Employee Benefits Issues And The Americans With Disabilities Act by Lissa J. Paris

Lissa J. Paris

is a partner with Murtha Cullina LLP in Hartford, Connecticut and chairs the firm’s Labor and Employment Group. Since joining Murtha Cullina LLP, she has litigated employment and employee benefit cases. Ms. Paris was involved in the Second Circuit cases establishing standards in age discrimination claims, bankruptcy pension issues, employee pension notification, and ERISA attorneys’ fees. She has lectured extensively on employment discrimination and ERISA issues in the workplace. An active member of the American Bar Association’s Labor and Employment section, she is an editor of and contributor to the ABA publication, “Employee Benefits Law.” Ms. Paris serves as a special master in Connecticut’s federal courts. She is a fellow of the American Bar Foundation and the American College of Employee Benefits Counsel.

Although plan administrators have wide discretion in design and administration, the plans should never run afoul of the ADA.

Generally, ERISA does not provide a source of law for disability discrimination claims. The statute permits plan sponsors (generally employers) to design welfare plans with whatever limitations they wish and to amend them freely so long as they follow the plan’s formal procedures. Lockheed v. Spink, 517 U.S. 882 (1996); Inter-Modal Rail Employees Ass’n v. Atchinson, 520 U.S. 510, 515 (1997); Hughes Aircraft v. Jacobson, 525 U.S. 432 (1999). Only the most egregious behavior, when the plan sponsor has taken on the role of a fiduciary, leads to claims of fiduciary breach. Varity v. Howe, 516 U.S. 489 (1996). Thus, in McGann v. H&H Music Co., The Practical Lawyer | 37

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946 F.2d 401 (5th Cir. 1991), cert. denied, 506 U.S. 981 (1992), the defendant amended its coverage for AIDS-related claims from a $1 million lifetime cap to $5,000 after plaintiff told defendant that the plaintiff had contracted AIDS. In response to the plaintiff ’s claim for discrimination under ERISA section 510, the court held that since the benefit action was not directed only at the plaintiff, and that he had no vested welfare rights, the defendant remained free to amend the plan at any time. Consequently, the arena for challenging welfare plan coverage has moved to the Americans with Disabilities Act. POTENTIAL DEFENDANTS UNDER THE ADA • The ADA prohibits discrimination by covered entities, including private employers, against qualified individuals with a disability. Title I covers private employers, Title II public employers, and Title III public accommodations. Specifically, it provides that no covered employer “shall discriminate against a qualified individual with a disability because of the disability of such individual in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions and privileges of employment.” 42 U.S.C. §12112(a); see also §12111(2) (“[t]he term ‘covered entity’ means an employer, employment agency, labor organization, or joint labor-management committee”). At least one circuit has held that the definition does not include insurers. In Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104 (9th Cir. 2000), the court ruled that UNUM Life Insurance Company of America which was the administrator of the employer’s group long-term disability plan was not a “covered entity” under Title I of the ADA. Federal Government: No Note that under 42 U.S.C. §12111(5)(B)(i), the term “employer” for ADA purposes does not include the “United States [or] a corporation wholly

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owned by the government of the United States.” The court in Whaley v. United States, 82 F. Supp. 2d 1060 (D. Neb. 2000), held that suits “against a federal agency or against an officer of a federal agency in his or her official capacity constitutes a suit against the United States, and is not permitted under the ADA.” Id. at 1061. Consequently, the CIA and its director were not “covered entities” under Title I of the ADA. See also Baldwin v. United States Army, 223 F.3d 100 (2d Cir. 2000) (uniformed members of the armed forces are barred from bringing claims under the ADA). The ADA does not explicitly include states or state agencies in its definition of employer, but does provide, in 42 U.S.C. §12202, that states are not immune under the Eleventh Amendment to the U.S. Constitution from actions in either state or federal courts for violations of the ADA. Following the Supreme Court’s decision in Kimel v. Florida Bd. of Regents, 528 U.S. 62 (2000), which held that Congress lacked authority to abrogate a state’s Eleventh Amendment immunity under the ADEA, a similar dispute arose as to whether, in extending the ADA to the states, Congress had properly abrogated, pursuant to section 5 of the Fourteenth Amendment, the states’ Eleventh Amendment immunity. States: No Resolving a split among the circuit courts, a bitterly divided (5-4) Supreme Court held that Congress had also not validly abrogated the states’ immunity from suit with respect to the ADA. Therefore, the Eleventh amendment barred suits by state employees to recover damages by reason of a state’s failure to comply with Title I of the ADA. Board of Trustees of the Univ. of Alabama v. Garrett, 531 U.S. 356 (2001). In Hason v. Medical Bd. of Cal., 279 F.3d 1167 (9th Cir. 2002), the Ninth Circuit held that Garrett did not apply to claims under Title II of the ADA. The plaintiff alleged the denial of a medical license because of mental disability vio-

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lated Title II. The court found both that Garrett did not apply and the claim stated a cause of action. In April, 2003 the Supreme Court dismissed its grant of certiorari. See 538 U.S. 958 (2003). However, in Tennessee v. Lane, 541 U.S. 509 (2004), the Court held that the architectural barriers which limited individuals’ courthouse access violated Title II of the ADA. The decision is limited to the right of access to courthouses. It is unclear how far it may be expanded. In Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474 (4th Cir. 2005) the court held that defendant had waived its immunity under section 504 of the Rehabilitation Act, 29 U.S.C. §794, and sovereign immunity did not bar relief under Title II of the ADA. The plaintiff alleged discrimination because defendant refused to allow her to retake an examination which she failed because of a migraine. State Governmental Subdivisions: Yes Although the impact of the decisions in the Garrett and Lane cases is still being assessed, the Eleventh amendment does not bar suits for ADA violations against political subdivisions of a state such as cities, counties, and similar municipal corporations. In Evans v. City of Bishop, 238 F.3d 586 (5th Cir. 2000), the court held that the reasoning of Kimel did not bar a suit against a city for ADEA violations, because Eleventh Amendment immunity applies only to states and not to other political subdivisions of a state, unless the other political entity such as a city is so controlled by the state “that it stands in the shoes of the state.” Id. at 589-90. POTENTIAL PLAINTIFFS UNDER THE ADA • A “qualified individual with a disability” is identified as “an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.” 42 U.S.C. §12111(8). In turn, a “disability” is defined as:

A physical or mental impairment that substantially limits one or more of the major life activities of such individual; • A record of such impairment; or • Being regarded as having such an impairment. 42 U.S.C. §12102(2). Given this definition, an individual who is totally disabled cannot sue for discrimination under the ADA. Weyer, supra, 198 F.3d at 1108. In Niemeier v. Tri-State Fire Protection District, 2000 U.S. Dist. LEXIS 12621 (N.D. Ill. Aug. 24, 2000), the court held that an employee’s spouse lacked standing as a qualified individual with a disability. •

Burden Of Proof To establish a claim under the ADA, a plaintiff must demonstrate that he or she is: • Disabled within the meaning of the ADA; • Qualified, that is, with or without reasonable accommodation (which plaintiff must describe); and • Able to perform the essential functions of the job. See Martin v. Kansas, 190 F.3d 1120 (10th Cir. 1999); • Plaintiff must also show that his or her employment was terminated because of his or her disability. Id. Proving Disability As stated above, a “disability” is defined as: “(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” 42 U.S.C. §12102(2). Persons who are taking prescription medications for various medical conditions are not per se disabled for ADA purposes. EEOC v. J.B. Hunt Transp. Inc., 128 F. Supp. 2d 117 (N.D.N.Y. 2001), aff ’d, 321 F.3d 69 (2d Cir. 2003).

