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Labor Law Roundup: Disabilities Act, Punitive Damages Highlight Supreme Court Term

July 1999

Co-Authors: Kris D. Meade, Terry Flynn and Andrew Bagley.

Those of us who follow such things predicted that the Supreme Court's 1998-99 term would be known in employment law circles as the "Year of the ADA." The Court did not disappoint. Having provided much-needed clarity last year in the area of sexual harassment, this year the Court turned its spotlight on the Americans with Disabilities Act ("ADA"), issuing four opinions that should dramatically affect ADA litigation. Read together, these opinions provide important clarification - and generally welcome news - to employers. In addition, the Court issued an important decision regarding the availability of punitive damages under Title VII of the Civil Rights Act of 1964.

Sutton, Murphy, and Albertsons': Good News on the ADA Front

On June 22, 1999, the Supreme Court provided its most extensive guidance to date on the definition of "disability" under the ADA, ruling in favor of employers in three separate cases. In these cases the Court ruled that a trial judge who evaluates whether a person is disabled under the ADA must consider the plaintiff's individual circumstances, including any correction of physical or mental impairments by use of medications or medical devices. The Court held that two women whose myopia was corrected by eyeglasses, a truck mechanic whose hypertension was controlled by medication, and a mechanic whose brain had compensated for virtual blindness in one eye were not entitled to protection under the ADA. The Supreme Court decisions represent a welcome clarification of some of the most hotly contested issues under the ADA. The decisions, however, leave a number of questions unanswered and assure significant ongoing litigation over the ADA's definition of disability.

The principal case among the three was Sutton v. United Air Lines, Inc. In Sutton, two sisters who suffer from severe myopia - but whose vision with glasses is corrected to 20/20 - applied to become pilots at United Air Lines. The airline rejected their applications because the sisters' uncorrected vision did not satisfy its minimum visual acuity requirements for that position. The sisters sued the airline under the ADA. The federal trial court in Colorado granted the airline's motion to dismiss the case, holding that the plaintiffs did not have a "disability" under the ADA because their vision impairment could be corrected with glasses and because the plaintiffs had not sufficiently alleged that they were regarded by the airline as having a disability. The Tenth Circuit affirmed, creating a split with prior rulings by six other circuit courts of appeal, all of which had held that disabilities should be determined without reference to mitigating measures.

The Supreme Court, on a vote of 7-2, affirmed the ruling of the Tenth Circuit. Writing for the majority, Justice O'Connor analyzed whether the near-sighted sisters could be deemed to have a "disability" under two prongs of the ADA's definition of disability: "a physical or mental impairment that substantially limits one or more of the major life activities of such individual"; and "being regarded as having such an impairment."

First, the Court ruled that the ADA's definition of "disability" mandates a fact-specific, individualized determination of whether the plaintiff is "presently - not potentially or hypothetically" substantially limited in a major life activity. The Court concluded that, in order to perform such an individualized analysis, a judge must take into account whether a person is taking measures to correct, or mitigate, a physical or mental impairment, as well as the effects, both positive and negative, of any mitigating measures. The Court also relied heavily on a Congressional finding - incorporated directly into the ADA - that the statute was designed to help "some 43 million Americans [who] have one or more physical or mental disabilities." Noting that the number of people with vision impairments alone is 100 million, the Court concluded that Congress must not have intended to include as disabilities any common, correctable impairments, such as weak vision, poor hearing, or high blood pressure.

Second, the Court held that, under the particular circumstances of that case, the plaintiffs had not adequately alleged that they were "regarded [by the employer] as having a disability." The Court ruled that the plaintiffs' allegations that the airline had deemed them physically unfit for the position of global airline pilot was insufficient to support their claim that the airline regarded them as having a disability that substantially limits one or more major life activities, such as working.

Justice Ginsburg, widely viewed as "left of center" on the Court and a strong proponent of the ADA, filed a short concurring opinion. Like Justice O'Connor, she relied on congressional findings specifically set forth in the statute - findings that "individuals with disabilities are a discrete and insular minority" who have been "subjected to a history of purposeful unequal treatment, and relegated to a position of political powerlessness in our society." Justice Ginsburg noted the common sense point that persons who need glasses do not constitute an "insular" minority that has been subjected to a history of discrimination. She thus concluded that the ADA's definition of disability "does not reach the legions of people with correctable disabilities."

The Supreme Court followed its Sutton rationale in Murphy v. United Parcel Service, Inc., holding that a truck mechanic whose hypertension was controlled by medication did not have a disability under the ADA. Similarly, in Albertsons, Inc. v. Kirkingburg, the Court again applied the Sutton principles to conclude that a truck driver who could only see effectively out of one eye - but whose brain had subconsciously compensated for the lack of vision in his weaker eye - did not have a disability under the ADA. The Court also held in Albertsons' that a difference in the means of performing one of life's activities - in this case, seeing with one eye instead of two - does not necessarily constitute a substantial impairment of a major life activity.

