees she had incurred in her proceedings before the EEOC.

In denying plaintiff’s motion, the court explained that the ADA permits courts to grant reasonable attorney’s fees and costs to a prevailing party in proceedings before state and federal administrative bodies, such as the EEOC. The court then examined whether the plaintiff was a prevailing party, noting that to be eligible for attorney’s fees, a plaintiff should receive at least some relief on the merits of his or her claim before the plaintiff could be said to prevail. At a minimum, the court continued, to be considered a prevailing party, a plaintiff must be able to point to a resolution of the dispute that changed the legal relationship between the plaintiff and the defendant. The court said that enforceable judgments on the merits and court-ordered consent decrees created the material alteration of the legal relationship of the parties necessary to permit an award of attorney’s fees. Private settlements, however, did not amount to a “judicially sanctioned change in the legal relationship of the parties,” the court pointed out.

It then noted that it had not found a case addressing whether an employee in an EEOC proceeding was a prevailing party if the EEOC entered into a conciliation agreement with the offending employer. The court ruled that the conciliation agreement was not a court-ordered decree that provided the necessary judicial or administrative imprimatur justifying an award of interim attorney’s fees.  The EEOC was a party to the conciliation agreement but there was no formal hearing or administrative order resulting from the agreement, the court continued. The court noted that the plaintiff would be entitled to attorney’s fees for work done because of a breach of the conciliation agreement, but not for work done negotiating the agreement, if she had brought an action to enforce the terms of the conciliation agreement. [Morse v. JetBlue Airways Corp., 2010 U.S. Dist. Lexis 134385 (E.D.N.Y. Dec. 20, 2010).]

Employee Who Became A Quadriplegic But Did Not Suffer Severance Of Limbs Is Not Entitled To AD&D Benefits

The plaintiff in this case began repairing casino slot machines for the Boyd Group in 1987, later earning a promotion to a managerial position. After his promotion, he enrolled in the Boyd Group’s benefits program for managers, including an accidental death and dismemberment insurance policy (the AD&D policy).

In 1992, a drunk person shot the plaintiff in the throat at a hunting lodge in Utah. The shot severed the plaintiff’s spinal cord at the C6 level, leaving him a permanent quadriplegic. The plaintiff claimed that he was eligible for benefits under the AD&D policy. After he brought suit, the district court ruled against him, concluding he was ineligible because his hands and feet had not been physically severed from his body. The plaintiff appealed.

In its decision, the U.S. Court of Appeals for the Ninth Circuit explained that the relevant portion of the AD&D policy provided for a lump sum payment in the event an insured lost both hands or both feet. The policy defined “loss” as: “For hands or feet, ‘loss’ means dismemberment by severance at or above the wrist or ankle joint.”

The plaintiff argued that although his hands and feet remained physically attached to his body, he had lost them from a functional standpoint due to the “severance” of his spinal cord. The Ninth Circuit decided that the term “dismemberment by severance” in an ERISA plan required “physical removal of the limbs.”

In the circuit court’s view, the word “dismemberment” implied actual separation; the noun derived from the transitive verb “dismember,” meaning “to cut or tear off or disjoin the limbs, members, or part of” or “to tear into pieces: take apart roughly or divide (a whole) into sections or separate units.” “Dismemberment” as a noun, therefore, referred to “the act of dismembering or the state of being dismembered: division into separate parts or units.” Furthermore, “severance” derived from “sever,” meaning “to put asunder,” “to join or disunite from one another,” “to keep separate or apart,” “to divide or break up into parts,” “to cut in two: sunder, cleave[.]” Thus, the Ninth Circuit continued, “dismemberment by severance” had to mean some actual, physical separation; the use of the two words together essentially expressing the same idea, the circuit court said, was “unambiguous draftsmanship by an abundantly cautious lawyer.”

