Labor & Employment Alert An informational bulletin from the Labor & Employment Practice at Goodwin Procter

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1 January 23, 2004 Labor & Employment Alert An informational bulletin from the Labor & Employment Practice at Goodwin Procter Recent U.S. Supreme Court and Massachusetts SJC Decisions Clarify Disability Discrimination Issues Last month, the United States Supreme Court and the Massachusetts Supreme Judicial Court issued decisions regarding disability discrimination issues of significant interest to employers. This Alert describes those decisions and their potential impact on employers. Raytheon v. Hernandez The United States Supreme Court s decision in Raytheon Co. v. Hernandez, (December, 2003), addressed important questions regarding claims of disparate treatment and disparate impact under the Americans with Disabilities Act ( ADA ). The Court unanimously held that an employer s no re-hire policy, pursuant to which the company refused to re-hire individuals who had left the company due to workplace misconduct, constitutes a legitimate, nondiscriminatory reason for refusing to re-hire a former employee. The Court, however, left unanswered the question of whether such a policy might, under certain circumstances, give rise to a disparate impact claim. Background The ADA, along with many other antidiscrimination statutes, allows for two broad categories of claims disparate treatment and disparate impact. Disparate treatment is readily understandable. In such a case, plaintiffs seek to prove that their employer has treated them less favorably than others because of their disability. Proof of discriminatory motive is vital in such cases. Disparate impact, by contrast, requires no showing of discriminatory motive. Instead, in a disparate impact case, the plaintiff seeks to prove through statistical evidence that a facially neutral employer policy or requirement adversely affects members of the protected class in a disproportionate manner. In Hernandez, the plaintiff brought a disparate treatment claim against his former employer, Raytheon, after the company refused to re-hire him. Hernandez had worked for Raytheon for over 20 years when, in 1991, he failed a drug test administered after his appearance and behavior at work suggested that he might be under the influence of drugs or alcohol. Upon notification that he had failed the test, Hernandez admitted to the company that he had used cocaine and alcohol the night before and resigned rather than face termination. Over two years later, Hernandez applied for re-hire. Upon receipt of his application, which indicated his prior employment with the company, Raytheon s human resources department reviewed his personnel file. The file contained an Employee Separation Summary, prepared at the time of his resignation, which stated the following as the reason for separation: discharge for personal conduct (quit in lieu of discharge). There was no indication in the file that Hernandez Boston New York New Jersey Washington DC

2 had been addicted to drugs the employment separation summary stated that he had been discharged for violating workplace conduct rules. However, one of the two letters of reference submitted by Hernandez along with his application stated that he regularly attended meetings of Alcoholics Anonymous and was in recovery. Raytheon rejected Hernandez s application because it had a policy against rehiring employees who were terminated for workplace misconduct. After receiving a determination from the EEOC that Raytheon may have rejected [Hernandez s] application based on his record of past alcohol and drug use, Hernandez filed a complaint against Raytheon in federal district court. He alleged that Raytheon refused to re-hire him because of his record of drug addiction or because he was regarded as being a drug addict. In response to Raytheon s motion for summary judgment, Hernandez argued for the first time that, if Raytheon had applied its no re-hire policy to him, it violated the ADA because such policy has a disparate impact on recovering drug addicts. The federal district court granted Raytheon s motion for summary judgment with regard to Hernandez s disparate treatment claim. The court refused to consider his disparate impact claim because he had failed to raise it in a timely manner. The Ninth Circuit Court of Appeals reversed the decision. Although it agreed with the District Court that Hernandez had not raised a timely disparate impact claim, the Ninth Circuit held that Raytheon s no re-hire policy was not a legitimate, nondiscriminatory reason for refusing to re-hire him because such policy had a disparate impact on recovering drug addicts and served to ban the re-employment of a drug addict despite his successful rehabilitation. The Supreme Court s Decision Specifically, the Supreme Court agreed to decide the question of whether the ADA confers preferential re-hire rights on disabled employees lawfully terminated for violating workplace conduct rules. The Supreme Court, however, did not address that issue because it concluded that the Ninth Circuit had erred by applying disparate impact analysis to a disparate treatment case. Justice Thomas, writing for a seven-member majority (two justices recused themselves), stated that, had the Ninth Circuit correctly applied the disparatetreatment framework, it would have been obliged to conclude that a neutral re-hire policy is, by definition, a legitimate nondiscriminatory reason under the ADA. Therefore, Raytheon had met its burden of production. In remanding the case back to the lower court, Justice Thomas noted that the only remaining issues were (i) whether Raytheon had, in fact, applied the no re-hire policy to Hernandez and, (ii) whether Hernandez could come forward with any evidence of discriminatory intent on the part of Raytheon. On remand, Hernandez, in the absence of direct evidence of discriminatory intent, would attempt to prove his case through circumstantial evidence, such as evidence showing that Raytheon enforced its no re-hire policy more strictly against alcoholics and drug users than other former employees fired for misconduct. See Flynn v. Raytheon Co., 868 F.Supp. 383 (D. Mass. 1994) (holding that the ADA did not prohibit an employer from firing an alcoholic for violating its policy that no employee report to work intoxicated, provided that it did not enforce that policy more strictly against alcoholics than it did against employees who were not alcoholics). With regard to this issue of discriminatory intent, the Court observed that, if the decisionmaker at Raytheon truly was unaware of Hernandez s alleged disability, i.e., his drug use, it would be impossible for her hiring decision to have been based, even in part, on his alleged disability. Therefore, Hernandez would have no claim for disparate treatment.

