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
38 | The Practical Lawyer 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
June 2007
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-
Employee Benefits and the ADA | 39
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).
40 | The Practical Lawyer “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,
Employee Benefits and the ADA | 41
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,
42 | The Practical Lawyer 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,
June 2007
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
Employee Benefits and the ADA | 43
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-
44 | The Practical Lawyer 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).
June 2007
•
•
•
•
•
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);
Employee Benefits and the ADA | 45
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-
46 | The Practical Lawyer 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
June 2007
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
Employee Benefits and the ADA | 47
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
48 | The Practical Lawyer 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
June 2007
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
Employee Benefits and the ADA | 49
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
50 | The Practical Lawyer 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:
June 2007
•
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
Employee Benefits and the ADA | 51
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
52 | The Practical Lawyer 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-
June 2007
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
Employee Benefits and the ADA | 53
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
54 | The Practical Lawyer 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
June 2007
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.
Employee Benefits and the ADA | 55
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.
56 | The Practical Lawyer •
June 2007
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
Employee Benefits and the ADA | 57
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.
•
•
•
•
•
•
•
•
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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