The circuit court concluded that reading the AD&D policy’s language in its “ordinary and popular sense,” the terms “dismemberment by severance” were unambiguous and required “actual, physical separation.” Because the plaintiff had not suffered the physical detachment of his limbs, the insurer did not owe him benefits under the AD&D policy, the Ninth Circuit concluded. [Fier v. Unum Life Ins. Co. of America, 2011 U.S. App. Lexis 292 (9^th Cir. Jan. 4, 2011).]

Pharmacist’s Disability Policy May Be Rescinded For Fraudulent Misrepresentations In His Policy Application

A licensed pharmacist who was the sole proprietor of two pharmacies in North Philadelphia sought treatment in September 2002 from a licensed clinical social worker, reporting to her that he had been abusing opiates including Percocet, Oxycontin, Vicodin, Lorcet, Xanax and Soma. The pharmacist indicated he had been taking these unprescribed narcotics from his pharmacy’s supply for about three months.

The social worker opined that the pharmacist had a “substance abuse disorder.” The pharmacist began individual therapy sessions with her that continued through February 8, 2006. The pharmacist also began group sessions in May 2003; a mandatory requirement for admittance into the group sessions (conducted by the social worker), was that the patient had some sort of substance problem.

In January 2005, the pharmacist applied for a disability insurance policy from Berkshire Life Insurance Company of America. The insurer’s agent filled out the disability insurance application based on information provided by the pharmacist. The pharmacist responded “no” to the following three questions asked by the agent: (1) “Have you ever used stimulants, hallucinogens, narcotics or any other controlled substance?”; (2) “Have you ever had or been advised to have counseling or treatment for alcohol or drug use?”; and (3) “In the last ten years, have you had, been treated for or received consultation or counseling for anxiety, depression, nervousness, stress, mental or nervous disorder, or other emotional disorder?”

The pharmacist alleged that he did not disclose that he had ever used controlled substances, obtained counseling for drug use or received treatment for emotional disorders because his drug abuse and treatment were not on his mind as he “breezed through” the questions with the agent. The pharmacist explained that his treatment with the social worker was a small matter that occurred years prior to his applying for insurance and had been addressed in just a few weeks. Additionally, he claimed that he was embarrassed about his treatment and wanted to keep it confidential because of the stigma in society associated with non-prescription drug abuse.

After the agent completed the application, he mailed it to the pharmacist for his signature. On January 18, 2005, the pharmacist signed the application, which read: “Those parties who sign below, agree that . . . All of the statements that are part of the application . . . are correctly recorded, and are complete and true to the best of the knowledge and belief of those persons who made them.”

Berkshire issued the disability insurance policy on February 5, 2005, which contained an “Incontestable” provision that stated that: “This policy will be incontestable as to the statements, except fraudulent statements, contained in the application after it has been in force for a period of two years during your lifetime.”

In August 2007, more than two years after the policy was issued, the pharmacist sought benefits under the disability insurance policy. While Berkshire was reviewing his claim, the pharmacist sued for benefits under the policy and Berkshire counterclaimed to rescind the policy.

Berkshire moved for summary judgment, arguing that it could rescind the policy based on the fraudulent misrepresentations the pharmacist had made in his application. Berkshire contended that the two year incontestability provision in the disability policy was inapplicable as there was an exception to the provision where fraudulent misrepresentations had been made.

The pharmacist responded that a heightened standard of scrutiny should be applied to his alleged fraudulent misrepresentations because Berkshire was seeking to rescind the disability insurance policy outside of the contestability period. He argued that Berkshire could not establish such fraud and therefore, Berkshire was not entitled to rescission as a matter of law.

The court found that the contestable period was not limited to two years where there were fraudulent statements, and decided that there was no support for the heightened standard of proof suggested by the pharmacist. It then considered whether Berkshire had established that the pharmacist knowingly had made fraudulent, material statements in the application.