3 Comment The Hernandez decision is significant for several reasons. First, the Supreme Court emphatically concluded that a no re-hire policy, neutrally and consistently applied to all employees, is a quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules. The Court did not address the question of whether such a policy might have a disparate impact on former employees who were forced to resign for drug or alcohol use but have since been rehabilitated. Nor did the Court address the larger issue of whether the ADA requires employers to give disabled employees preferential treatment in a re-hire situation. Second, Justice Thomas noted that there was some question as to whether the Ninth Circuit had suggested that, because Hernandez s workplace misconduct (testing positive for cocaine) was related to his disability, Raytheon s refusal to re-hire him based on that misconduct violated the ADA. In a footnote that is likely to be the subject of much discussion in the lower courts, Justice Thomas observed that the Supreme Court has rejected a similar argument in the context of the Age Discrimination in Employment Act. In the case cited by Justice Thomas, Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993), the Court rejected a plaintiff s argument that his employer s decision to terminate him because his pension (which was calculated based on years of service) was about to vest necessarily meant that such decision was taken on account of his age. Instead, the Court concluded that [b]ecause age and years of service are analytically distinct, an employer can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on years of service is necessarily age based. By citing to Biggins, the Supreme Court appears to be signaling that employers may take disciplinary action against employees because of workplace misconduct, without violating the ADA, even where such misconduct is attributable to an employee s disability. Indeed, many lower federal courts, as well as the Supreme Judicial Court of Massachusetts, have held that an employee s disability is no excuse for workplace misconduct. See Garrity v. United Airlines, Inc., 421 Mass. 55 (1995); see also 42 U.S.C (c)(4) (employers may hold alcoholics and illegal drug users to the same standards as other employees). Lastly, the Court s opinion provides some practical litigation insight. The Court noted that the EEOC s probable cause determination may have been based, in part, on the fact that Raytheon s position statement to the EEOC, written by its Manager of Diversity Development, suggested that the person who rejected Hernandez s application had knowledge of his prior drug use. This person later testified, however, that she had no such knowledge. This inconsistency may prove problematic in the eventual trial of the case. Employers should be extremely diligent in preparing their initial responses to agency complaints, and give them the same careful attention they would give to a formal court complaint. City of New Bedford v. MCAD The Massachusetts Supreme Judicial Court s (December, 2003) decision in City of New Bedford v. Massachusetts Commission Against Discrimination established that an individual s inability to handle stressful aspects of his particular job does not render him handicapped within the meaning of the Massachusetts anti-discrimination statute. The Court also clarified the standard of review of an arbitrator s decision rendered under the auspices of the MCAD s alternative dispute resolution program. Background The case concerned a New Bedford police officer serving on the City s SWAT teams who, in the course of his duties, fatally shot an armed suspect. After spending 12 months on leave pending public and internal