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“Impairment” Although not defined in the ADA, the Equal Employment Opportunities Commission (“EEOC”) has defined an “impairment” as a physiological disorder affecting one or more named body systems, a mental disorder or a psychological disorder. Compliance Manual section 902: Definition of the Term “Disability,” EEOC Compliance Manual (CCH) ¶¶6880-6889. Normal deviations in height, weight, and strength are not considered impairments; however, morbid obesity is considered an impairment by the EEOC. Id. Further, the EEOC recognizes that an irregularity in height, weight, or strength caused by an underlying disorder can be an impairment. Id. “Substantially Limits” And “Major Life Activity” The ADA does not define either “substantially limits” or “major life activity.” According to the regulations implementing the ADA, “major life activities” include “functions such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working.” Martin v. Kansas, 996 F. Supp. 1282, 1288 (D. Kan. 1998) (citing 29 C.F.R. §1630.2(i)), aff ’d 190 F.3d 1120 (10th Cir. 1999). Other activities, such as sitting, standing, lifting, and reaching, may be considered “major life activities.” Id. The Supreme Court found reproduction a major life activity in Bragdon v. Abbott, 524 U.S. 624 (1998). In Toyota Motor Mfg., Ky., Inc. v. Williams, 534 U.S. 184 (2002) the Court held that for an impairment to have a “substantial” effect on a major life activity it must limit that activity “to a large degree.” The activity limited must be of central importance to daily life outside of work. Ms. Williams’ inability to perform her job, which involved repetitive manual tasks, because of carpal tunnel syndrome, did not constitute a disability. Id.

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“Regarded As” Disabled The regulations implementing the ADA explain that a person is “regarded as” having an impairment that substantially limits a major life activity if he or she: • Has a physical or mental impairment that does not substantially limit major life activities but is treated as constituting such limitation; • Has a physical or mental impairment that substantially limits major life activities only as a result of the attitudes of others toward such impairment; or • Has none of the impairments defined in the regulations but is treated as having a substantially limiting impairment. Martin v. Kansas, supra (citing 29 C.F.R. §1630.2(l)(1)(3)). Medications, Corrective Devices, And Other Mitigating Measures In Sutton v. United Airlines, 527 U.S. 471 (1999), twin sisters brought an ADA claim based on their denial of employment as commercial airline pilots. The Supreme Court upheld a Fed. R. Civ. P. 12(b)(6 )dismissal of their claim for failure to state a claim on which relief could be granted. Both sisters suffered severe myopia and, uncorrected, their visual acuity was 20/200 or worse in the right eye, and 20/400 or worse in the left eye. However, with the use of corrective lenses, both women had 20/20 vision. The Court determined that neither woman was disabled under the ADA as “the determination of whether an individual is disabled should be made with reference to measures that mitigate the individual’s impairment....” Id. at 475. With glasses serving as a mitigating measure, both women had perfect eyesight. The Court therefore concluded that the women were not substantially limited in the major life activity of working because, according to the Court, the statutory phrase “substantially limits” requires, at a minimum, that plaintiffs allege they are unable to work in a broad class of jobs,

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and not just as pilots. Id. at 489. Accordingly, the Supreme Court held they could not claim protection under the ADA. In so holding, the Court rejected the opinions of the EEOC and the Department of Justice (“DOJ”), as espoused in their ADA Guidelines, that a disability should be determined without regard to mitigating measures. 29 C.F.R. pt. 1630, app. §1630.2(j); 28 C.F.R. pt. 35, app. A §35.104; 28 C.F.R. pt. 36, app. B, §36.104. The Court, noting that the existence of a disability is an individualized inquiry, felt that the guidelines’ approach “would often require courts and employers to speculate about a person’s condition and would, in many cases, force them to make a disability determination...about how an uncorrected impairment usually affects individuals, rather than on the individual’s actual condition.” Sutton, suora, 527 U.S. at 483. The EEOC has since taken action to amend its interpretive guidance on Title I of the ADA. See 65 Fed. Reg. 36327 (June 8, 2000) (amending 29 C.F.R. §§1630.2(h) and (j)). The Court further explained its Sutton decision in two companion cases. In Albertson’s, Inc. v. Kirkingburg, 527 U.S. 555 (1999), it held that in judging whether an individual possesses a “disability” within the meaning of the ADA, mitigating measures must be taken into account, including both measures undertaken with artificial aids, like medications and devices, and measures undertaken, whether consciously or not, with the body’s own systems. In Murphy v. United Parcel Serv., Inc., 527 U.S. 516 (1999), it found that an employee was not “disabled” due to his high blood pressure, within the meaning of the ADA, because when plaintiff was medicated for his condition, his high blood pressure did not substantially limit him in any major life activity; see also Todd v. Academy Corp., 57 F. Supp. 2d 448 (S.D. Tex. 1999) (an epileptic deemed not disabled because with medication he was not substantially limited in a major life activity); Robb v. Horizon Credit Union, 66 F. Supp. 2d 913 (C.D. Ill.

1999) (individual diagnosed with depression but could be treated with anti-depressant medications which allowed her to work without any medical restrictions was not limited in major life activity, and, thus, did not suffer from “disability” within meaning of ADA). Existence Of Mitigating Measure Does Not Preclude Disability Finding However, the mere existence or availability of a mitigating measure does not, by itself, preclude a finding of “disability,” within the meaning of the ADA. For example, in Belk v. Southwestern Bell Tel. Co., 194 F.3d 946 (8th Cir. 1999), plaintiff suffered from the residual effects of polio, forcing him to wear a full-length leg brace at all times. He applied for a position for which his employer required a physical exam that included sit-ups and leg lifts. The plaintiff requested accommodation with respect to these tests. The employer permitted some minor modifications in the tests for plaintiff, but he nevertheless failed to qualify for the position. Plaintiff filed a complaint alleging that employer failed to afford him a reasonable accommodation with respect to the leg lift test. In Belk, the defendant argued that plaintiff was not “disabled” for purposes of the ADA because he could walk and engage in many physical activities with the use of his leg brace. The court disagreed, quoting Sutton in stating that the mere use of a corrective device alone is not enough to relieve an individual of a disability. Rather, the court said, one has a disability if, notwithstanding the use of the corrective device, the individual is limited in a major life activity. The court found plaintiff to be disabled in the major life activity of walking because the full motion of his leg was limited by the brace, and his gait was hampered by a pronounced limp. See also Finical v. Collections Unlimited, Inc., 65 F. Supp. 2d 1032 (D. Ariz. 1999) (in determining whether an employee with a hearing impairment had a “disability” within the meaning of the ADA,

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the court would not consider mitigating measures, such as hearing aids, that the employee did not actually use). In EEOC v. J. B. Hunt Transp., Inc., supra, the court held that an employer, which had conditionally offered employment to a group of applicants, did not violate the ADA when it refused to hire them after it learned that they were taking various prescription medications which appeared on a company list that had been established to comply with DOT regulations. Are Disabled Former Employees Covered? There is currently a split among the federal circuit courts regarding whether a disabled former employee may be a “qualified individual” capable of suing under Title I of the ADA: • The Seventh, Ninth, and Eleventh Circuits have each held that access to Title I of the ADA is unambiguously limited to job applicants and current employees capable of performing essential functions of available jobs. See, e.g., Weyer v. Twentieth Century Fox Film Corp., supra (rejecting any analogy between Title I of the ADA and Title VII of the Civil Rights Act because Title I of the ADA, unlike Title VII of the Civil Rights Act, unambiguously excludes former employees); Gonzales v. Garner Food Services., Inc., 89 F.3d 1523 (11th Cir. 1996) (stating that the plain language of the ADA clearly demonstrates the intent of Congress to limit the scope of the ADA to only job applicants and current employees capable of performing essential functions of available jobs); EEOC v. CNA Ins. Companies., 96 F.3d 1039 (7th Cir. 1996) (distinguishing Title VII of the Civil Rights Act in holding that a former employee could not bring a claim under Title I of the ADA); • Other circuit courts rely on reasoning similar to that of the Supreme Court in Robinson v. Shell Oil Co., 519 U.S. 337 (1997). In Robinson,