Overall, these three Supreme Court decisions represent good news for employers. They may help stem the ever-increasing tide of ADA claims filed by persons who suffer from common and easily correctable impairments. In addition, the Court left undisturbed the principle that employers are free to set criteria and preferences in hiring and that they are "free to decide that some limiting, but not substantially limiting, impairments make individuals less than ideally suited for a job." Therefore, the Court strongly reaffirmed the notion that a plaintiff's exclusion from a particular job on account of an impairment does not per se give rise to an actionable claim under the ADA.

On the other hand, these cases addressed only a limited spectrum of ADA cases. Each case involved individuals (a) who were not substantially limited in any major life activity or precluded from obtaining a range of jobs, but rather were barred from working in a particular job, and (b) whose mitigating remedies completely compensated for their impairments. The Court was not presented with more difficult facts - facts with which employers routinely deal. Moreover, the Supreme Court's reaffirmation that each inquiry is fact-specific ensures that much litigation over the definition of "disability" still lies ahead.

Cleveland: Admissions of "Total Disability" Do Not Preclude ADA Claims

The Court's fourth ADA decision, Cleveland v. Policy Management Systems Corp., settled another issue that has been the subject of much recent litigation. Resolving a split among the circuit courts, the Supreme Court held that the application and receipt of social security disability income ("SSDI") benefits "does not automatically estop" an employee from later filing an ADA claim or, for that matter, even "erect a strong presumption against the recipient's success under the ADA."

The plaintiff, Carolyn Cleveland, performed background checks on prospective hires for her employer until she suffered a stroke, which damaged her "concentration, memory, and language skills." She filed for SSDI benefits, claiming in writing that she was "disabled" and "unable to work." Three months later she returned to work, informed the Social Security Administration ("SSA") that she had returned, and her application for SSDI benefits was denied. Three days after the denial, Cleveland's employer terminated her and she asked SSA to reconsider its denial. In her request she stated that she "was terminated . . . due to my condition and I have not been able to work since. I continue to be disabled." In addition, she alleged that her employer had fired her because "she could no longer do the job in light of her 'condition.'" SSA again denied her benefits. At a subsequent SSA hearing Cleveland reiterated that she was "unable to work due to [her] disability." Following the hearing, the SSA awarded her benefits, retroactive to the date of her stroke.

One week before her SSDI award, Cleveland filed an ADA claim. The district court granted summary judgment to her employer on the basis that her admission of total disability in her SSDI fight estopped her "from proving an essential element of her ADA claim, namely that she could 'perform the essential functions' of her job, at least with 'reasonable accommodation.'" The Fifth Circuit affirmed, holding "that, because Cleveland consistently represented to the SSA that she was totally disabled, she has failed to raise a genuine issue of material fact rebutting the presumption that she is judicially estopped from now asserting that for the time in question she was nevertheless a 'qualified individual with a disability' for purpose of her ADA claim."

A unanimous Supreme Court reversed, ruling that "the two claims do not inherently conflict to the point where courts should apply a special negative presumption . . . ." The Court noted a number of reasons why an ADA claim and the receipt of SSDI benefits can stand side-by-side. First, in making a disability determination, the SSA does not assess whether the applicant may, with reasonable accommodation, continue to work. Second, the SSA uses a five-step question-and-answer process to simplify its assessment of disability and job availability. Thus, it is possible for a person to both qualify for SSDI benefits and, "due to special individual circumstances, remain capable of 'perform[ing] the essential functions' of her job.'" Third, the Court observed that the SSA often grants benefits to people who are working. Fourth, the nature of the disability may change over time such that the previous statement to SSA may not accurately reflect the plaintiff's condition at the time of the employment action at issue. Finally, the Court noted that individuals who have merely applied for SSDI benefits, and not received them, have engaged in "alternative pleading," a common and acceptable practice under the Federal Rule of Civil Procedure.

Notwithstanding its holding, the Court recognized that a "plaintiff cannot simply ignore [her prior statement of disability] . . . [r]ather, she must proffer a sufficient explanation" for the seemingly contradictory statement. Moreover, the Court noted that to "defeat summary judgment, that explanation must be sufficient to warrant a reasonable juror's concluding that, assuming the truth of, or the plaintiff's good faith belief in, the earlier statement, that plaintiff could nonetheless 'perform the essential functions' of her job, with or without 'reasonable accommodation.'" The Court remanded the case to the district court to evaluate the plaintiff's explanations that (a) the SSA did not take into account any reasonable accommodation and (b) her statements are all accurate in the time frame in which they were made.

