Riker Danzig Employment UPDATE, August 2002

Riker Danzig Employment UPDATE, August 2002
Contents U.S. Supreme Court Addresses ADA Issues For California Employers: New Law Governs Use of Social Security Numbers

U.S. Supreme Court Addresses ADA Issues The United States Supreme Court published three opinions in 2002 interpreting and clarifying the Americans with Disabilities Act (the "ADA"). Each decision gives employers useful information on how to cope with complex issues in this legal minefield; together, they also send a strong message to employers that generalizations about disabilities are dangerous ground for employment decisions and that employers are well advised to create procedures that ensure individualized inquiries will occur as needed to minimize liability under the ADA. Provisions of the Statute Enacted in 1990 and effective in 1992, the ADA is a significant statute in terms of employee rights, creating protections and requiring preferences to benefit disabled workers. The ADA protects an employee who can show:

If an impairment meets the first two requirements, it is considered a "disability" for the purposes of the ADA. The ADA also protects individuals who have a record of a disability, or who are incorrectly regarded as having a disability.5 The ADA provides that an employer cannot discriminate against an individual, i.e., cannot fire, demote, refuse to hire or promote the individual, or take any other adverse job action against him or her on the basis of the disability. In addition, the employer must make "reasonable accommodations" to an employee who meets the requirements for protection under the ADA. Toyota v. Williams: When Is an Individual "Disabled"? In Toyota v. Williams, 122 S.Ct. 681 (Jan. 8, 2002), the Supreme Court clarified the threshold issue of whether an employee has a disability that qualifies under the ADA. The Court held not every impairment entitles someone to the protections of the ADA; not even every impairment that interferes with an employee's job performance will qualify. Rather, the test is whether the impairment effectively prevents the individual from performing an important task of "daily living," while still allowing that person to perform the essential functions of his/her job, with or without reasonable accommodation. Ella Williams was an assembly line worker at a Toyota auto manufacturing plant. After several years on the job, she developed carpal tunnel syndrome and related conditions in her upper extremities. Part of her job involved wiping down cars with her hands and arms extended at or above shoulder height for several hours at a time, which aggravated her condition. Williams sought an exemption from having to perform that task, as an accommodation. Toyota refused, stating it was an essential function of the job. (The ADA does not require an employer to make an accommodation to an essential function of the job, only to a non-essential or marginal function.) Ultimately, Williams was terminated when her attendance became unsatisfactory, and she sued, claiming protection under the ADA because her condition "substantially impaired" her ability to perform a "major life activity" of performing manual tasks. The Supreme Court addressed the threshold issue of whether William's condition was a disability entitling her to the protections of the ADA. It answered this in the negative, finding that the impairment did not interfere substantially with Williams' "major life activities,"6 therefore Williams did not have a disability under the ADA. The Court explained that "major life activities" are activities of central importance to the ordinary person's daily living. The term "major life activity," which appears in the statute but is not defined, has been interpreted by courts to include activities such as seeing, breathing, hearing, walking, and eating. However, the Court said, manual tasks unique to any particular job are not necessarily "major life activities;" and the sort of manual work required in Williams' job -- repetitive work with hands and arms extended above shoulder-level for lengthy periods of time -- is not an important part of most people's daily lives. The Court further noted that the statutory phrase "substantially limits" should be interpreted strictly to create a "demanding standard" for someone to qualify as disabled. The Court held that the statutory requirement of an impairment that substantially limits a major life activity must be a "severe" limitation, noting that the impairment should be judged in terms of the severity of the condition in that particular person, and the impact on the life of that individual - not by general reference to the diagnosis. Even with carpal tunnel syndrome, the Court found, Williams still could perform such tasks as bathing, personal care, laundry, some housework, and cooking. Although she had some medical restrictions in certain other tasks such as driving long distances, sweeping floors, and gardening, the Court found those limitations were not severe restrictions in the activities of central importance to most people's daily lives, such that they would establish a manual-task disability under the ADA. Implications of the Toyota Decision The implications of this case are favorable for employers. Because the decision