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the Court held that the term “employees” in section 704(a) of Title VII of the Civil Rights Act includes former employees. The Court began its inquiry by noting that the “first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning.” Id. at 340. The Court then reasoned that the statute was ambiguous because “there was no temporal qualifier in the statute such as would make plain that section 704(a) protects only persons still employed at the time of the retaliation.” Id. at 341. The Court ultimately concluded that, because the surrounding provisions clearly contemplated suits by former employees, “it is far more consistent to include former employees within the scope of `employees’ protected by section 704(a).” Id. at 345. By analogy, some courts reason that Title I of the ADA is ambiguous as to whether one must be a “qualified individual” at the time of the discrimination and whether a disabled former employee can sue, because Title I also contains no “temporal qualifiers.” See, e.g., Castellano, supra; Ford v. Schering-Plough Corp., 145 F.3d 601 (3d Cir. 1998), cert. denied, 525 U. S 1093 (1999). These courts conclude that denying former employees access to Title I of the ADA is inconsistent with section 12112(b)(2) of the Act, which puts the provision of fringe benefits within the ambit of the Act, because certain fringe benefits such as pensions and disability benefits are provided only post-employment and are meaningful only in that context. Castellano, 142 F.3d at 67. MAKING A CLAIM • Instead of starting entirely from scratch when drafting the ADA, Congress borrowed liberally from Title VII. Among other things, it engrafted onto the ADA the full panoply of procedures described in section 2000e of Title VII, and decreed that those enumerated procedures shall be applicable to proceedings under Title I of

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the ADA. Bonilla v. Muebles J.J. Alvarez, Inc., 194 F.3d 275 (1st Cir. 1999). Exhaustion Of Administrative Remedies The ADA requires compliance with the administrative procedures specified Title VII of the Civil Rights Act of 1964. 42 U.S.C. §§12117(a), 12188(a). Therefore, absent special circumstances, a federal court will require compliance with such administrative procedures before the court may consider a suit that seeks recovery for an alleged violation of the ADA. See Bonilla, supra. Timing Section 706 of Title VII, 42 U.S.C. §2000e-5, states that a charge must be filed with the EEOC within 180 days after the alleged unlawful employment practice occurred or within 300 days if the person aggrieved has initially instituted proceedings with an authorized state or local agency. Accordingly, an individual who seeks to recover for an asserted violation of the ADA, like an individual who seeks to recover for an asserted violation of Title VII, must first exhaust administrative remedies by filing a charge with the EEOC or, alternatively, with an appropriate state or local agency within the prescribed time limits. Bonilla, supra; see also Gallegos v. N.Y.C. Health and Hosp. Corp., 1998 U.S. Dist. LEXIS 16089 (S.D.N.Y. Oct. 14, 1998); Lipscomb v. Clearmont Const. Co., 930 F. Supp. 1105 (D. Md. 1995), aff ’d without op., 91 F.3d 131 (4th Cir, 1996); Sherman v. Optical Imaging Sys., Inc., 843 F. Supp. 1168 (E.D. Mich. 1994). DAMAGES AVAILABLE • As explained above, enforcement of the ADA is placed under the aegis of EEOC procedures. Since the enactment of the Civil Rights Act of 1991, these procedures provide for jury trials, compensatory damages for pain and suffering, and punitive damages in addition to the more traditional remedies of reinstatement, cease and desist orders, and backpay. See Panken and

Williams, Disabilities In The Workforce: The Impact Of The Americans With Disabilities Act, SD50 ALI-ABA 757 (April 8, 1999); 42 U.S.C. §12117(a). The ADA also provides a court with the discretion to allow the prevailing party, other than the United States, a reasonable attorneys’ fee, including litigation expenses and costs. 42 U.S.C. §12205. In general, a prevailing plaintiff will recover an attorneys’ fee unless special circumstances would render such an award unjust. Roe v. Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1231 (10th Cir. 1997). The statutory cap on the maximum award of compensatory damages for future pecuniary losses under the ADA, 42 U.S.C. §1981a(b)(3), does not include an award for front or back pay. Pollard v. E.I. du Pont de Nemours & Co., 532 U.S. 843 (2001). DISPARATE IMPACT ISSUES • The Supreme Court has recognized the applicability of a disparate impact theory in ADA litigation. Raytheon Co. v. Hernandez 540 U.S. 44, 54 (2003). Consequently, a neutral employment selection device which unfairly screens out qualified persons could be challenged under the ADA. However, these cases appear to be difficult to prove. In EEOC v. Schneider Nat’l Inc., (E.D.Wis, May 31, 2006), aff ’d, 2007 U.S. App. LEXIS 6454 (7th Cir. March 21, 2007), the employer trucking company terminated its longterm driver Mr. Hoefner, when he was diagnosed with a cardiac condition which had apparently caused a previous employee to drive off a bridge, causing his death. Mr. Hoefner received medical clearance to drive. However, the defendant instituted a policy which automatically disqualified any employees suffering the same syndrome from driving. The EEOC contended that defendant “regarded” Mr. Hoefner as disabled. Relying on Hunt, the court held that “an employer is free to decide that physical characteristics or medical conditions that do not rise to the level of an impairment…are preferable to others, just as it is free to decide that some limiting, but not substantially limiting, im-

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pairments make individuals less than ideally suited for a job.” Sutton, supra, 490-91. And the court also cited Sutton in holding that Schneider was free to set a higher safety standard than federal regulations mandated. Schneider, supra, at *14-15. ADA TITLE I: BENEFIT AND COVERAGE ISSUES • Title I of the ADA, 42 U.S.C. §§1211112117, prohibits discrimination against a qualified individual with a disability because of the disability of such individual: “[I]n regard to job application procedures, the hiring, advancement or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment.” 42 U.S.C. §12112(a). The ban on discrimination expressly includes “fringe benefits available by virtue of employment, whether or not administered” by the employer. 42 U.S.C. §12112(b); 29 C.F.R. §1630.4(f).

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•

• • • •

Temporary non-chronic physical or mental impairments of short duration, 29 C.F.R. Pt. 1630, Appendix, discussion of §1630.2(j); Characteristic predisposition to illness or disease, id., discussion of 29 C.F.R. §1630.2(h); Advanced age, id.; Other conditions, such as pregnancy, that are not the result of physiological disorder, id.; and In the opinion of at least one court, common personality traits such as poor judgment or a quick temper when those are not symptoms of a mental or psychological disorder. See Daley v. Koch, 892 F.2d 212, 214 (2d Cir. 1989).

Nondiscriminatory Coverage The Circuit Courts have held that as long as disabled employees receive the same benefit package as the non-disabled, no discrimination occurs. See Weyer, supra, at 1116-18. So long as every employee is offered the same plan regardless of that employee’s Conditions Not The Circuit Courts have held that as long contemporary or future disabilCovered as disabled employees receive the same ity status, then no discrimina Many types of condi- benefit package as the non-disabled, no tion has occurred even if the tions for which plan partic- discrimination occurs. plan offers different coverage ipants may seek coverage for various disabilities. Ford, suunder employee welfare pra, 145 F.3d at 608. The ADA benefit plans are specifically excluded from the ADA “does not require equal coverage for every type of definition of disability under several different provi- disability; ...” Id. at 145 F.3d at 608; accord EEOC v. sions of the statute and the EEOC regulations: Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir. • Illegal drug use, 42 U.S.C. §12210(a); 2000) (gathering cases). • Homosexuality and bisexuality, 42 U.S.C. The ADA and the Rehabilitation Act ensure §12211(a); that disabled persons are treated evenly in relation • Sexual behavior disorders, 42 U.S.C. to non-disabled persons, but the federal disability §12211(b)(1); statutes “are not designed to ensure that persons • Compulsive gambling, kleptomania, pyromawith one type of disability are treated the same as nia, 42 U.S.C. §1211(b)(2); persons with another type of disability.” Lewis v. • Psychoactive substance use disorders resulting Kmart Corp., 180 F.3d 166, 171-72 (4th Cir. 1999), from current use of illegal drugs, 42 U.S.C. cert. denied, 528 U.S. 1136 (2000). §1211(b)(3);

