Court Report

August 27, 2014

0914cover.jpgCourt Upholds Inflexible Six-Month Leave Limit

Hwang v. Kansas State University, 10th Cir., No. 13-3070.

The 10th U.S. Circuit Court of Appeals upheld a university’s inflexible six-month leave policy, finding that the university was not required to provide an employee undergoing cancer treatment with more than six months’ medical leave as a reasonable disability accommodation.

The plaintiff, Grace Hwang, alleged that Kansas State University’s inflexible leave policy allowing employees no more than six months’ sick leave violated the Rehabilitation Act. The Rehabilitation Act, 29 U.S.C. §794(a), prohibits federal agencies and programs receiving federal funding from discriminating on the basis of disability and applies the same legal standards for disability discrimination as the Americans with Disabilities Act.

Hwang was an assistant professor at Kansas State University who signed a one-year contract to teach classes over the fall, spring and summer academic terms. Before the fall term started, she was diagnosed with cancer, and the university granted her request for a six-month paid leave of absence. Hwang then requested additional leave continuing through the end of the spring term, but the university denied her request based on its inflexible leave policy capping sick leave at six months. Instead, the university arranged for her to receive long-term disability benefits, which she claimed effectively terminated her employment.

Hwang filed a lawsuit in the district court, alleging that the university’s denial of her request

Professional Pointer:

Employers should proceed with caution in adopting inflexible leave limits. Although this court upheld the practice, most other courts facing the issue have found similar policies to be discriminatory.

based on its inflexible six-month leave policy constituted disability discrimination and arguing that additional leave should have been granted as a reasonable accommodation. The district court dismissed Hwang’s claim, failing to see how the Rehabilitation Act required the university to provide more than six months’ leave.

On appeal, the 10th Circuit upheld the dismissal of Hwang’s disability discrimination claim. The appellate court found that Hwang could not prove that she was qualified to perform her job with a reasonable accommodation because, while there was no doubt that she was a good teacher, an employee who is incapable of working in any capacity for more than six months is not capable of performing the essential functions of her job.

The 10th Circuit also held that requiring the university to provide more than six months’ sick leave would not be a reasonable accommodation because “reasonable accommodations … are all about enabling employees to work, not to not work.” The Rehabilitation Act was not designed “to turn employers into safety-net providers for those who cannot work,” the court stated.

The appellate court acknowledged that in some cases, such as when an employer’s inflexible leave policy is too short or when the policy is inconsistently applied, providing additional leave may be a reasonable accommodation.

However, the court reasoned that “six months is beyond a reasonable amount of time.” Accordingly, the 10th Circuit declared that the university’s six-month inflexible leave policy was “more than sufficient to comply with the Act in nearly any case.”

Thus, in the absence of evidence that the university’s policy was inconsistently applied to other similarly situated employees, the 10th Circuit upheld the university’s six-month leave limit and concluded that it was not required to provide Hwang more than six months’ leave.

The court also upheld dismissal of Hwang’s related disability retaliation claims for lack of evidence suggesting unlawful animus.

By Kelly S. Riggs, an attorney in the Portland, Ore., office of Ogletree Deakins, an international labor and employment law firm representing management.

Conflicting Evaluations Can Interfere with Terminations

Barthelus v. G4S Government Solutions Inc., 11th Cir., No. 13-14121.

A district court improperly dismissed a former employee’s unlawful discrimination and wrongful termination claims where there was some evidence, including from a third-party auditor, that the employee’s performance was not uniformly deficient, the 11th U.S. Circuit Court of Appeals held.

G4S Government Solutions (and its predecessor) employed Cegeste Barthelus from 1997 until his termination in 2011. Barthelus is Haitian and black—the only such employee at G4S. At the time of termination, he was the senior network administrator and sole engineer within the IT department.

In 2012, Barthelus filed suit against G4S alleging unlawful workplace discrimination and wrongful termination. He alleged that, unlike his non-Haitian, white co-workers, he was denied

Professional Pointer:

This case presents a stark reminder of how important it is to fully and accurately document ongoing performance issues.

promotions and raises, received negative performance evaluations, and was subjected to negative treatment in the workplace. Further, Barthelus alleged that he had complained to management in 2010 that he was being treated adversely because of his national origin and race.

The district court ruled that G4S introduced sufficient evidence to demonstrate that Barthelus was terminated for performance-related reasons.

On appeal, the 11th Circuit reversed, concluding that the district court had improperly discounted evidence of adequate performance. The appellate court cited evaluations categorizing Barthelus as a “valuable employee” and “underpaid.” While there was no indication that the 2009 third-party audit directly addressed Barthelus’ performance, the 11th Circuit concluded that because he “was the Senior Network Administrator and only engineer in the IT Department and the Department’s security posture was ‘above par and secure,’ it can be inferred … that Barthelus’s performance may not have been as uniformly negative as the District Court concluded.”

As a result of the conflicting factual information, the 11th Circuit reinstated Barthelus’ claims.

By Benjamin P. O’Glasser, an attorney with Bullard Law, the Worklaw® Network member firm in Portland, Ore.

Choice of Funding Source Not a Fiduciary Act

Coulter v. Morgan Stanley & Co., 2nd Cir., Nos. 13-2504, 13-2509.

Morgan Stanley wasn’t acting as a fiduciary under the Employee Retirement Income Security Act (ERISA) when it decided to fund the company’s retirement plans with employer stock rather than cash, according to the 2nd U.S. Circuit Court of Appeals.

Morgan Stanley had established a defined contribution retirement plan for its employees. The company was not the designated plan administrator or fiduciary. In January 2007 and 2008, Morgan Stanley chose to make its employer contributions to the plan in the form of Morgan Stanley company stock instead of cash. The plan expressly permitted the company to choose between stock or cash payments. Between Dec. 14, 2007, and Feb. 6, 2008, Morgan Stanley’s stock prices plummeted in conjunction with the broader economic downturn.

Five employees brought suit under ERISA against Morgan Stanley to recover the losses suffered as a result of the drop in Morgan Stanley’s stock price. They argued that Morgan Stanley breached its fiduciary duty under ERISA by failing to act with prudence when it opted to change its contributions from cash to stock options. Morgan Stanley executives argued that the company was not a fiduciary because it was not a plan administrator and because

Professional Pointer:

This case presents a stark reminder of how important it is to fully and accurately document ongoing performance issues.

it did not exercise discretionary authority over most of the plan. The New York federal district court granted the company’s motion to dismiss. The 2nd Circuit agreed with the dismissal.

The 2nd Circuit held that mere exercise of discretion about funding a plan does not make an employer a fiduciary under ERISA; rather, the discretion must be exercised with respect to plan management or administration.

By Emily J. Gelhaus, an attorney with Denlinger, Rosenthal & Greenberg Co. LPA, the Worklaw® Network member firm in Cincinnati


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