narrows the ADA definition of a substantial limitation to a "severe limitation of an activity of daily living," employers can anticipate fewer frivolous claims by those with moderate limitations or impairments to job-related tasks only. Employers should be aware, though, that with any physical or mental condition, the diagnosis itself does not indicate whether the condition would be a "disability" under the ADA. Each case must be assessed individually, and there is no laundry list of impairments which will entitle a claimant to the protections of the ADA - or categorically bar him or her from it. 7 Additionally, after the Toyota decision, an employer might be tempted to ask an applicant or employee whether a claimed disability severely impacts the person's activities of daily living -- because if it does not, the employer is not bound by the ADA to make reasonable accommodations to enable that person to work. Such inquiries are fraught with danger for the employer. The employer's proper scope of inquiry is generally restricted to job-related functions,8 and whether the employee can perform the essential functions of the job which he or she holds or desires. While medical inquiries and inquiries about the nature of an impairment are permitted in certain limited circumstances where the inquiry is job-related and consistent with business necessity,9 it is all too easy for an employer to cross the line into impermissible inquiries. Often, the wise approach is to enlist the assistance of legal counsel to ensure that personnel procedures connected with hiring, coordinating medical leave, terminating employees unable to work, and communicating with any employee claiming an injury or illness do not violate the ADA. Chevron U.S.A. v. Echazabal: "Threat to Self" Defense In Chevron U.S.A. v. Echazabal, 122 S.Ct. 2045 (June 10, 2002), the Court addressed the question of whether an employer can refuse to hire an applicant who seeks a job which threatens his or her own health. Mario Echazabal, who had Hepatitis C, worked for various independent contractors at a Chevron oil refinery for 20 years. Nevertheless, when he applied for employment with Chevron in 1992, the company refused to hire him because his liver condition would be aggravated by continued exposure to toxins in Chevron's workplace. In refusing to hire Echazabal, Chevron had relied on a regulation issued by the Equal Employment Opportunity Commission ("EEOC"), the federal agency charged with enforcing the ADA. The regulation addresses employers' concerns about hiring individuals who are likely to become injured on the job, thus potentially causing workers' compensation claims, OSHA violations and other liability for the employer.10 The Supreme Court ratified Chevron's reliance on the regulation, but remanded the matter for clarification of whether Chevron had completed the proper inquiry into the circumstances (as discussed below). The EEOC regulation provides that an employer may refuse to hire an employee who poses a "direct threat" to him or herself (or to others) in the workplace, as long as the threat rises to a "significant risk of harm" and has been established through an "individualized assessment of the individual's present ability to safely perform the essential functions of the job."11 The Court noted that the regulation's requirement of a fact-based inquiry is designed to prevent employers from acting upon mere supposition driven by a stereotype about disabilities or a paternalistic desire to be over-protective of the disabled. Chevron also argued that the "threat to self" defense is justified under the ADA's conditions that an employer's work rule must be "job related and consistent with business necessity."12 Prohibiting employment of workers who present a threat to themselves, Chevron contended, is work-related and a matter of business necessity, because it allows Chevron to avoid violations of the Occupational Safety and Health Act (OSHA), which requires an employer to ensure the safety of its employees. Although critics have classified the Chevron decision as favoring employers, the individualized inquiry contemplated by the Supreme Court is not an easy standard, and employers must be vigilant in their efforts to ensure that stereotypes, protective, paternalistic attitudes, and blanket generalizations are not allowed to color employment-related decisions made by the company. Barnett v. U.S. Airways: Seniority Systems and the ADA In U.S. Airways v. Barnett, 122 S.Ct. 1516 (April 29, 2002), the Court addressed the conflict an employer faces in balancing the duty to accommodate a worker with a disability with the rights of other workers under a seniority system. Again, the Court's message was clear: generalizations are no protection for an employer in the realm of ADA decisions, and in each case the specific circumstances should be considered. Robert Barnett was a cargo handler for U.S. Airways. When he injured his back, he was transferred to a less strenuous job in the mailroom. That position, however, was later opened to seniority-based bidding under the employer's seniority system. Barnett requested permission to stay in the mailroom job as a "reasonable accommodation" of his disability, although he was not the most senior employee. U.S. Airways