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Greater State Law Protections Remember, however, that the ADA does not invalidate any law of any state or a political subdivision of any state “that provides greater or equal protection for the rights of individuals with disabilities than are afforded by this chapter.” 42 U.S.C. §12201(b). Depending on the type of state or local law and the type of employee welfare benefit plan, the scope and extent of ERISA preemption may be dispositive on the question of the enforceability of a state or local law that requires certain types of benefit coverage for persons with disabilities. TITLE III: PUBLIC ACCOMMODATIONS AND THE ADA • ADA Title III litigation involving benefit issues largely centers on whether an insurance policy or benefit plan is a “public accommodation” under the ADA. The statute guarantees: “[F]ull and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases, (or leases to), or operates a place of public accommodation.” 42 U.S.C. §12182(a). To avoid Title I’s requirement that the discriminating entity be an employer and most courts’ requirement in disability insurance cases that the employee be able to work, plaintiffs have looked to Title III with mixed results. “Public Accommodation” Not Limited To Physical Structures In one of the first cases addressing this issue, plaintiff, an employee and owner of Carparts, was diagnosed with AIDS. Carparts Distrib. Ctr. v. Automotive Wholesaler’s Ass’n, 37 F.3d 12 (1st Cir. 1994). Carparts self-insured its health benefits through defendant. Defendant amended its plan to limit AIDs coverage to $25,000. The circuit court held that public accommodations are not limited to actual physical structures and remanded for the district court to determine whether the services offered by an insurer included insurance policies. In contrast, Parker v. Met-

ropolitan Life Ins. Co., 121 F.3d 1006 (6th Cir. 1997) (en banc), cert. denied, 522 U.S. 1084 (1998), held that Title III coverage was limited to physical structures. In most cases, courts have held that while Title III prevents a refusal to sell goods and services to a disabled purchaser, it does not govern which goods and services an entity chooses to sell. Thus, in Ford, supra, plaintiff sued her employer and its insurance provider for a disparity between physical disability and mental disability coverages in a disability insurance policy. The court held that while an insurance office may be a place of public accommodation, Title III’s purpose is to guarantee “accessibility to the goods offered by a public accommodation, not to alter the nature or mix of goods that the public accommodation has typically provided.” Id. at 613. Consequently, plaintiff ’s claim failed. Similarly, in Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557 (7th Cir. 1999), cert. denied, 528 U.S. 1106 (2000), the court upheld a $25,000 AIDS cap in a group insurance policy against a Title III challenge. The court found a difference between refusing to sell a policy to a disabled person (or charging him/her a higher price), and offering policies that contain caps for various diseases which may be disabilities under the ADA. However, it found Title III covered the sale of insurance policies. It held that “Sec. 302(a) does not require a seller to alter his product to make it equally valuable to the disabled and to the nondisabled, even if the product is insurance.” Id. at 563. Accord, Weyer v. Twentieth Century Fox Film Corp., supra (9th Cir. 2000). Pallozzi v. Allstate Life Ins. Co., 198 F.3d 28, amended on denial of reh’g, 204 F.3d 392 (2d Cir. 2000), addresses the situation of failure to sell policies to the disabled. There, the defendants, who both suffered from mental disabilities, claimed that Allstate refused to sell them life insurance because of their disabilities. The court rejected defendant’s claim that Title III of the ADA does not regulate insurance underwriting. Finding that “[t]he most conspicuous ‘goods’ and ‘services’ provided by an ‘in-

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surance office’ are insurance policies,” it held that the refusal to sell constituted a denial of a public accommodation. Id. at 31. Significantly, the court did not address caps on coverage, but simply access to insurance. Accord, Wai v. Allstate Ins. Co., 75 F. Supp. 2d 1 (D.D.C. 1999). Benefit Plans Are Not “Public Accommodations” Several circuits hold that Title III cannot be used to challenge insurance policies offered through employment because a “benefit plan offered by an employer is not a good offered by a place of public accommodation.” Among other things, the courts found no nexus between the benefit disparity and services which MetLife offered from its insurance office. Parker, supra. Accord McNeil v. Time Ins. Co., 205 F.3d 179, 188 (5th Cir. 2000). Weyer, supra. In these circuits, former disabled employees, who have no standing to sue under Title I, cannot bring their cases under Title III. SUBTERFUGE • Section 501(c) of the ADA, 42 U.S.C. §12201(c), provides that: “Subchapters I through III of this chapter and title IV of this Act shall not be construed to prohibit or restrict— (a) an insurer, hospital or medical service company, health maintenance organization, or any agent, or entity that administers benefit plans, or similar organizations from underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; or (b) a person or organization covered by this chapter from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; or (c) a person or organization covered by this chapter from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan

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that is not subject to State laws that regulate insurance. Paragraphs (1), (2) and (3) shall not be used as a subterfuge to evade the purposes of subchapters I and III of this chapter.” Because the only other limitations on benefit plans under section 501(c) are that the plan be “bona fide,” see Piquard v. City of East Peoria, 887 F. Supp. 1106, 1120 (C.D. Ill. 1995) (a benefit plan is “bona fide” if it exists and pays benefits), and not contrary to state law, often the central question in determining whether a plan is exempted under §501(c) is what constitutes “subterfuge”—a term that is not defined by any provision of either the ADEA or the ADA. Judicial opinion and the EEOC are at variance with respect to whether the “subterfuge” inquiry applies to non-fringe benefits. Judicial Interpretation In Public Employees Retirement Sys. of Ohio v. Betts, 492 U.S. 158, 167-68 (1989), the Supreme Court considered the meaning of “subterfuge” within the context of section 4(f)(2) of the ADEA, 29 U.S.C. §623(f)(2), before its amendment in 1990. The Court first held that plans adopted before the enactment of the ADEA could not be a subterfuge under that Act. The Betts Court also held that the term “subterfuge” was meant only to prohibit those terms of a plan that have the effect of discriminating in the non-fringe-benefit aspects of employment. 492 U.S. at 180. The Court found that Congress meant to exempt benefit plans from the ADEA except to the extent they were a subterfuge for age discrimination in other aspects of employment. Id. EEOC Position The EEOC rejects application of Betts’ holdings to interpretation of the ADA. The EEOC asserts that the language of the ADA explicitly includes fringe benefits and the legislative history rejects any safe harbor for pre-ADA plans; therefore, in the EEOC’s view, Congress could not have meant for

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Betts to apply to the ADA. See EEOC: Interim Guidafforded deference by federal reviewing courts and ance on Application of ADA to Health Insurance, (6/8/93) are sustained unless “plainly erroneous or inconsis(“EEOC Guidance”) BNA Fair Employment Practices tent with the regulation.” Paralyzed Veterans of Am. v. Manual 405:7115, Part IIIB at n.10. D.C. Arena, L.P., 117 F.3d 579, 584 (D.C. Cir. 1997), Judicial interpretation of the term “subterfuge” cert. denied, 523 U.S. 1003 (1998). How much deferunder the ADA is at variance with the EEOC posi- ence should be given to an agency’s “informal poltion. Compare Doe, supra, 179 F.3d 557, 561-62; Leonicy pronouncements” is unsettled. Doe, supra, 179 ard v. Israel Discount Bank of New York, 199 F.3d 99, F.3d 563; see also Commonwealth Edison Co. v. Vega, 174 103-5 (2d Cir. 1999); Ford, supra, 145 F.3d at 611; F.3d 870 (7th Cir. 1999) (discussing the weight to be Modderno v. King, 82 F.3d 1059 (D.C.Cir 1996) su- given to DOL advisory opinion letters and a DOL pra; and Krauel v. Iowa Methodist Medical Ctr., 95 F.3d amicus brief). 674, 678-79 (8th Cir. 1996) (all rejecting EEOC’s In litigating under the ADA, attorneys must be position); with Henderson v. Bodine, 70 F.3d 958, at aware that the federal courts have not consistently 960-61 (8th Cir. 1995)(implicitly accepting EEOC deferred to the DOJ and EEOC interpretive guideposition). The emerging lines under the ADA, reasonview appears to be that: ing that, although an agency’s A “distinction” is any difference in benefits reasonable interpretation of “[T]he subterfuge clause under a plan. an ambiguous provision in a in section 501(c) of the statute that it administers is ADA should be construed, as in Betts, to require entitled to judicial deference, no deference is due an intent to evade, making it inapplicable to a plan to agency interpretations at odds with the plain formulated prior to the passage of the Act regard- language of the statutes themselves. Indeed, in less whether the plan relies on sound actuarial prin- Sutton v. United Airlines, 527 U.S. 471 (1999), the ciples.” Court rejected the EEOC’s definition of disability since it went beyond its statutory power. InconsisLeonard, supra, 199 F.3d at 104. Thus, in Fitts v. Fedtent agency interpretations are entitled to even less eral Nat’l Mortgage Ass’n, 191 F. Supp. 2d 67 (D.D.C. deference. INS v. Cardoza-Fonseca, 480 U.S. 421, 445 2002) (on remand from 236 F.3d 1 (D.C. Cir. 2001)); (1987). and Aramark Corp., supra, the courts found that in- While many courts have not followed the sured group LTD plans which were in existence EEOC’s Guidances, they provide a “safe harbor” before passage of the ADA could not be deemed for compliance. The EEOC Guidance concerning subterfuges to avoid the purposes of the statute. Acbenefits sets forth a two-step analysis to determine cord, EEOC v. Deloitte & Touche, 2000 WL 1024700 whether a medical plan violates the ADA. The first (S.D.N.Y. July 25, 2000) (a 1988 agreement between step examines whether the plan contains a disabilityan employee and his employer which excluded the based distinction. If it does not, the plan does not viemployee’s pre-existing cancer from the employer’s olate the ADA. If it does, then the burden falls to the death benefit arrangement was protected by the employer to prove that the distinction is justified. 501(c) safe harbor provision). Disability-Based Distinctions EEOC REGULATIONS: ARE THEY ENTI- A “distinction” is any difference in benefits TLED TO DEFERENCE? • As a general rule, under a plan. Under the EEOC Guidance, a disagency interpretations of their own regulations are tinction is based on a disability if it singles out a

