Ohio to prohibit discrimination based on "military status"

I try to stay on top of all issues that impact Ohio employers, but this one simply fell beneath my radar. On December 20, Governor Strickland signed into law House Bill 372 – The Ohio Veterans Package.

Of importance to employers, the law, which will go into effect on March 18, 2008, adds "military status" to the list of classes protected from discrimination in employment by Ohio Revised Code chapter 4112. "Military status" means a person's status in "service in the uniformed services," which includes active duty, active duty for training, initial active duty for training, inactive duty for training, full-time national guard duty, and performance of duty or training by a member of the Ohio organized militia, in addition to any period of time a person is absent from work for a fitness for duty exam for such service.

Ohio now joins a handful of other states in which it is illegal to discriminate based on military status. This law does will not affect the rights that employees already enjoy under the federal Uniformed Services Employment and Reemployment Rights Act (USERRA). Now is as good a time as any to educate your supervisors and managers that "military status" will be joining the list of employment law no-nos in Ohio, alongside race, sex, age, disability, religion, national origin, color, and ancestry.

(Hat tip to John Phillips' Word on Employment Law.)

Supreme Court considers use of age as factor in disability retirement benefits

Yesterday, the Supreme Court heard oral argument in Kentucky Retirement Systems v. EEOC. The issue is whether a benefit plan's use of age as a potential factor in the distribution of retirement benefits to disabled workers establishes a prima facie case of age discrimination. Kentucky’s disability retirement plan at issue awards benefits based in part on how close a disabled worker is to reaching normal retirement. For example, it disqualifies those who have already reached normal retirement age, and otherwise calculates disability retirement benefits so that an eligible older employee receives a lower monthly benefit payment than a younger disabled employee who is similar to in every relevant way other than age. It therefore affects older workers differently than younger workers, even though its goal is to provide workers with the same retirement benefits he or she would achieved by working until eligible for normal retirement.

The EEOC sued on behalf of a 61-year-old disabled employee. Because he was over age 55 and eligible for normal retirement, he received normal retirement benefits based on his years of service. The EEOC claimed that this policy constituted age discrimination because had he been under age 55 and not eligible for retirement, he would have received higher disability retirement benefits based on the 20 years of service he would have been granted under the plan.

The 6th Circuit decision from which the State of Kentucky appealed found that the EEOC established a prima facie case of age discrimination based on the facially discriminatory language of the plan, and further that when a plan is facially discriminatory one need not offer any further proof of discriminatory animus to establish a prima facie case.

The State argued that the plan is not facially discriminatory because it differentiates on the basis of retirement eligibility, and not age. The EEOC has countered that the plan is facially discriminatory because it uses age as a factor to the disadvantage of older workers.

Kentucky also argues that as age is a necessary component of any retirement plan, only plans that use age in an arbitrary manner can be considered discriminatory on the basis of age. The EEOC, on the other hand, counters that the the at-issue plan is arbitrary because its use of age to provide a claimed necessary safety net for younger workers is based on "stereotypical assumptions of the kind the ADEA seeks to eradicate."

Instead of reinventing the wheel on yesterday's oral argument, I'll merely point everyone to Professor Paul Secunda's thorough summary at the Workplace Prof Blog.

It is very difficult to get a read on what the Court is going to do with this case. If I had a vote, I would reject Kentucky's argument that there is a difference between retirement eligibility and age. The former certainly seems like a proxy for the latter, and both are facially discriminatory. Nevertheless, I would reverse the 6th Circuit, because the use of age in this context simply is not arbitrary. One simply cannot design a disability retirement plan without taking age into consideration.

Deconstructing the Ohio Healthy Families Act

Last week a colleague asked me for my opinion on the proposed Ohio Healthy Families Act that is now pending in the state legislature. I figured I'd share it with the world. I think that the OHFA is largely a political agenda that, at the end of the day, will do nothing more than create yet another avenue for employees to sue their employers, while at the same time creating an administrative mess for Ohio businesses. Sick Days Ohio, the group lobbying for this bill, estimates that 2.2 million Ohio employees cannot earn paid sick days. I have no idea where they get their numbers from, but it seems like a gross exaggeration to me. According to the 2000 census, Ohio has approximately 6.7 million people of working age. I find it hard to believe that one-third of all Ohio workers do not have access to paid days off.

Essentially, the OHFA will grant all employees working for companies with 25 or more employees 7 paid days off per year for (1) their own physical or mental illness, injury or medical condition, (2) their own professional medical diagnosis or care, or preventive medical care, and (3) the same for an employee's child, parent, or spouse. Employees who work less than 30 hours per week or 1,560 total hours per year will receive a pro rated amount of paid time off. Sick leave will begin to accumulate immediately, but employees will not be able to use it until they have been employed for 90 days. The paid sick leave must accrue at least monthly, and except for the initial 90 days of employment, employees will be able to use it as it is accrued. Employers will not be able to prohibit employees from carrying over up to 7 days of unused paid time off per year.