refused, stating that this would be an "undue hardship" on the employer, because it would force the company to violate its own work rule (the seniority system) and also would be an undue hardship to the senior employees who would lose the opportunity to bid for the job. The Supreme Court observed that the ADA is, in fact, a preference system. The "reasonable accommodation" which an employer is sometimes required to make is, in fact, an affirmative action which favors the disabled person by making an exception to workplace rules. Because this is the underlying policy of the ADA, merely having a neutral workplace rule is not a sufficient defense for an employer seeking to avoid making an accommodation for an employee. Nonetheless, the Supreme Court recognized the special importance of seniority systems, i.e., those policies which afford employees additional rights as they gain seniority in the company. Though such systems are often created through collective bargaining (unionized workforces), they can also be instituted by a non-unionized employer, such as U.S. Airways. In either case, the critical feature is that the systems create rights for employees, and they contain an element of due process, creating and fulfilling "employee expectations of fair, uniform treatment." The Court noted that seniority systems are often integral parts of lay-off plans and they play a role in employee retention. Undermining the seniority system, the Court suggested, could have severe detrimental effects on the company's employee relations. Thus, the Court held, even if Barnett's request for a specific position might have been a reasonable accommodation if there was no seniority system, nonetheless, a seniority system is ordinarily sufficient to make such a request unreasonable - and thus the employer need not grant that request, under the circumstances. However, the Court stated, if the employee can show that the requested exception to the seniority system would be reasonable in a specific circumstance, then the accommodation must be granted. For example, if an employer often makes exceptions to its seniority rules, there would be less expectation among workers of uniform treatment - and so, that employer could not argue that making one more exception would truly damage its seniority system, or that it would be seen by employees as an unprecedented departure from the system. The Court's message to employers in Barnett is that, first, it is only a very special sort of work rule that can allow an employer to avoid making a "reasonable accommodation," and second, employers should think carefully before granting any exceptions to work rules - because with each exception granted, the rule becomes further eroded and more difficult to uphold. Concluding Thoughts Although Toyota, Chevron and Barnett address three distinct areas of the ADA, together, they point to the conclusion that employers are well advised to avoid gross generalizations in the area of disabilities. Employers must not make categorical decisions that certain diagnoses or conditions do or do not qualify as ADA disabilities; they must not presume that persons with disabilities are pre-destined to be more easily injured, or that they need to be given special protections for their own good. The one generalization that may be legitimate is that whenever an employee claiming a disability asks for an accommodation, the employer should assess whether, given the specific circumstances, the request is reasonable. An individualized inquiry into the factual circumstances of each situation involving an employment-related issue for a person claiming a disability, and careful application of sound employment practices, will go a long way toward minimizing an employer's liability in the face of ADA challenges. ********************* 1. 42 USC 12102(2)(A) 2. 42 USC 12102(2)(A) 3. 29 CFR 1630.2(j)(2)(iiii) 4. 42 USC 12112 §101 (8) 5. 42 USC 12102(2) 6. If she had been found to be "disabled" the Court then would have looked at whether she could perform the essential functions of the job and if it was possible to reasonably accommodate her, without causing an undue hardship to the employer. This question was not reached, because she was found not to be disabled under the ADA. We would also note that the New Jersey Supreme Court may come to a different conclusion in defining the boundaries of what qualifies as a "handicap" under the New Jersey Law Against Discrimination. 7. 42 USC 12112 (d) 8. 42 USC 12112(d)(4) 9. 29 CFR §1630 et seq. 10. 29 CFR §1630.2 11. 