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particular disability, a group of disabilities, or disability in general. For example, according to the EEOC, a cap on AIDS benefits, because it affects only disabled individuals, is “disability-based.” EEOC Guidance, Part IIIB. Interim Enforcement Guidance In the Application of the ADA to Disability-based Distinctions in Employer Provided Health Insurance. (Available at www.eeoc.gov/policy/docs/health.html). Look For Disparate Treatment In terms of employment discrimination law, the EEOC’s position is that a medical plan can only violate the ADA through “disparate treatment,” and not “disparate impact.” For example, a plan that limits payments for blood transfusions is not discriminatory, because it affects both disabled and non-disabled persons. Though disabled persons will probably need more blood transfusions than nondisabled persons, the EEOC nonetheless takes the position that this distinction is not disability-based. Id., n.7. The EEOC does not mandate, however, that an employer provide reasonable accommodations under its medical plan to disabled employees. Accordingly, an employer need not have a better medical plan for its disabled employees than for its non-disabled employees. See EEOC Guidance on Reasonable Accommodation under the ADA (10/17/2002), Reasonable Accommodation Related to the Benefits and Privileges of Employment, available at http://www.eeoc.gov/policy/docs/accommodation.html#privileges; see 29 C.F.R. pt. 1630, App. at discussion of section 1630.2(o). Is The Distinction Justified? If a disability-based distinction is found, the employer must establish that the distinction is justified. At this stage, the employer must prove that the plan is not a “subterfuge” under the ADA. The EEOC Interim Enforcement Guidance on the Application of the ADA to Disability-Based Distinctions in Employer

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Provided Health Insurance, supra, suggests five methods to meet this burden: • First, the employer may prove that the plan does not have a disability-based distinction. Of course, if the plan does not have a disabilitybased distinction, “subterfuge” never becomes an issue. Id., Part IIIB; • Second, the employer may prove that the distinction is necessary to ensure that the plan follows commonly accepted or legally required standards of fiscal responsibility. “Necessary” in this context means that there is no way to achieve the same result with a non-disability-based distinction. However, no matter what the cost savings under a disability-based distinction, a reduction in all benefits would likely amount to the same or greater savings. Further, it is unclear exactly what standards the EEOC refers to, as medical plans generally do not have assets themselves and benefits are paid by insurance companies or from the employer’s assets. Id., Part IIIC.2(c); • Third, the employer may prove that the disability-based distinction is necessary to avoid an unacceptable increase in premiums or cutback in coverage. However, only premium increases or coverage cutbacks that would make coverage unavailable to employees would be deemed unacceptable. Further, even if the premium increase or benefit cutback is “unacceptable,” the employer would still have to prove that it is “necessary,” i.e., the employer would have to show that the same effect could not be avoided by a non-disability-based distinction. Id., Part IIIC.2(d); • Fourth, the employer may prove that the treatment being denied has no medical value, i.e., that scientific evidence proves that the treatment does not cure the condition, slow its degenerative effects, alleviate its symptoms, or maintain the current health of the individuals receiving the treatment. However, if the

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plan reimburses worthless treatments for any nondisabling conditions, this method cannot justify the exclusion of worthless treatments for disabling conditions. Id., Part IIIC.2(e); •

Finally, an employer may prove that the per-capita cost of the disabling condition for which the treatment is limited is at least as high as the per-capita cost of non-disabling conditions. So, for example, if capping cancer benefits at $200,000 results in a per-capita cost of $400, and the per-capita cost of noncapped coverage of pregnancy benefits is $600, then the plan would be a subterfuge. However, if the per-capita cost of pregnancy benefits was $400, then the cap would be justified and the plan would not be a subterfuge. The difficulty in this method lies in deciding how to classify benefits for the purpose of determining their per-capita cost. For example, an employer could use “cancer benefits” or could break that category down further to “breast cancer benefits,” “prostate cancer benefits,” etc.

Application Of EEOC Guidance By The Courts As noted above, most courts have rejected the EEOC’s interpretation of “subterfuge.” In Piquard, supra, the court partially adopted the Betts interpretation instead of the EEOC’s. The court’s analysis centered on whether the plan was being used to discriminate on the basis of disability in non-fringe benefit areas of employment; therefore, the existence of a disability-based distinction was irrelevant. Id. This interpretation of subterfuge has been adopted by the Seventh, Second, Third, Sixth, Eighth, and D.C. Circuits. See Doe, supra, 179 F.3d at 561-62, Leonard, supra, 199 F.3d at 104; Ford, supra, 145 F.3d at 611; Parker, supra, 121 F.3d at 1019; Krauel, supra, 95 F.3d at 678-79; Fitts, supra; Aramark Corp., supra, 208 F.3d 266 (D.D.C. 2000); and Modderno, supra, 82 F.3d at 1064-65.

Significance Of State Laws State laws may present or impose significant limitations on the design of employee welfare benefit plans in the following respects: • It has been clear since Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739-47 (1985), that insured welfare benefit plans, i.e., plans which provide for benefits through group insurance policies or contracts with HMOs, must comply with the mandated benefit requirements of state insurance laws. Pursuant to ERISA section 514(b)(2)(A), there is no preemption of state laws which regulate insurance; • As to self-funded or self-insured welfare benefit plans, however, ERISA does preempt the application of state mandated benefit laws because, pursuant to ERISA section 514(b)(2)(B), employee benefit plans cannot, for purposes of state insurance laws, be deemed to be an insurance company or other insurer or to be engaged in the business of insurance; • The ADA specifically states that it does not bar more stringent state laws. 42 U.S.C. §12201(b). Conversely, some courts have held that the approval of an insurance policy under state insurance law does not necessarily mean that the policy is exempted under section 501(c)(2). See World Ins. Co. v. Branch, 966 F. Supp. 1203, 1209 (N.D. Ga. 1997), aff ’d in part, vacated in part on other grounds per curiam, 156 F.3d at 1142 (11th Cir. 1998). Under the EEOC Guidance on Application of ADA to Health Insurance, supra, it is the view of the EEOC that, in order to “gain the protection of section 501(c)” for a challenged disability based insurance distinction, the employer must prove either that: • The health insurance plan is a bona fide health insurance plan that is not inconsistent with state law; i.e., the plan exists and pays benefits, its terms have been accurately communicated to eligible employees, and the plan’s