The Court's decision in Cleveland, therefore, removes one important arrow from an employer's quiver, at least in the early stages of an ADA case, as employers will no longer be able to seek early dismissal of an ADA claim based on the claimant's prior assertions of "total disability." However, employers retain the ability to highlight such claims at the summary judgment and trial stages. Whether the lower courts will attach much importance to such claims at the summary judgment stage or whether juries will look askance at plaintiffs who make such claims is yet to be seen.

Kolstad: A Mixed Bag for Employers

In addition to its important decisions under the ADA, the Supreme Court issued a critical decision regarding the availability of punitive damages in employment discrimination cases. In a 7-2 ruling issued on June 22, 1999, the Court held that victims of intentional employment discrimination need not prove that their employer engaged in "egregious or outrageous" conduct in order to recover punitive damages under Title VII of the Civil Rights Act of 1964. However, in the same case, Kolstad v. American Dental Association, the high court also voted by a narrow 5-4 margin that employers may not be held vicariously liable for punitive damages where a manager's discriminatory conduct runs counter to the employer's good-faith efforts to maintain a bias-free workplace.

Congress amended Title VII in 1991 to allow victims of intentional employment discrimination to collect up to $300,000 in punitive damages if they prove that their employer engaged in a discriminatory practice "with malice or reckless indifference" to the employee's federally protected rights. The plaintiff in Kolstad sued her employer under Title VII for sex discrimination after she was passed over for a promotion in favor of a male co-worker. The jury found for Ms. Kolstad and awarded her $52,718 in back pay. At trial, however, the district court refused to submit the punitive damages issue to the jury, finding that the employer's conduct did not meet the standard set forth in the 1991 Amendments. On appeal, the full U.S. Court of Appeals for the District of Columbia Circuit agreed, holding that Congress intended to limit the availability of punitive damages to exceptional cases in which the employer has been shown to have engaged in some "egregious" misconduct.

In the majority opinion authored by Justice O'Connor, the Supreme Court set aside the D.C. Circuit's ruling and remanded the case to the trial court for further proceedings. Justice O'Connor acknowledged that when Congress amended the statute in 1991, it clearly intended to impose two standards of liability - one for establishing a right to recover compensatory damages and another, higher, standard to qualify for a punitive award. However, she said, Congress did not require "a showing of egregious or outrageous discrimination independent of the employer's state of mind." Rather, Justice O'Connor reasoned, the terms "malice" or "reckless indifference" in the statute refer to the employer's knowledge that it may be acting in violation of federal law. Thus, to recover punitive damages, a plaintiff need only show that the employer "discriminat[ed] in the face of a perceived risk that its actions [would] violate federal law." Under this standard, intentional discrimination would not give rise to liability for punitive damages when the employer is unaware of the federal prohibition against its conduct or engages in conduct with the distinct belief that the conduct is lawful.

Even assuming that a plaintiff could establish that a manager acted with the requisite malice or reckless indifference, the next question, said the Court, is whether liability for punitive damages may be imputed to the corporate employer. Writing for a narrow 5-4 majority, Justice O'Connor said that an employer may not be held vicariously liable for punitive damages based upon the discriminatory employment decisions of managerial employees if the employer has undertaken good faith efforts to eliminate bias from the workplace. Justice O'Connor explained that imposing vicarious liability where an employer has endeavored to comply with the law would run counter to the traditional common law rule that it is improper to award punitive damages against a person who is personally innocent of misconduct. The majority also observed that a shield against punitive damages for companies which implement procedures to prevent discrimination in the workplace accomplishes Title VII's objective of motivating employers to detect and deter discriminatory conduct.

The Kolstad decision will have the most significant impact in jurisdictions, such as the D.C. Circuit, which previously required a showing of "egregious" misconduct as a prerequisite to recovery of punitive damages. In those jurisdictions, it will now be significantly easier for plaintiffs to establish preliminary entitlement to punitive damages under Title VII in cases involving claims of intentional discrimination. The good news is that the decision also provides employers with a powerful defense against ultimate liability for punitive damages. Employers who have taken proactive measures to devise and enforce policies against workplace discrimination will now have a strong basis for moving to dismiss punitive damages counts before or at trial. Thus, the Kolstad decision, like the Supreme Court's 1998 decisions in the sexual harassment arena, underscore the importance of maintaining a proactive, ongoing anti-discrimination program.

Kris D. Meade
Partner – Washington, D.C.
Phone: +1.202.624.2854

Andrew W. Bagley
Senior Counsel – Washington, D.C.
Phone: +1.202.624.2672