Association Discrimination: Yet Another Pitfall for the Unwary Employer

April 1, 2008

The Seventh Circuit Court of Appeals, which covers Wisconsin, recently revived Phillis Dewitt’s claim for “association discrimination” under the Americans with Disabilities Act (ADA). Dewitt sued her employer, Proctor Hospital, after her employment was terminated. Dewitt claimed that Proctor Hospital discriminated against her in violation of federal law because her husband’s expensive cancer treatment was costing more than Proctor Hospital wanted to pay through its employee health insurance program. The trial court dismissed her claim; the court of appeals overturned that decision.

In September 2001, Proctor Hospital hired Dewitt to work as a nurse on an “as-needed” basis. Proctor Hospital apparently liked how Dewitt did her job because the following month she was promoted to the permanent position of second-shift clinical manager. In that role, Dewitt supervised nurses and other Proctor Hospital staff members. Three years into the job, Dewitt switched to the first-shift clinical manager slot. In the summer of 2005, she switched to a part-time schedule, sharing the responsibilities of second-shift clinical manager with a coworker. Dewitt received favorable performance reviews and appeared to be a valued employee.

Dewitt and her husband, Anthony, were covered under Proctor Hospital’s health insurance plan. Throughout Dewitt’s tenure, Anthony suffered from prostate cancer and received expensive medical care. His covered medical expenses were paid by Proctor Hospital, which was partially self-insured. It paid for members’ covered medical costs up to $250,000 per year. Anything above this “stop-loss” figure was covered by a policy issued by the Standard Security Life Insurance Company of New York. Dewitt was able to maintain health insurance coverage for herself and Anthony even during her short part-time stint, since Proctor Hospital credited Dewitt with “hospital approved absence” (unpaid time), allowing her to reach the minimum number of hours necessary to qualify for benefits.

Since Proctor Hospital was self-insured, it took a keen interest in the medical claims submitted by its employees. Each quarter, the administrator of Proctor Hospital’s medical plan prepared a “stop-loss report” for Proctor Hospital’s vice-president of human resources, Linda Davis. The report identified all employees whose recent medical claims exceeded $25,000. The stop-loss reports highlighted Dewitt’s expenses. In 2003, the Dewitts’ medical claims for Anthony were $71,684. In 2004, the figure jumped to $177,826. In the first eight months of 2005, the expenses were $67,281.50.

In September 2004, Davis confronted Dewitt about Anthony’s high medical claims. Specifically, she asked what treatment Anthony was receiving. Dewitt responded that he was undergoing chemotherapy and radiation. Davis asked Dewitt if she had considered (less expensive) alternative hospice care placement for her husband. Dewitt responded that Anthony’s doctor considered the less expensive hospice care placement to be premature. Davis explained that a committee was reviewing Anthony’s medical expenses, which she described as unusually high. In February 2005, Davis again pulled Dewitt aside to ask about Anthony’s treatment. Dewitt informed her that Anthony’s situation had not changed. In May 2005, Davis organized a meeting where she informed the employees that Proctor Hospital faced financial troubles, which, according to Davis, required a “creative” effort to cut costs.

Proctor Hospital fired Dewitt on August 3, 2005, and designated her as “ineligible to be rehired in the future.” Proctor Hospital provided no explanation for its “ineligible for rehire” decision. Proctor Hospital claimed only that Dewitt was fired for “insubordination.” Dewitt’s medical benefits with Proctor Hospital continued as Dewitt paid for COBRA coverage for herself and her husband until he passed away in August 2006.

The Court’s Decision
Dewitt filed a lawsuit under the infrequently litigated “association discrimination” section of the ADA. Under 42 U.S.C. § 12112(b)(4), an employer is prohibited from discriminating against an employee as a result of “the known disability of an individual with whom [the employee] is known to have a relationship or association.” Specifically, Dewitt claimed that Proctor Hospital fired her to avoid having to continue to pay the substantial medical costs that were being incurred by her husband under Proctor Hospital’s self-insured health insurance plan. There are three categories into which “association discrimination” plaintiffs generally fall: (1) expense; (2) disability by association; and (3) distraction. In the “expense” scenario, an employee who is fired because her spouse has a disability that is costly to the employer (i.e., he is covered by the company’s health plan) is within the intended scope of the “associational discrimination” section of the ADA.

Proctor Hospital paid its employees’ medical bills until the claims exceeded $250,000, so it personally paid Dewitt’s expenses. Dewitt produced evidence that Proctor Hospital faced financial trouble and was concerned about cutting costs. In a May 2005 meeting, Proctor Hospital’s clinical managers made clear to its employees that the hospital would have to be “creative” in cutting costs. Proctor Hospital’s management was interested specifically in the high cost of Anthony’s treatment. Twice, Dewitt’s supervisor, the person who ultimately fired her, asked about Anthony’s medical condition. Dewitt was told that a Proctor Hospital committee was reviewing Anthony’s unusually high medical expenses. Dewitt was asked whether she considered hospice care instead of costly chemotherapy and radiation. The timing of Dewitt’s termination suggests that the financial burden of Anthony’s continued cancer treatment was an important factor in Proctor Hospital’s decision to terminate Dewitt’s employment. Dewitt was fired five months after her supervisor asked if she considered hospice care for Anthony and three months after Proctor Hospital warned employees about impending “creative” cost-cutting measures. The court determined that Dewitt may have been terminated because Proctor Hospital was concerned that Anthony might survive for a long period of time and be too costly.

Proctor Hospital argued that its decision to terminate Dewitt’s employment could not have been based on the high cost of Anthony’s cancer treatment because the medical expenses of other female employees exceeded those of Dewitt and that it never sought to restrict the Dewitts’ access to health insurance. Proctor Hospital also argued that firing Dewitt would not mean that it would be rid Anthony’s medical bills since Dewitt was eligible for post-termination COBRA insurance. However, the court noted that COBRA coverage would expire after 18 months and at the very least limit Anthony’s medical expense.

The court ruled that Dewitt provided direct evidence that “association discrimination” may have motivated Proctor Hospital to terminate her employment.

Interestingly, Judge Posner wrote an additional opinion, called a concurrence. Judge Posner thought that Proctor Hospital did not discriminate against Dewitt on the basis of her association with a disabled person, but terminated her solely because she was an employee whose spouse caused her employer to incur substantial medical expenses. Proctor Hospital simply failed to produce the evidence that Proctor Hospital fired Dewitt because she cost more money than the Proctor Hospital was willing to spend. If cost was Proctor Hospital’s only motive for terminating Dewitt’s employment, then Anthony’s disability played no role in the employer’s decision and it was not guilty of disability discrimination. The judge then invited Proctor Hospital to make this argument again in front of the trial court.

Bottom Line
Employers should always pay careful attention to any decisions which may be violations of federally protected rights. Wisconsin’s Fair Employment Act provides additional protections for employees and is more liberally interpreted to protect employees than the ADA. If you find yourself facing a similar scenario, consulting with legal counsel is advised before taking any adverse employment action against an employee who may have a potential association discrimination claim.

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