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terms are not inconsistent with applicable state law as interpreted by the appropriate state authorities; or •

The health insurance plan is a bona fide selfinsured health insurance plan; i.e., the plan exists and pays benefits and its terms have been accurately communicated to covered employees. As the court observed in Doe, “...section 501(c) is obviously intended for the benefit of insurance companies rather than plaintiffs....” Doe, supra, 179 F.3d at 562 Also, the EEOC has issued a Compliance Manual section on Employee Benefits. EEOC Compliance Manual, Notice 915.003 (Oct. 3, 2000). ESTOPPEL ISSUES • Much of the confusion regarding so-called judicial estoppel in the context of benefits claims was resolved by the Supreme Court’s decision in Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795 (1999). In Cleveland, the plaintiff suffered a stroke and thereafter filed a claim for Social Security Disability Insurance (“SSDI”) benefits in which she stated that she was unable to work. She nonetheless subsequently returned to work and, based on her return, her SSDI claim was denied. A few weeks later, she was fired. She then sued under the ADA, asserting that her former employer discriminated against her by failing to reasonably accommodate her stroke-related impairments. The district court granted summary judgment to the employer. The court ruled that the plaintiff was estopped from asserting that she was a “qualified” individual with a disability because of her statement in her SSDI claim that she was unable to work. On appeal, the Fifth Circuit agreed. Cleveland v. Policy Mgmt. Sys. Corp., 120 F.3d 513 (5th Cir. 1997). However, the Supreme Court held that the plaintiff ’s statements on her SSDI application were not a concession that she was unable to work for purposes of the ADA. The Court pointed out four major differences between SSDI disability and ADA disability:

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•

First, SSA does not take reasonable accommodations into account. When making SSDI disability determinations. Under the ADA, however, reasonable accommodations must be taken into account. Thus, a person who is unable to work for SSDI purposes may be able to work when provided with a reasonable accommodation; • Second, the SSDI process incorporates a set of assumptions under which some individuals who would be qualified for purposes of the ADA would nevertheless be deemed unable to work for purposes of SSDI; • Third, an individual’s condition can change over time in ways that might allow the individual to remain eligible for SSDI (for example, under the SSA’s transition to work program) but also qualified to work; • Fourth, the basic concept of pleading in the alternative permits an individual to file a claim for SSDI benefits and simultaneously sue her employer under the ADA. See Cleveland, supra, 526 U.S. at 800. Nevertheless, the Court held that employers are still entitled to summary judgment if an SSDI/ ADA claimant fails to provide a “sufficient explanation” for any apparent inconsistency between the two claims. The explanation must be sufficient to warrant a reasonable juror’s conclusion that at the time the plaintiff told the SSA she was “unable to work,” she really was able to “perform the essential functions” of the job, with or without “reasonable accommodation.” In decisions subsequent to Cleveland, courts have closely examined whether the plaintiff can establish the elements of a prima facie case of discrimination under the ADA. See, e.g., Giles v. General Elec. Co., 245 F.3d 474 (5th Cir. 2001); Reed v. Petroleum Helicopters, Inc., 218 F.3d 477 (5th Cir. 2000); Lloyd v. Hardin County, Iowa, 207 F.3d 1080 (8th Cir. 2000); Loeb v. Trans World Airlines, Inc., 1999 U.S. App. LEXIS

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25475 (8th Cir. Oct. 7, 1999); Feldman v. American Memorial Life Ins. Co., 196 F.3d 783 (7th Cir. 1999). Plaintiff Needs To Explain Inconsistency Between SSI And ADA Claims The basic line of analysis is that inconsistent statements between an SSA disability claim and an ADA lawsuit are not automatically disqualifying, but the plaintiff has the burden to offer some explanation for the inconsistency and, in the absence of an adequate explanation, the ADA claim should be dismissed. DiSanto v. McGraw-Hill, Inc., 220 F.3d 61 (2d Cir. 2000). Collateral Estoppel Federal courts are required by federal common law to apply the same preclusion doctrine to the determination of a state administrative agency acting in its judicial capacity as would be applied by a court of the forum state. University of Tenn. v. Elliott, 478 U.S. 788, 799 (1986). Therefore, federal courts are directed to look to state law to determine whether collateral estoppel applies. In Stafford v. True Temper Sports, 123 F.3d 291, 294-95 (5th Cir. 1997), the court applied collateral estoppel to preclude an ERISA retaliation claim because the issue had been fully and fairly litigated before the Mississippi Unemployment Compensation Board. See also, Marrese v. American Acad. of Orthopaedic Surgeons, 470 U.S. 373, 382 (1985). The Sixth Circuit has declined to apply collateral estoppel to preclude litigation over a denial of disability benefits because the benefit plan was not a party at the state court administrative level. See Perez v. Aetna Life Ins. Co., 96 F.3d 813, 820-21 (6th Cir. 1996), vacated on other grounds, 106 F.3d 146 (6th Cir. 1997), remanded on reh’g en banc, 150 F.3d 550 (6th Cir. 1998). The court held that because state law was unclear about whether mutuality was a required element of an application of collateral estoppel, it should not apply the doctrine.

PRE-EXISTING CONDITIONS • Since the enactment of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (“HIPAA”), which limits the circumstances in which a pre-existing condition exclusion may apply under a group health plan, such health plan exclusions have been less problematic to persons with serious health conditions. Nevertheless, such clauses in health plans continue to exist and thus present significant issues under the ADA. Pre-existing Conditions Can Be Excluded In general, courts hold that a uniform pre-existing condition clause that excludes from coverage the treatment of conditions that pre-date an individual’s eligibility for benefits is not a disability-based distinction, and thus does not violate the ADA. See, e.g., McLaughlin v. General Am. Life Ins., 1998 U.S. Dist. LEXIS 16994 (E.D. La. Oct. 21, 1998) (plaintiff denied health coverage for treatment of sickle cell disease based on the health plan’s general preexisting condition exclusion clause); EEOC v. Hinsdale Hosp., 1999 U.S. Dist. LEXIS 10588 (N.D. Ill. June 29, 1999) (amputee denied coverage for a new prosthesis based on a health plan provision that excluded coverage for a prosthesis to replace a body part lost before an individual became eligible for coverage under the plan). However, while a health plan may deny an individual with a pre-existing condition coverage for that condition for the period specified in the plan without violating the ADA, the plan cannot deny coverage for illnesses or injuries unrelated to the pre-existing condition. Anderson v. Gus Mayer Boston Store of Delaware, 924 F. Supp. 763 (E.D. Tex. 1996). Thus, it may be unlawful under the ADA for a plan to deny any health coverage based on the existence of a pre-existing condition. Id. MENTAL HEALTH LIMITATIONS • Most health plans have much lower limits for benefits for mental disorders than for physical disorders. The

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EEOC Guidance expressly states that a distinction between lifetime maximum mental and physical benefits is not based on disability and therefore does not violate the ADA. Similarly, most disability plans contain a two-year coverage maximum for mental health disability coverage. Defendants have been successful defending these limits on three grounds: no discrimination, no standing to sue, no subterfuge. Benefits Do Not Have To Be Equal Among Different Disabilities In Modderno, supra, the court held that a $75,000 limitation on mental health benefits did not violate the ADA, even though there was no similar limitation on benefits for physical conditions, because benefits do not have to be equal among different disabilities. Id. at 82 F.3d 1065. See also Ford, supra, 145 F.3d at 608; Parker, supra; Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999); Bril v. Dean Witter, Discover & Co., 986 F. Supp. 171, 175 (S.D.N.Y. 1997) (all holding that limits on benefits for mental health disorders that are less generous than coverage for physical disabilities do not violate the ADA), Weyer, supra; EEOC v. Staten Island Sav. Bank, 207 F.3d 144 (2d Cir. 2000)). With respect to subterfuge and mental health benefit limitations, see Fitts, supra; Aramark, supra; Leonard, supra. Significantly, the court in Fitts held that bipolar disorder was a physical condition and covered under an employment disability policy. Interpreting the ERISA policy under traditional contract law, the court found that the policy limitation for “mental, nervous or emotional disease[s] or disorder[s] of any type was too vague to exclude bipolar disorder.” The court adopted a psychologist’s opinion that the condition is a “neurobiological” disorder that affects the “physical and chemical structure of the brain.” Id. at 70, and interpreted the policy against the insurer. Similarly, in Billings, supra, 459 F.3d 1081 (11th Cir. 2006), applying the contra proferentum doctrine to the disability insurance poli-