Similar to the FMLA, but without the FMLA's level of specificity, the OHFA will also allow for the use of incremental (i.e., less than a full day) time off, certification by a health care professional when an employee is out for more than 3 consecutive work days, an anti-retaliation provision, and a private right of action for aggrieved employees. It also will forbid employers from counting the use of paid sick leave under a no-fault attendance policy. It is unclear if this prohibition applies only to paid leave under this statute, or any paid leave granted by an employer. Finally, it will require employers to keep records documenting hours worked and paid sick leave taken by employees for a period of 3 years.

Proposed O.R.C. 4114.07(B) is what I believe to be the saving grace for most employers, and why I think the OHFA will not result in monumental practical changes for the vast majority of companies that already provide paid time off. That section provides: "An employer with a leave policy providing paid leave options shall not be required to modify such policy, if such policy offers an employee the option at the employee’s discretion to take paid leave that is at least equivalent to the sick leave described in this section." As I read that section, and this is where my colleague and I differ, if a company has a leave policy that already provides for at least 7 paid sick days, it will not have to grant any additional paid leave.

The limited practical effect of this legislation notwithstanding, the cons of the OHFA far outweigh its pros. First and foremost, that last thing that businesses want is another statute under which employees will be able to sue, especially when it provides for treble damages and attorneys fees. Take a look at proposed O.R.C. 4114.10(C)(2): "No employer shall discharge or in any manner discriminate against any employee for opposing any practice made unlawful by this Act, including ... using paid sick leave taken pursuant to this Act as a negative factor in an employment action, such as hiring, promotion, or a disciplinary action." "Negative factor" is far too lenient of a standard, and will hamstring employers from taking action against any employee who is out for even a day with an illness.

There are other serious gaps in the statute. For example, the OHFA states that it covers all employers with 25 or more employees. If a company has 1,000 employees nationwide, but only maintains one Ohio facility with 15 employees, will the OHFA apply to that employer? What does "physical or mental illness, injury or medical condition" mean? What type of certification by a health care professional will support an extended leave? Can an employer dispute such a certification and obtain a second opinion?

The legislature, and if necessary, Ohio's voters, should take a long, hard look at these serious deficiencies in the OHFA, and should not merely knee-jerk vote in its favor because paid time off is viewed by most employees (and most of us are employees) as a "good thing." If this statute becomes law in its current form, it will take a herculean effort by the director of commerce to draft clear and comprehensive rules and regulations that make this law workable for businesses, instead of leaving myriad unanswered questions for the courts to sort out at the expense of those companies who will have to defend their individual interpretations.

Health insurance audits poised as a trend for 2008

Does anyone remember the episode of the Drew Carey Show where Drew's dog needed a hip replacement? Drew couldn't afford it, so he claimed his dog as his gay husband to get coverage under his employer's medical plan. I was reminded of it Saturday morning when reading the front page of the Cleveland Plain Dealer's business section, which had an article on employer audits to verify health insurance dependents. The article reports that to control rising insurance costs, more and more companies are auditing their health plans and requiring employees to prove (via marriage and birth certificates) the status of claimed dependents. It cites Chrysler as an example, which found 20,000 ineligible dependents saving the company millions of dollars.

Maybe I'm missing something here, but isn't this fraud? Do we want employees working for us who willfully steal by claiming false dependents? Today's unqualified dependent could be tomorrow's embezzlement. Isn't this covered by our employee handbooks, which should have a policy that states that theft is grounds for immediate discharge? But, at the same time, can Chrysler continue to build cars if it has to terminate 20,000 employees? Could you survive if you had to immediately terminate a percentage of your workforce? You could pick one or several employees to set an example, but then you run the risk of being scrutinized under the discrimination laws for who you selected and did not select.

Maybe the best way to handle this problem is to write it directly into your employee handbook. Change your termination policy to clearly state that claiming an unqualified dependent for company benefits is considered theft and subject to discipline up to and including termination. That way, expectations are established on the front end, and employees will have less of reason to cry foul if they are terminated for this type of insurance fraud.

Ohio Healthy Families Act up for legislative consideration

As I reported in October, the Ohio legislature will this term consider the Ohio Healthy Families Act. The Act, if passed, will guarantee 7 sick days for all full time Ohio employees who work for companies with 25 or more employees, and a prorated number of days for part time employees. As today's Cleveland Plain Dealer reports, "If the Republican-led House and Senate fail to act within 120 days, the union-led coalition behind the Healthy Families Act will have the right to take the issue to the November ballot." That threat may spur the Republicans to pass the legislation, as having an issue such as this on the ballot in November will certainly draw more Democrats to the polls to vote for it, just as the Minimum Wage amendment did in 2006. This issue bears watching, and I will continue to post updates as this bill weaves it way through the legislature.