42 USC 12112(d)(4) For California Employers: New Law Governs Use of Social Security Numbers California has yet again leapfrogged the other forty-nine states in terms of providing protections to employees. Provisions of a new California law, which became effective this month, create significant restrictions for "any person or entity" in the use of social security numbers. The law, Senate Bill 168, thus encompasses all California employers, creating stringent new limitations on employers' use of the Social Security numbers of their employees - as well as applicants, employee family members, and former employees. The Purpose of the Legislation The new law is designed to help prevent identity theft and misuse of social security numbers, according to California's Office of Privacy Protection. California's concern is not unprecedented: the Federal Trade Commission (FTC) reports that identity theft was the number one consumer fraud complaint of 2001, and accounted for 42 percent of the complaints made with the Commission in 2001. An individual is not the only one harmed by misappropriation of social security numbers: employers face exposure to lawsuits for as little as the inadvertent mishandling of, or failure to protect, such confidential information. The new California law now expands potential liabilities to include fines and additional civil litigation. Because employers customarily use social security numbers as identification numbers on everything from job applications to time cards to health insurance ID cards, it is critical that California employers educate themselves on the new law and adjust their practices accordingly. Confidentiality Restrictions for Employers The pertinent portion of the bill is now codified in the California Civil Code, section 1798.85 entitled "Confidentiality of Social Security Numbers." Effective July 1, 2002, 1798.85 bans employers (as well as "any person or entity") from:

Exceptions to the Law Certain exemptions and exceptions to the law exist. First, the new law contains a "grandfather" clause, permitting employers who have been using social security numbers in one of these fashions to continue to do so, if certain conditions are met. Those conditions include: (1) the employer's use of the number in this manner must be continuous, and may not be resumed if it is interrupted; (2) the employer must inform the individual annually that he or she has a right to stop the use of the social security number, (3) the employer shall cease such use if the individual so requests, and (4) no services shall be denied to an individual who asks an employer to cease using his or her social security number in such a manner. However, the grandfather provision applies only to "existing accounts" and not to new employees hired after July 1, 2002. To give an example, the new law will not permit an employer with a past practice of putting new employees' social security numbers on badges to continue this practice for new hires after July 1, 2002. However, the employer will be able to have its current employees, whose social security numbers are already on their badges as of July 1, 2002, continue to use those badges - unless the employees request otherwise. The law also excuses use of the social security number where required by law. For example, under the California Labor Code, the social security number must appear on employee pay stubs. Federal law requires the number be included on various documents including the W-4 and W-2 forms, the latter of which is mailed to each employee at the end of the year. The law pertains to public disclosure, and does not prohibit employers from using the social security number for internal identification. The law does not apply to sending social security numbers through the mail to other organizations for legitimate business purposes. (For example, employers may continue to include employee social security numbers on communications to health insurers who use those numbers for identification.) The restriction is solely on mailings to the individual whose social security number appears on the mail. The law similarly does not apply to "forms" and "applications" sent through the mail. The terms "form" and "application" are not defined in the code, however, and employers are cautioned to be conservative in their own interpretation of these words until further guidance comes from the California legislature or courts. Finally, while employers must comply as of July 1, 2002, health care providers and insurance providers have a longer grace period. Their compliance will be required in stages from January 1, 2003 through July 1, 2005. Employers must be careful to continue to observe the new law, even though the health insurance companies they deal with do not have the same restrictions, at least for the next few years. For instance, the group health insurance plan (but not the employer) can require employees to provide the social security number. The insurance company (but not the employer) may issue an identification card bearing the social security number. The employer may mail information containing social security numbers to the provider (since the mailing restriction pertains only to mailing information to the individual, not to a third party). There is no exclusion for third party administrators or ERISA plan sponsors, however. Whether ERISA would preempt the new law is unclear, so employers would be well advised to examine their practices, and minimize social security number usage in these areas. Best Practices for California Employers The California Office of Privacy Protection has issued guidelines for recommended procedures in light of this new law, outlined below. Because the new law is obviously untested in the courts, we would urge our clients to heed these recommendations and implement them at once.

  1. Avoid use of social security numbers if possible.
  2. Disclose.
  3. Do not publicly display social security numbers.
  4. Limit access within your company.
  5. Implement confidentiality procedures.