4 investigations, he returned to his regular duties as a police officer. However, the City refused to reinstate the officer to the SWAT teams because he appeared to be under stress and not ready to perform in highrisk situations. The officer filed a complaint with the MCAD charging that the City illegally removed him from the SWAT teams based on a perceived handicap in violation of Massachusetts General Laws Chapter 151B. The parties agreed to submit their dispute to binding arbitration under the MCAD s alternative dispute resolution Policy The arbitrator found in favor of the officer and awarded him reinstatement to the special forces teams, back pay with interest, emotional distress damages, punitive damages, and attorney s fees. The City asked the MCAD to set aside the award; the MCAD issued a decision in which it declined to do so and declared the arbitrator s award final. After the City s appeal to the Superior Court was rejected, the City appealed to the SJC. The Court s Decision The Court rejected the officer s contention that the City s challenge should be assessed under the extremely deferential standard of review found in the Commonwealth s Uniform Arbitration Act for Commercial Disputes. Instead, the court looked to whether the MCAD complied with its own Policy 96-1, which requires the MCAD to set aside an arbitrator s decision if it is not in the public interest, or palpably wrong. The SJC concluded that the MCAD committed a clear error of law when it affirmed the arbitrator s award because the arbitrator was palpably wrong to have found the officer to be handicapped under 151B. The Court rejected the MCAD s assertion that judicial review should be limited to whether the agency abused its discretion in upholding the arbitrator s award. In holding that the officer was not handicapped under Chapter 151B, the SJC applied a three-part analysis derived from cases analyzing federal law: (i) whether a plaintiff s condition, actual or perceived, constitutes a mental or physical impairment; (ii) whether the life activity curtailed constitutes a major life activity; and (iii) whether the impairment substantially limits the major life activity. The officer claimed that he was not reinstated to the SWAT teams because he was perceived as being handicapped. In such perception cases the plaintiff must show that his employer believed that he had an impairment that substantially limited a major life activity. With respect to the issue of whether stress constitutes an impairment for purposes of Chapter 151B, the Court stated that stress might be a mental impairment in some cases, and therefore assumed that the plaintiff had established an impairment without deciding the issue. The major life activity at issue in the case was the activity of working. The SJC hinged its decision on the officer s inability to show that his mental impairment substantially limited his ability to work. Relying primarily on MCAD guidelines, the court held that a perceived impairment must preclude a plaintiff from performing a class of jobs. Here, the officer returned to active duty and assumed all of the duties the position demands and was not perceived by his superiors as limited in his ability to perform as an active police officer. The court stated that [a] perception that an employee is unable to perform only a particular aspect (SWAT team membership) of a single, particular job (New Bedford police officer) is not sufficient to satisfy the substantial limitation requirement of the statute. Further, the officer s attempt to recast the major life activity at issue from working to mental and emotional processes such as thinking, concentrating and interacting with others was of no consequence, since there was no evidence that his supervisors perceived him to be substantially limited in that regard. Comment City of New Bedford makes clear that Massachusetts employers do not have a duty

5 to accommodate employees simply because they find certain job duties to be too stressful. The case also sets forth a new standard of review for cases submitted for arbitration under the MCAD s arbitration policy, making clear that the MCAD will be required to set aside any arbitration decisions that are either palpably wrong or not in the public interest. The standard of court review of arbitration decisions under the MCAD s Policy 96-1 is much more stringent than the typical standard of review found, for example, in the Federal Arbitration Act, which provides that a court may overturn an arbitrator only in very limited circumstances, e.g., where the arbitrator was corrupt, partial, guilty of misconduct or exceeded his or her powers. Some federal case law suggests, however, that, in the employment discrimination context, an arbitrator s decision interpreting a statute (as opposed to a collective bargaining agreement) should be reviewed more carefully to determine whether the arbitrator s decision is in manifest disregard of the law and indicates that the standard must be sufficiently rigorous to permit a determination of whether the arbitrator properly interpreted and applied statutory law. This was the holding of the D.C. Circuit Court of Appeals in a 1997 case, Cole v. Burns International Security Svcs. The City of New Bedford case, coupled with the federal Cole doctrine, may eventually lead to greater judicial scrutiny of all arbitration decisions concerning Massachusetts employment discrimination claims, not just those conducted under the MCAD s auspices. Employers should be aware of this potential standard of review when they evaluate the pros and cons of implementing arbitration agreements with their employees in an effort to obtain quick and inexpensive binding resolution of any statutory disputes that may arise outside of the collective bargaining agreement context. For more information on these decisions and their potential implications for your business, please contact: Wilfred J. Benoit, P.C. wbenoit@goodwinprocter.com Robert M. Hale rhale@goodwinprocter.com James W. Nagle, P.C. jnagle@goodwinprocter.com Joseph A. Piacquad jpiacquad@goodwinprocter.com Bradford J. Smith, P.C. bsmith@goodwinprocter.com Albert J. Solecki, Jr. asolecki@goodwinprocter.com Full access to all articles on labor and employment law prepared by Goodwin Procter is available at: Full access to all articles prepared by Goodwin Procter is available at: This publication, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP or its attorneys Goodwin Procter LLP. All rights reserved.