Federal court upholds punitive verdict with no compensatory damages

It has long been the law in Ohio that a jury cannot award punitive damages without also making a corresponding award of actual, compensatory damages. Further, since the United States Supreme Court decided State Farm Mut. Automobile Ins. Co. v. Campbell several years ago, it has also been the law that for a punitive verdict to satisfy due process, there cannot be an excessive disparity between the actual harm suffered by the plaintiff and the punitive damages award. The Supreme Court, albeit in dicta, suggested that "few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process."

A case earlier this week out of the 5th Federal Circuit, however, casts serious doubt on both of these long-held principles. In Abner v. The Kansas City So. RR, a racial harassment case, the court of appeals upheld a $125,000 punitive damage jury verdict with a mere grant of $1 in nominal damages by the court. Abner involved allegations of racial graffiti, a noose hanging outside a door, racially derogatory comments, and a company that failed to correct this improper behavior.

In reaching its conclusion, the court relied heavily on the statutory damage caps put in place by the Civil Rights Act of 1991. The court found that under the plain language of Title VII and Section 1981, an award of punitive damages need not be accompanied by any compensatory damages. The statutory damages cap takes care of any potential runaway jury verdicts. Also because of the statutory cap, the court was unconcerned with the 125,000-1 ratio between the punitive and nominal damages. If the plaintiff was not harmed by the alleged harassing conduct, how could he have been sufficiently subjectively offended by the conduct to sustain the harassment claim in the first place? The gap in common sense in allowing this punitive verdict to stand for an uninjured plaintiff is astounding. Civil lawsuits are supposed to compensate for harm suffered, not to punish for the sake of punishment. If there is no harm to remedy, then the law has no role in doling out punishment.

Let me also point out that the conduct that led to a $125,000 verdict in Abner is eerily similar to the same conduct over which the EEOC settled with Lockheed Martin for $2.5 million earlier this week. I can't wait until the next time I'm asked to evaluate a racial harassment case and have to provide a range of $125,000 and $2.5 million as the potential exposure. Does this disparity make any sense at all?

Hat tip to John Phillips at The Word on Employment Law and Ross Runkel's Employment Law Blog.

6th Circuit limits scope of "regarded as" disability claims

The Americans with Disabilities Act not only protects employees who have actual disabilities, but also those who have a record of a disability and those who an employer regards as disabled. Gruener v. The Ohio Casualty Ins. Co., decided yesterday by a unanimous panel of the 6th Circuit, defines the scope of regarded-as-disabled claims.

Sharyn Gruener, an IT technician for Ohio Casualty, suffered from a long history of degenerative joint disease in her knee, which ultimately resulted in a double knee replacement. After the surgery, she returned to work with restrictions on her ability to squat, crawl, kneel, lift more than 20 pounds, or carry more than 10 pounds. When her supervisor learned that had been asking her co-workers to help her perform certain tasks she could not do, such as plugging in computers and lifting heavy monitors, the company terminated her, concluding that she could not perform the essential functions of her position without asking co-workers to live, move, or plug-in computer equipment for her.

Following her termination. Gruener sued Ohio Casualty under two different theories of disability discrimination -- actual disability and regarded-as-disabled disability. The jury found against her on the former, and the trial court refused to instruct the jury on the latter.

The appellate court found that that the trial court did not err in refusing to give a jury instruction on the regarded-as-disabled theory. The ADA's regarded-as-disabled provision protects employees who are perfectly able to perform a job, but are rejected or terminated because of "myths, fears, and stereotypes" that go along with disabilities. The theory requires that the employer "entertain misconceptions about the employee," either by mistakenly believing that the employee has a physical impairment that substantially limits one or more major life activities, or mistakenly believing that an actual non-limiting impairment substantially limits one or more major life activities.

In this case, there was no dispute that Gruener could not perform the essential functions her job without the help of co-workers. Moreover, the only understanding Ohio Casualty has about her impairments, their limits, and her ability to perform her job came directly from her own doctor's valid, permanent work restrictions. Following the specific recommendations of a treating physician does not wrongfully view an employee through a stereotype of disability.

While this case does not set earth shattering precedent in regarded-as-disabled cases, it does provide some added comfort for employers who rely upon an employee's treating doctor's work restrictions in making personnel decisions. It also further illustrates an issue that I wrote about earlier this week - discrimination cases are largely about harbored stereotypes and the impact they have on one's perception of another to perform a job.