From the Courts

May 1, 2015 | Appeals | Insurance Coverage

Plaintiff’s Statements to Social Security Administration Doom His ADA Discrimination Claim, Tenth Circuit Rules

After the plaintiff in this case allegedly suffered a workplace injury, he sought and obtained Social Security disability benefits on the ground that he was unable to work. While the plaintiff was representing to the Social Security Administration that he was unable to work, however, he also was applying for and obtaining a job as an armed security guard with Knight Protective Service.

As part of the application process, Knight asked the plaintiff a number of questions about his physical condition. Each time, the plaintiff said, falsely, that he suffered no relevant disabilities.

After he was hired by Knight, one of the plaintiff’s supervisors noticed that the plaintiff seemed to be in pain. When the supervisor asked if he was alright, the plaintiff confided that he had undergone a number of neck and back surgeries and that he experienced recurring pain. The supervisor became concerned that the plaintiff was not fit to be an armed guard, that someone might grab his weapon, or that someone might take him hostage. The supervisor told the plaintiff that he could not return to work without passing a physical examination.

The plaintiff waited for Knight to schedule the exam but it did not do so. The plaintiff took that to mean that he had been terminated, and he sued Knight in federal district court for discriminating against him in violation of the Americans with Disabilities Act (ADA). The district court ruled against the plaintiff, and he appealed to the U.S. Court of Appeals for the Tenth Circuit.

The Tenth Circuit affirmed the district court’s decision. In its opinion, the circuit court explained that to make out a discrimination claim under the ADA, an employee must, among other things, show that he or she was “qualified, with or without reasonable accommodation, to perform the essential functions of the job.” It then ruled that the plaintiff had not met this standard.

The circuit court pointed out that, as the plaintiff had acknowledged in his written employment application with Knight, the essential functions of his job as an armed security guard required him to engage in frequent and prolonged walking, standing, and sitting; to react quickly to dangerous situations; to subdue violent individuals; and to lift heavy weights. The Tenth Circuit added, however, that in representations that the plaintiff had made to the Social Security Administration, he had conceded that, during the relevant period in question, he was in pain all the time, he could stand for only 20 minutes, and he could walk for just 10 or 15 minutes. The circuit court added that the plaintiff had told the Social Security Administration that sometimes his pain was so severe that he needed to stay at home and lie down. Moreover, the plaintiff was unable to lift more than 10 pounds.

Although the circuit court ruled against the plaintiff in this case, it said that a discrimination claim would not always be barred because an individual had applied for or had received Social Security benefits. When a plaintiff, however, made “seemingly inconsistent statements like those before us,” the plaintiff must offer a “sufficient explanation” for the apparent contradiction in order to be able to bring a discrimination claim under the ADA. The plaintiff in this case failed to do that, the circuit court concluded. [Myers v. Knight Protective Service, Inc., 774 F.3d 1246 (10th Cir. 2014).]

Employee Not Entitled to Disability Benefits When He Was Injured a Few Days After His Retirement

On October 4, 2010, the plaintiff in this case, who was the chief executive officer of LifePoint Hospitals, Inc., notified LifePoint in writing that he was resigning from the company effective November 3, 2010. On the date of his retirement, the plaintiff had accrued four weeks of paid time off (PTO), which LifePoint continued to pay through November 27, 2010.

On November 8, 2010, the plaintiff flew his private plane to Louisiana and, while deplaning, he fractured his back. The plaintiff subsequently was diagnosed with multiple myeloma. The plaintiff applied to LifePoint’s insurance carrier, Life Insurance Company of North America (LINA), for short term and long term disability benefits. LINA denied both claims on the ground that the plaintiff was not in “Active Service” at the time of his injury. As a result, according to LINA, the plaintiff was not eligible for benefits.

The plaintiff sued. The district court upheld the denial of benefits, concluding that, because the plaintiff had not been in “Active Service” when the injury had occurred, he was not eligible for benefits. The plaintiff appealed to the U.S. Court of Appeals for the Sixth Circuit.

The Sixth Circuit affirmed the district court’s decision. In its decision, the circuit court explained that, under the short term and long term disability plans, an employee was in “Active Service” and thereby eligible for benefits either:

  1. on a day that was one of LifePoint’s scheduled work days if the employee was performing his or her regular occupation for LifePoint on a full time basis at one of LifePoint’s usual places of business or at some location to which LifePoint’s business required the employee to travel, or
  2. if the day was a scheduled holiday or vacation day and the employee had performed his or her regular occupation on the preceding scheduled work day.
  3. As the circuit court pointed out, the plaintiff did not meet the first condition because he had not been “performing his … regular occupation for [LifePoint] on a full time basis” at the date of the onset of his alleged disability.
  4. The circuit court then ruled that LINA’s conclusion that the plaintiff also had not met the second condition was neither arbitrary nor capricious because LINA reasonably could have determined that the plaintiff had not been on a “vacation day” when he had been injured but, rather, that he had retired.  The Sixth Circuit noted that because the plans did not define the term “vacation,” LINA had to interpret that term according to its ordinary meaning. It said that LINA could have reasoned that a “vacation” must be from something. In the context of an employer’s disability plan, the circuit court continued, it was reasonable – and not arbitrary or capricious – to read “vacation” to mean vacation from the plaintiff’s “job responsibilities.” The plaintiff in this case could not “vacation” from his job responsibilities because, having retired, he had no job responsibilities whatsoever, the circuit court observed. It then ruled that LINA could reasonably have concluded that the plaintiff had not been on “vacation” when the plaintiff said that his injury had occurred, meaning that he would not have been in “Active Service” for purposes of receiving benefits under the plans.
  5. In conclusion, the circuit court also rejected the plaintiff’s argument that he was entitled to receive benefits because, at the time of his injury, LifePoint still was deducting insurance premiums from his payouts. According to the circuit court, an otherwise ineligible employee did “not somehow become eligible for coverage simply because he continued to pay premiums.” Finally, the Sixth Circuit was not persuaded by the plaintiff’s contention that his unused vacation time at the end of his employment relationship with LifePoint had extended the period of his employment for purposes of benefit eligibility or calculation, finding no support for that proposition. [Sanford v. Life Ins. Co. of North America, 2015 U.S. App. Lexis 2562 (6th Cir. Feb. 13, 2015).]

Court Dismisses Plaintiff’s ADA Claim Due to His Failure to Provide Medical Testimony Supporting His Disability Claim

The plaintiff in this case, who had been hired as a senior global marketing manager in Covidien LP’s Respiratory and Monitoring Solutions Global Business Unit, alleged in his lawsuit against Covidien that it had fired him in violation of the Americans with Disabilities Act (ADA) after he had been diagnosed with major depression and anxiety and had filed for short term disability benefits.

Covidien moved for summary judgment, contending that it had provided the plaintiff with a coaching memorandum (Action Plan) that outlined alleged performance deficiencies and set expectations and goals; that it had placed the plaintiff on a performance improvement plan (PIP) based on his alleged continued performance deficiencies after the Action Plan; and that it had terminated him after he had failed to meet the expectations and terms in the PIP.

The court granted Covidien’s motion for summary judgment.

In its decision, the court explained that to establish that he had a disability for purposes of the ADA, the plaintiff had to have a recognized impairment, identify one or more appropriate major life activities, and show that the impairment substantially limited one or more of those activities. The court acknowledged that the plaintiff had presented evidence that he had been diagnosed with major depression and anxiety. It also noted that the plaintiff had testified that he had difficulties with “high-level thinking” and short-term memory, and that he was having anxiety attacks that produced severe diarrhea or vomiting. Because “thinking” was a major life activity, the court found that the plaintiff had sufficiently identified an activity that might be impaired under the ADA.

The court determined, however, that the plaintiff had not presented any medical evidence that his disability had caused any such limitations but that, instead, the plaintiff had relied solely on his own testimony. Because the plaintiff had not cited any admissible evidence supporting a finding that his impairment substantially limited one or more major life activities, the court concluded that he had not established that he had a disability under the ADA and that he had failed to establish a prima facie case of disability discrimination. [Enlow v. Covidien LP, 2014 U.S. Dist. Lexis 178202 (D. Colo. Dec. 30, 2014).]

“Collective Allegations” Found Sufficient to State Claim Against Individual Defendant for Personal Liability Under the FLSA

In this case, the plaintiff, who was employed as a security guard by MWR Investigations, Inc., alleged that he routinely had worked more than 40 hours per week but that he had not received any overtime pay, in violation of the federal Fair Labor Standards Act (FLSA) of 1938 and the state of Maryland’s version of that law, the Maryland Wage and Hour Law (MWHL). The plaintiff sued both MWR and an individual whom the plaintiff’s complaint identified as “manag[ing], own[ing], and operat[ing]” MWR.

The individual defendant moved to dismiss the plaintiff’s claims against him on the ground that the plaintiff had not asserted sufficient factual allegations that could create a plausible inference that he could be considered the plaintiff’s “employer” under either the FLSA or the MWHL.

The court denied the individual defendant’s motion to dismiss.