In the court’s view, the pharmacist had knowingly provided fraudulent answers. The court pointed out the following undisputed facts:  The pharmacist had 57 individual treatment sessions for drug or emotional issues between September 2002 and the day he signed the disability application on January 18, 2005.  He had an individual session on January 12, 2005 – six days prior to signing the disability application and health form. Further, in January 2005, at the very time when the pharmacist responded “no” to the question of whether he had ever had treatment or counseling for any emotional issues, including stress, he was receiving ongoing treatment for a number of issues, including stress. In addition, the pharmacist had 78 group sessions between May 2003 and January 12, 2005. He had a group session on January 12, February 9, and February 16, 2005. Based on this, the court found that no reasonable fact-finder could find that the pharmacist did not know that he had provided fraudulent statements.

The court also ruled that the misrepresentations were material to the risk being insured. The court pointed out that the underwriting guidelines used by Berkshire stated that a policy would not be issued to anyone who abused controlled substances within five years of the date of the application. Therefore, the court granted Berkshire’s motion for summary judgment, entitling it to rescind the policy. [Sadel v. Berkshire Life Ins. Co. of America, 2011 U.S. Dist. Lexis 8993 (E.D. Pa. Jan. 31, 2011).]

Claim Of Disability Discrimination Under New York’s Human Rights Law Found To Be A Benefits Deprivation Claim Preempted By ERISA

The plaintiff in this case alleged that he was an employee of the Long Island newspaper Newsday, that in January 2001 he had severely injured his back in an automobile accident unrelated to his employment, that he had to undergo spinal surgery, that he was unable to work for several months, and that he returned to work and was able to “resume[] his normal employment duties and activities” despite continuing pain in his back.

On August 9, 2004, the plaintiff had to undergo a second corrective spinal surgery, after which he went on short term medical leave from the date of the surgery until February 24, 2005. During this time, the plaintiff was entitled to receive his full salary pursuant to the terms of Newsday’s disability plan. Under the terms of the plan, if the plaintiff was deemed permanently disabled by the end of his short term medical leave, he would be eligible to receive long term disability benefits totaling $936 a week, plus additional benefits, for the rest of his life.

However, on or about September 2, 2004, approximately one month after the plaintiff’s short term medical leave had begun, Newsday informed him that he had been terminated. As explained in a letter from Newsday dated September 3, 2004, the plaintiff was fired based on his “participation in fraudulent circulation practices, [his] failure to be forthright with company attorneys during the investigation, and [his] violations of the company’s Code of Conduct.” The plaintiff, however, claimed that the allegations in the termination letter were untrue, wrongful . . . and made with the fraudulent intent of terminating his employment while on disability and terminating his disability benefits. The plaintiff stated that he was “absolutely truthful” with Newsday’s attorneys, that he had never engaged in wrongful conduct and that the “sole reason” Newsday terminated him while he was on disability was to prevent him from receiving short term disability benefits for 26 weeks and lifetime long term disability benefits.

In June 2005, the plaintiff filed a complaint against Newsday with the New York State Division of Human Rights. He later brought suit against Newsday in state court, asserting violations of the New York State Human Rights Law (NYSHRL) and various federal laws. Newsday removed the case to federal court arguing that the NYSHRL claim was preempted by ERISA because it was, in essence, a benefits deprivation claim. The plaintiff moved to remand the case to state court, countering that the allegations in his NYSHRL claim did not seek any type of federal relief and should not be found to be preempted by ERISA. The court denied plaintiff’s motion to remand the case to state court, finding that the plaintiff’s claim that his employment was terminated solely for the purpose of depriving him of disability benefits fell squarely within the scope of ERISA and was preempted.

The court reasoned that the plaintiff’s only allegations related to his claim that Newsday terminated his employment solely for the purpose of preventing him from receiving disability benefits. It added that although the plaintiff had labeled his claim as a disability discrimination claim arising under the NYSHRL, he had alleged no specific instances of discrimination that arose separate from his benefits termination claim, and, to the contrary, alleged that the “sole reason” Newsday had terminated him was to deprive him of his disability benefits. The court concluded that such a claim directly conflicted with an ERISA cause of action under the ERISA provision making it “unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.” [Schultz v. Tribune ND, Inc., 2010 U.S. Dist. Lexis 129581 (E.D.N.Y. Dec. 8, 2010).]

Reprinted with permission from the April 2011 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.