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cy, found that because the insurer failed to specify whether “mental illness is based on its symptoms or etiology,” it was ambiguous. Because plaintiff ’s obsessive compulsive disorder had organically based origins, which were not excluded in the definition of “mental illness” plaintiff ’s psychiatric condition received coverage. However, in Fuller v. J.P. Morgan Chase Co., 349 F. Supp. 2d at 148-49 (2005), the Second Circuit held that the administrators’ classification of bipolar disorder as a “mental” disorder using the Diagnostic and Statistical Manual of Mental Disorders (4th ed.) (“DSM IV”) as its authority was a valid exercise of its discretionary authority. Long-Term Disability Benefits In Iwata v. Intel Corp., 349 F. Supp. 2d 135 (D. Mass. 2004) the court rejected the prevailing view that employers can provide different levels of longterm disability benefits for physical and mental disabilities. Relying on the reasoning in the vacated decision of Johnson v. KMart, 273 F.3d 1035 (11th Cir. 2001) it found that limiting long-term disability benefits to 24 months for the mentally disabled violates the ADA. Iwata, supra, 349 F. Supp 2d at 14849. See also Fletcher v. Tufts University, 367 F. Supp. 2d 99 (D. Ma. 2005). Limits on drug and alcohol treatment may be considered along with limitations on mental health benefits. The ADA contains specific provisions relating to the use of drugs and alcohol. See 42 U.S.C. §12114. Under these provisions, alcoholics and persons who have completed a drug rehabilitation program are considered disabled; current drug users, however, are not protected. Similar Caps For Physical And Mental Health Benefits A limitation of mental health benefits must comply with the Mental Health Parity Act of 1996 (“MHPA”), which became effective on January 1, 1998. 42 U.S.C. §300gg-5 (1996). The MHPA prevents lifetime caps on mental health benefits in a

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group health plan if physical benefits are not similarly capped. 42 U.S.C. §300gg-5(a)(1)(A). However, some exclusions apply. First, employers with fewer than 51 employees are exempt. 42 U.S.C. §300gg-5(c)(1). Also, the MHPA does not apply if compliance would cause the cost of insurance to increase by more than one percent. 42 U.S.C. §300gg-5(c)(2). The law has been extended, with a sunset date of December 31, 2007. Be aware of congressional action to extend the scope of mental health coverage. Experimental Treatments • The EEOC Guidance suggests that a broad-based exclusion of experimental treatments or drugs is not a violation of the ADA because it is not a disabilitybased distinction. However, some employees have successfully challenged limitations on experimental treatments. In Henderson v. Bodine, supra, the Eighth Circuit indicated that if a plan covered experimental treatment for some conditions, the ADA may require the plan to provide that treatment for other similar conditions. The Henderson court did not, however, analyze the subterfuge issue, instead relying on the EEOC’s guidelines. A court that interprets subterfuge differently might find that limitations on experimental conditions are acceptable if they do not discriminate on the basis of disability in non-fringe-benefit aspects of employment. AIDS/HIV • Much controversy initially surrounded the issue of whether the inability to reproduce and bear children constituted a disability. The Supreme Court largely resolved this issue in Bragdon v. Abbott, supra, a case involving the question of whether HIV was a disability. That case involved an asymptomatic HIV positive woman whose dentist refused to treat her in his office because of fear of infection. He was willing to treat her in the hospital. She sued, claiming that the dentist had violated Title III of the ADA. The Court first looked to determine whether the plaintiff suffered from a disability for purposes of the ADA. Reciting the medi-

cal evidence demonstrating HIV’s serious physical effects on a person from the moment of infection, it found HIV to be a “physical impairment during every stage of the disease.” The Court went on to hold that reproduction was an ADA major life activity upon which HIV imposes a substantial limitation. Differing Benefit Caps Are Permissible While Bragdon v. Abbott will undoubtedly help persons with HIV obtain reasonable accommodations and fight disability discrimination in obtaining and remaining in employment, in light of the cases discussed above, it does not require employers or insurers to offer equal benefits to persons with HIV, either because the ADA does not cover benefit differences or an exclusion is not a subterfuge. See, e.g., McNeil v. Time Ins. Co., 205 F.3d 179 (5th Cir. 2000), cert. denied, 531 U.S. 1191 (2001) (Title III of the ADA does not regulate the content of insurance policies. Thus, a cap of $10,000 for AIDS treatments during the first two years of the policy (as opposed to $2 million life time maximum for other conditions) was not in violation of the ADA). Doe, supra. Attorneys should be aware that the EEOC does not agree with most courts’ allowing caps on coverage for certain disabilities or the court’s Betts interpretation of subterfuge. See EEOC Interim Policy Guidance, supra, at III B, C(2). INFERTILITY TREATMENTS • In Krauel v. Iowa Methodist Med. Ctr., supra, plaintiff claimed that defendant’s failure to cover infertility treatment constituted ADA discrimination. While Bragdon v. Abbott implicitly overrules the court’s finding that infertility does not substantially affect a major life activity, two other grounds support the court’s holding that a health insurance policy’s exclusion of infertility treatment does not violate the ADA: • First, the court also held that the exclusion of infertility is not disability-based distinction because it does not single out a particular group

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of disabilities but applies equally to all plan participants; •

Second, it found that the plan fell within the insurance safe harbor (Betts) protection. The benefit exclusion was not a subterfuge. Similarly, in Saks v. Franklin Covey Co., 316 F.3d 337 (2d Cir. 2003), the Second Circuit held that the exclusion of the infertility treatments disadvantages male and female employees equally and, therefore, falls outside the purview of Title VII. It found no protected classification based on reproductive capacity and therefore no ADA violation. Accord, Lehman v. Adecco North Am., L.L.C., 2001 U.S. Dist LEXIS 6391 (N.D. Ill. Apr. 3, 2001). HEARING AIDS • The EEOC Guidance states that an individual who uses a hearing aid to correct only slight hearing loss is not necessarily disabled under the ADA. Thus, an exclusion for all hearing aid expenses should pass muster under the EEOC’s guidelines because it impacts disabled and non-disabled employees/participants equally. This reasoning was applied by the court in Micek v. City of Chicago, 1999 U.S. Dist. LEXIS 16263 (N.D. Ill. Sept. 30, 1999), in which a plaintiff ’s claim that the failure of the city’s health plan to provide a hearing aid benefit was a violation of the ADA was rejected. The court reasoned that there was no violation of the ADA because “...plaintiffs receive exactly the same coverage that other city employees receive, regardless of disability. Id. at *24 n.11. Notwithstanding this interpretation, the EEOC filed suit against Hertz Corporation in 1997, claiming that a $150 limit on benefits paid for hearing aids contained in the Hertz medical plan violated the ADA. 24 Pens. & Ben. Rep. (BNA) 1104 (May 5, 1997). The case settled on confidential terms. Although courts generally do not view corrective eyewear as a sign of a disability under the ADA, courts may be more receptive to the argument that the need for a hearing aid is a sign of a disability, perhaps because the use of corrective

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lenses is much more common in society than the use of hearing aids. Even so, given the court decisions to date on the section 501(c) “safe harbor” it appears to be unlikely that a court will find that uniform plan limitations or exclusions regarding hearing aids are discriminatory, unless a state law requires otherwise. PRESCRIPTION DRUGS • The ADA prohibits employers from making disability-related inquiries of employees, unless the inquiry is job-related or consistent with business necessity. 42 U.S.C. §2112(d)(4)(A). It is often difficult to determine whether an employer’s inquiries about an employee’s prescription drug use is appropriate under the ADA. For example, in Roe v. Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1226 (10th Cir. 1997), the employer adopted a policy requiring, as a condition of employment, that employees report “without qualification” all drugs present within their system. The policy further provided that “prescribed drugs may be used only to the extent that they have been reported and approved by an employee supervisor.” Id. Inquiry Must Be Job-Related And Consistent With Business Necessity Although the district court recognized that the employer’s inquiry regarding prescription drug use would be permissible if the employer could demonstrate the inquiry was job-related and consistent with business necessity, the court found the employer failed to make any such showing. Id. at 1155 (D. Colo. 1996). Therefore, the district court determined the policy constituted a “disability-related inquiry” and granted summary judgment in favor of the plaintiff on her medical inquiry claim. Id. The Tenth Circuit upheld the district court’s determination that the employer’s prescription drug disclosure policy violated the ADA. Roe, supra, 124 F.3d 1221.