In its decision, the court explained that the FLSA generally required that employers provide their employees with overtime compensation for all hours worked in excess of a 40 hour workweek. The court noted that the FLSA defined “employer” in this context to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” The court said that to decide whether a particular individual was an “employer” under this definition, “the economic realities of the relationship between the employee and the putative employer” had to be examined.  The court pointed out that there were a number of factors that courts typically examined when considering the economic realities test, including whether the putative employer was someone who:

  • had the authority to hire and fire employees;
  • supervised and controlled work schedules or employment conditions;
  • determined the rate and method of payment; and
  • maintained employment records.

The court observed that, in addition to alleging that the individual defendant managed, owned, and operated MWR, the plaintiff included in his complaint several “collective allegations” against both the individual defendant and MWR. In these collective allegations, the plaintiff alleged that:

  • “Defendants made all decisions relating to Plaintiff’s rate and method of pay”;
  • “Defendants routinely scheduled Plaintiff … for hours exceeding forty (40) hours within a single workweek”;
  • “Defendants, acting without good faith, withheld wages owed to Plaintiff”; and,
  • “Defendants willfully and intentionally failed to compensate Plaintiff for the overtime wages owed to him.”

The court observed that the individual defendant had not supported his motion to dismiss with any evidence disclaiming his control over the plaintiff’s hours and wages.  The court then concluded that the plaintiff’s collective allegations were sufficient to state a claim against the individual defendant for personal liability under the FLSA and under the MWHL, which also used the economic realities test to assess an individual’s liability as an “employer” for alleged overtime violations. [Lackey v. MWR Investigations, Inc., 2015 U.S. Dist. Lexis 1971 (D. Md. Jan. 8, 2015).]

Employer that Knew or Had Reason to Know that Its Employee Underreported His Hours May Not Escape FLSA Liability by Blaming the Employee

In this case, the plaintiff was an employee of TitleMax of Georgia, Inc., who alleged that he had worked overtime hours for which he had not been paid because his time records were not accurate. The plaintiff contended that there were two reasons his time records did not reflect the actual time he had worked.

First, the plaintiff alleged that his supervisor had told him that TitleMax did not pay overtime and, as a result, he underreported his own hours by working off the clock.

According to the plaintiff, he would, “for the most part,” clock in and out when his supervisor told him to, even though that sometimes did not match up with the hours he actually worked. For example, on some Saturdays, he said, he would work from 8:30 a.m. to 5:30 p.m., but his supervisor would tell him, “your hours are … high, so make sure that you clock in at 9:00 and clock out at 4:00.” The plaintiff said that he would follow that instruction, logging only seven hours for the day despite working nine.

Second, the plaintiff asserted that his supervisor sometimes changed his time records to decrease the number of hours he reported. For example, according to the plaintiff, on September 9, 2011, he clocked in at 10:57 a.m. and clocked out at 7:17 p.m., without recording any lunch break. He said that his supervisor later changed his clock-out time to 7:00 p.m. and also added a lunch break from 1:00 p.m. to 2:00 p.m. The plaintiff contended that, on the next day, his supervisor also edited his clock-out time, changing it from 8:03 p.m. to 7:03 p.m.

After the plaintiff resigned from TitleMax, he filed suit against the company. He claimed that TitleMax had violated the Fair Labor Standards Act of 1938 (FLSA) by failing to pay overtime as required by the federal law.

For its part, TitleMax argued that the plaintiff’s conduct had violated its policies. It said that when the plaintiff had worked off the clock, he had violated a policy requiring accurate reporting of hours. The company also asserted that, by not objecting to his supervisor changing his time records and by not reporting inaccuracies in his records, the plaintiff had violated a policy requiring regular verification of time. Finally, the company contended that by not reporting any of this, the plaintiff had violated a policy instructing employees who had a problem at work to notify a supervisor or, if the supervisor was part of the problem, to inform a higher-level manager or call an anonymous employee hotline. TitleMax asserted that the plaintiff had been aware of these company policies.

TitleMax moved for summary judgment. It argued that the plaintiff was responsible for, and equitably barred from seeking to recover, any unpaid overtime because he had violated its policies. The district court agreed with TitleMax and granted summary judgment in its favor. The dispute reached the U.S. Court of Appeals for the Eleventh Circuit. The circuit court reversed the district court.

In its decision, the Eleventh Circuit ruled that if TitleMax “knew or had reason to know that its employee underreported his hours,” it could not escape liability under the FLSA by arguing that he was responsible for his unpaid overtime. To hold otherwise, the circuit court stated, would allow an employer to “wield its superior bargaining power to pressure or even compel its employees” to underreport their work hours.

The circuit court concluded by stating, “Where, as here, an employer knew or had reason to know that its employee underreported his hours, it cannot invoke equitable defenses based on that underreporting to bar the employee’s FLSA claim.” [Bailey v. TitleMax of Georgia, Inc., 776 F.3d 797 (11th Cir. 2015).]

Reprinted with permission from the May 2015 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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