Court Report

Termination of LTD benefits triggers notice requirement; denial of lunch in stockroom leads to ADA trial

Nov 1, 2005

HR Magazine, November 2005

Clerk With Difficulty Walking Entitled To ADA Trial

EEOC v. Sears, Roebuck & Co.

7th Cir., Nos. 04-2222 and 04-2493, Aug. 10, 2005

An employee who suffered numbness in her feet and right leg when she walked short distances, and who was not allowed to eat her lunch in a department stockroom or take shortcuts through other departments, may go to trial on her claim of disability discrimination, the 7th U.S. Circuit Court of Appeals has held.

In 1992, Judith Keane was hired to work as a department sales associate at a Sears store in Illinois. Her job duties included handling purchases, assisting customers, and transporting money to and from cash registers. Two years later, Keane began to experience numbness in her right leg that did not affect her ability to walk within her immediate work area, but sometimes kept her from walking to the employee cafeteria farther away.

Keane explained the problem to her supervisor and asked if she could eat her lunch in the department stockroom. The supervisor initially allowed this, but then issued a blanket policy forbidding all eating in the stockroom. As her condition worsened and extended to both feet, she requested permission to take shortcuts through another department at the beginning and end of each shift, but this request was denied.

Keane also asked for permission to park in a merchandise pickup lot near the employee entrance to shorten her walks to and from the employee swipe-in area, but she was told to use a parking space designated for people with disabilities near her department that did nothing to shorten her commute.

Following a change in Keane’s work hours that she found unacceptable, Keane concluded that Sears was attempting to make her work environment inhospitable and resigned.

Keane sued, alleging constructive discharge and disability discrimination in violation of the Americans with Disabilities Act (ADA). The district court granted summary judgment for Sears, but on appeal the 7th Circuit held that a jury could reasonably find that Keane was substantially limited in the major life activity of walking. The court also noted that although Keane was not entitled to the accommodation of her choice, the employer’s selected accommodation had to be effective. The disabled parking space did not shorten Keane’s commute, and permission for her to eat in the stockroom or take shortcuts was refused or revoked.

This was enough, the court held, for a jury to find that Sears’ response to Keane’s request for an accommodation was not reasonable.

By John Keil, an attorney with the firm of Collazo Carling & Mish LLP in New York, an affiliate of Worklaw® Network.

Termination of LTD Benefits Requires Prompt Notice

Peralta v. Hispanic Business Inc.
9th Cir., No. 03-57000, Aug. 18, 2005

An employer’s notice, three months after the fact, of its termination of a long-term disability (LTD) benefits plan was not adequate and proper notice as required by the Employee Retirement Income Security Act (ERISA), the 9th U.S. Circuit Court of Appeals has held.

Carmen Peralta began working for Hispanic Business Inc. (HBI), a magazine publisher, in October 1998. In 1999, HBI introduced a long-term disability insurance policy to its employees. The insurance plan was an employee benefits plan as defined by ERISA, and Peralta was a plan beneficiary.

Without notifying employees, a human resource manager canceled the company’s LTD plan in July 2000. Peralta later was severely injured in an automobile accident and requested disability benefits. A week after Peralta’s accident, a new human resource manager sent an e-mail to HBI employees informing them that the policy had been canceled.

Peralta sued, alleging a breach of fiduciary duty under ERISA. The district court granted summary judgment in favor of HBI.

There is no question an employer has a right to eliminate an ERISA-governed benefits plan, the 9th Circuit noted on appeal. Rather, the issue is whether an employer has a fiduciary duty to notify participants in a timely fashion of the termination of coverage, and, if so, whether that duty is separate from the reporting and disclosure duty under ERISA to notify participants of material modifications to benefits plans within 210 days after the end of the plan year in which a change is adopted.

ERISA does impose a fiduciary duty on the employer and that duty is distinct from the reporting and disclosure duty, the 9th Circuit concluded. The statute obligates an employer or plan administrator to provide “prompt notice” to employees when their benefits are terminated. That may involve notice before benefit termination so that affected employees have adequate time to secure alternative coverage. Accordingly, HBI’s failure to give proper notice was a violation of its fiduciary duty, the court held.

The 9th Circuit went on to find, however, that ERISA’s civil enforcement provisions contain no remedy for Peralta because the court found no egregious or willful conduct by HBI, but merely negligence. It is for Congress to provide a statutory remedy when negligent conduct results in the termination of coverage without timely notice, the court noted.

By Charles E. Feuss, an attorney with the firm of Seaton, Beck, Peters, Bowen & Feuss PA in Minneapolis, an affiliate of Worklaw® Network.

Couple May Sue Same Employer For Hostile Work Environment

Venezia v. Gottlieb Memorial Hospital
7th Cir., No. 04-1976, Aug. 26, 2005

Married couples generally have been barred from joint legal action against the same organization for harassment by a single supervisor, but the 7th U.S. Circuit Court of Appeals recently let a husband and wife proceed with their harassment complaint against the same employer.

The key difference in this case was that the couple, although working for the same employer—Gottlieb Memorial Hospital—claimed to have suffered harassment by different individuals.

Leslie Venezia, director of child care, claimed a hostile work environment arising from several incidents: In the presence of other employees, a male co-worker remarked that Leslie had “sat on” his lap; she found pornographic notes and a lewd picture with her name on it; and someone slashed her tires after she registered a complaint about another matter.

Leslie reported these acts to the HR department, then resigned, claiming no corrective action was taken.

Frank Venezia, a maintenance worker, alleged that his supervisor and co-workers created a hostile work environment by suggesting that he had obtained his job through his wife’s efforts, including sexual acts. He said co-workers sent him pornographic pictures with captions referring to Leslie and put pictures of nude men on his bulletin board. Frank said that he too had complained of harassment, but no corrective action was taken. Frank then took a medical leave, but resigned before returning to work.

Frank and Leslie filed a joint complaint against the hospital, alleging violation of Title VII. The district court granted the hospital’s immediate motion to dismiss, noting that cases in which a married couple has brought joint action against an employer for harassment by a single supervisor generally have failed based on the rationale that the supervisor’s harassment was against both a man and a woman and therefore could not be based on gender. This rationale has been referred to as the “equal opportunity harasser” defense.

On appeal, the 7th Circuit reversed the dismissal of the Venezias’ complaint. The defense makes sense when the husband and wife complained about harassment by a single supervisor, the court said. But the court determined that applying that rationale to the Venezias’ case would inappropriately extend the “equal opportunity harasser” rationale from an individual to an entire company.

The appeals court went on to hold that both Leslie and Frank set forth facts sufficient to allow their claims of harassment, including Frank’s claim of male-to-male harassment, to survive a motion to dismiss. A hostile work environment is possible even when the harasser is of the same gender as the victim, the court determined.

By Maria Greco Danaher, an attorney with the firm of Dickie, McCamey & Chilcote in Pittsburgh.

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