EEOC Settlement Highlights Risks of Outsourcing ADA Accommodations

Employers may outsource the administration of disability accommodation requests, but a recent Equal Employment Opportunity Commission (EEOC) settlement serves as a reminder that they cannot outsource responsibility for complying with the Americans with Disabilities Act (ADA).

Penney OpCo LLC, which does business as JCPenney, agreed to pay $99,000 and take remedial measures to settle an EEOC disability discrimination lawsuit involving a warehouse employee undergoing treatment for breast cancer.

According to the EEOC, the employee worked at JCPenney’s logistics center in Forest Park, Ga., when she was diagnosed with breast cancer and requested time off for medical appointments. She submitted a written accommodation request and medical documentation of her treatment and need for leave to the company’s third-party benefits administrator (TPA), but JCPenney denied the request.

The time she took off for cancer treatment was subsequently counted against her under the company’s attendance points policy. After she accumulated more points than the policy permitted, she was fired on July 3, 2023, the EEOC alleged.

The agency sued under the ADA, alleging disability discrimination. As part of the settlement, JCPenney agreed to provide monetary relief, train relevant managers on their ADA responsibilities, and periodically report on certain accommodation requests. The company will also establish a process for monitoring how its third-party administrator handles ADA accommodation requests and a review procedure before terminating employees who may have pending disability accommodation requests.

“Employers’ use of third-party administrators to handle reasonable accommodations can be inherently problematic, especially when not effectively monitored,” Marcus G. Keegan, regional attorney for the EEOC’s Atlanta District, said in announcing the settlement.

Toolkit: Managing Disability Accommodations

Outsourcing the Process, Not the Responsibility

For HR professionals, the settlement raises a broader compliance question: How much of the ADA reasonable accommodation process should employers entrust to third-party administrators?

Using a TPA does not alter an employer’s underlying ADA obligations, according to Nadine Chang Dupré, of counsel at Quarles & Brady in San Diego. An outside administrator can handle much of the procedural work — such as receiving requests, following up with employees, obtaining medical paperwork and tracking accommodations — but “the employer is ultimately responsible for compliance,” she said.

TPAs can be valuable precisely because they take much of the administrative work off HR’s plate. But Chang Dupré cautioned that, like any outside service provider, they can have “their own hiccups, missteps, and miscommunications.”

That makes it important to decide at the outset exactly where the TPA’s role begins and ends. Employers should determine whether the administrator merely gathers and summarizes documentation, makes recommendations about accommodations or has authority to approve, deny or modify requests. If the TPA is making those determinations, employers should consider creating an internal process to review denials and modifications.

The same clarity is needed around communications with managers. A TPA may need information about a position’s essential functions to assess a proposed accommodation, but Chang Dupré cautioned against leaving those conversations entirely to an outside administrator without appropriate HR expertise.

“In my experience, a manager rarely understands the employer’s obligations under the ADA and certainly not what constitutes a ‘reasonable accommodation’ or an ‘undue hardship,’” she said.

An employer’s own HR professionals, who understand the organization, its jobs and its operational needs, should therefore remain involved in discussions about whether a particular accommodation will work.

Checklist: ADA Reasonable Accommodation Checklist

Avoid a One-Size-Fits-All Process

HR involvement is also important because reasonable accommodation decisions tend to be highly individualized. While a TPA can create an efficient and consistent administrative process, Chang Dupré warned that accommodation itself “does not adhere to a formula.”

“There is only so much a TPA can do — they don’t know the employer’s business, they are generally managing a process,” she said.

Employers should therefore establish ways to keep HR informed when significant decisions are made. For example, HR can require notification when an accommodation request is denied or closed and require the TPA to document the basis for that outcome.

Managers also need training on when to bring HR into the conversation. If an employee connects an attendance or performance issue to a medical condition or accommodation need, that information can signal that HR needs to examine the situation through an ADA lens rather than allowing the matter to proceed solely through ordinary disciplinary channels.

Oversight should extend beyond individual accommodation requests. Chang Dupré also recommends that employers understand their TPA’s document-retention policies and ensure they will retain access to relevant records if the relationship with the administrator ends. Employers should also review how their TPA uses generative AI.

The broader goal is not necessarily to bring every administrative function back in-house. Instead, employers can use TPAs to streamline the process while maintaining meaningful HR oversight of decisions that carry legal risk.

“Ultimately, it is the employer’s potential liability,” Chang Dupré said, “not the TPA’s.”