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In Wyland v. Boddie-Noell Enters., Inc., 165 F.3d 913 (4th Cir. 1998), an employee sought to be promoted to a supervisory position with respect to fast food franchises. The job would require the employee to do a lot of driving in a company car. The employer required the employee to disclose his prescription drug use. Upon discovering the employee was taking prescription narcotics in connection with a back injury, the employer asked that the employee take quarterly drug tests to demonstrate that the prescription narcotics were no longer in his system. When the employee failed to timely report for a quarterly drug screen, he was terminated. The employee sued his employer under the ADA, alleging wrongful discrimination and impermissible disability-related inquiries. On the issue of whether the prescription drug inquiries and quarterly drug testing was inappropriate under the ADA, the court found they were both job-related and necessary for a business purpose. The court said the employer needed to ensure that the employee was capable of driving the company car as required to perform his job. Therefore, the court held the employer did not violate the ADA. CONCLUSION • Given the broad interpretation of the section 501(c) “safe harbor” and the Circuit Courts’ holdings that equal availability of the same policy to all does not constitute discrimination, it appears that most types of plan limitations or exclusions will not be found to be in violation of the ADA so long as they are equally and generally applicable to all plan participants, are consistent with

state laws, and are not disease- or disability-specific. See EEOC Guidance at Part III B. For example, in Templet v. Blue Cross/Blue Shield of Louisiana, 2000 U.S. Dist. LEXIS 15605 (E.D. La, Oct. 19, 2000), the court held that an insurance policy’s exclusion of benefits for weight-related conditions did not violate the ADA. In addition, attorneys should make sure to check individual state statutes that may mandate coverage of specific types of health-related conditions. For instance, Connecticut mandates insured plans to cover all mental health conditions listed in the most recent edition of the DSM on the same basis as they cover physical conditions. Conn. Gen Stat. 38a - 488a. The Ninth Circuit upheld a Washington state law requiring all plans to cover the cost of various alternative health practitioners. Washington Physicians Serv. Ass’n v. Gregoire, 147 F.3d 1039 (9th Cir. 1998), cert. denied, 525 U.S. 1141 (1999). Massachusetts and Connecticut require insured plans to cover certain fertility treatments. Finally, attorneys should know what approach to take in analyzing these questions. It is always best to keep the basic analytical framework of the ADA in mind. To qualify under the ADA, there must be an impairment and it must substantially limit a major life activity. In assessing an employee benefit plan, think first about the nature of physical limitation in question, do some research to determine if it is a recognized disability, and, if so, whether there is disparate treatment. If so, then there is good cause to challenge the plan and to do so in the interest of defending the employee’s ADA-protected rights.

PRACTICE CHECKLIST FOR Employee Benefits Issues And The Americans With Disabilities Act ERISA gives plan sponsors the flexibility to put limitations into welfare plans and amend them, so long as they follow the plan’s formal procedures. Nevertheless, welfare plan coverage can be challenged under Americans with Disabilities Act.

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Under the ADA, Title I covers private employers, Title II public employers, and Title III public accommodations. In general, the federal government and states cannot be named as defendants, but governmental subdivisions of states can be. Potential ADA plaintiffs include anyone who can satisfy the ADA’s basic requirement as an individual: __ With a physical or mental impairment that substantially limits one or more of the major life activities of such individual; __ With a record of such impairment; or __ Who is regarded as having such an impairment. • To establish a claim under the ADA, a plaintiff must demonstrate that he or she is: __ Disabled within the meaning of the ADA; __ Qualified, that is, with or without reasonable accommodation (which plaintiff must describe); and __ Able to perform the essential functions of the job. • The EEOC has defined an “impairment” as a physiological disorder affecting one or more named body systems, a mental disorder, or a psychological disorder. The ADA does not define either “substantially limits” or “major life activity.” The regulations implementing the ADA explain that a person is “regarded as” having an impairment that substantially limits a major life activity if he or she: __ Has a physical or mental impairment that does not substantially limit major life activities but is treated as constituting such limitation; __ Has a physical of mental impairment that substantially limits major life activities only as a result of the attitudes of others toward such impairment; or __ Has none of the impairments defined in the regulations but is treated as having a substantially limiting impairment. • “Disability” must be determined with regard to mitigating or corrective measures, including both measures undertaken with artificial aids, like medications and devices, and measures undertaken, whether consciously or not, with the body’s own systems. • A claimant has to exhaust administrative remedies and a charge must be filed with the EEOC within 180 days after the alleged unlawful employment practice occurred or within 300 days if the person aggrieved has initially instituted proceedings with an authorized state or local agency. • The ADA’s ban on discrimination expressly includes “fringe benefits available by virtue of employment, whether or not administered” by the employer. 42 U.S.C. §12112(b); 29 C.F.R. §1630.4(f). • Benefit plans must be non-discriminatory; so if disabled employees receive the same benefit package as the non-disabled, no discrimination occurs. Additionally, the ADA does not require equal coverage for every type of disability. However, the ADA does not invalidate any law of any state or a political subdivision of any state “that provides greater or equal protection for the rights of individuals with disabilities than are afforded by this chapter.” 42 U.S.C. §12201(b). • In general, Title III of the ADA cannot be used to challenge insurance policies offered through employment because a “benefit plan offered by an employer is not a good offered by a place of public accommodation.” • A “distinction” is any difference in benefits under a plan. Under the EEOC Guidance, a distinction is based on a disability if it singles out a particular disability, a group of disabilities, or disability in general. In terms of employment discrimination law, the EEOC’s position is that a medical plan can

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only violate the ADA through “disparate treatment,” and not “disparate impact,” so an employer need not have a better medical plan for its disabled employees than for its non-disabled employees. •

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A uniform pre-existing condition clause that excludes from coverage the treatment of conditions that pre-date an individual’s eligibility for benefits, is not a disability-based distinction, and thus does not violate the ADA. Most health plans have much lower limits for benefits for mental disorders than for physical disorders. The EEOC Guidance expressly states that a distinction between lifetime maximum mental and physical benefits is not based on disability and therefore does not violate the ADA. A limitation of mental health benefits must comply with the Mental Health Parity Act of 1996 (“MHPA”), which became effective on January 1, 1998. 42 U.S.C. §300gg-5 (1996). The MHPA prevents lifetime caps on mental health benefits in a group health plan if physical benefits are not similarly capped. 42 U.S.C. §300gg-5(a)(1)(A). This statute has many exceptions. A broad-based exclusion of experimental treatments or drugs is not a violation of the ADA because it is not a disability-based distinction. HIV is considered to be a “physical impairment during every stage of the disease” that can substantially limit many major life activities. Under current ADA precedents, employers and insurers generally do not have to offer equal benefits for HIV treatment. Exclusion of infertility treatment should not violate the ADA because infertility is not a disabilitybased distinction because it does not single out a particular group of disabilities but applies equally to all plan participants. The EEOC Guidance states that an individual who uses a hearing aid to correct only slight hearing loss is not necessarily disabled under the ADA. Thus, an exclusion for all hearing aid expenses should pass muster under the EEOC’s guidelines because it impacts disabled and non-disabled employees/ participants equally. Inquiries about prescription drug use are permissible if the employer could demonstrate the inquiry is job-related and consistent with business necessity. State law requirements may be more stringent than the ADA.

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