SLF LABOR AND EMPLOYMENT ALERT January 2010

Defense Contractors Beware: The Franken Amendment Lurks

The Department of Defense Appropriations Act for fiscal year 2010 (H.R. 3326) contains an important provision (section 8116) that restricts the use of arbitration agreements for dispute resolution between defense contractor employers and their employees or independent contractors. The specific claims for which arbitration agreements are barred are discrimination claims and tort claims arising out of sexual assault or harassment.  Section 8116 was offered by Senator Al Franken of Minnesota. It passed the U.S. Senate, with amendments, this past October. The entire defense appropriations bill, which includes the Franken Amendment, was signed by President Obama on December 21, 2009.  The final version of Section 8116 prohibits the use of funds appropriated by the Defense Appropriations Act for any federal contract over $1 million unless the contractor agrees, within 60 days of enactment, not to:  (1) enter into any agreement with its employees or independent contractors that requires, as a condition of employment or doing business with the employer, that the employee or independent contractor agree to resolve through binding arbitration claims under Title VII of the Civil Rights Act of 1964 or any tort claim related to or arising out of sexual assault or harassment; or (2) take any action to enforce any provision of an existing arbitration agreement that requires that the employee or independent contractor resolve such claims through arbitration. The Franken Amendment also prohibits the expenditure of funds for federal contracts awarded more than 180 days from the date of enactment of the Act, unless the contractor certifies that it requires each covered subcontractor to agree not to enter into, and not to take any action to enforce any provision of, covered arbitration agreements and claims regarding any employee or independent contractor performing work on covered subcontracts. The amendment does contain a narrow exception that allows the Secretary or Deputy Secretary of Defense to waive the arbitration restrictions if it is determined that a waiver is necessary to avoid harm to the national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm.

Given this Congress’ disdain for employer sponsored, mandatory arbitration programs, it is expected that similar bills restricting the use of mandatory arbitration agreements are on the horizon. It is likely that many will be tied to appropriations bills.

Eleventh Circuit Recognizes Private Right of Action Under ADA For Pre-Offer Improper Medical Inquiries Irrespective of Disability Status

Last week, the Eleventh Circuit Court of Appeals joined the Second, Seventh, Eighth, Ninth, and Tenth Circuits in recognizing that plaintiffs have a private right of action under the Americans with Disabilities Act of 1990 (“ADA”), 42 U.S.C. §12112(d), irrespective of their disability status against prospective employers who conduct a medical examination or make medical inquiries of a job applicant as to whether such applicant is an individual with a disability, or as to the nature or severity of the disability.  Referring to the ADA and its legislative history, decisions by sister circuits and EEOC regulations, the Court made clear that while it is appropriate for an employer to inquire into an applicant’s ability to perform job-related functions, it is illegal for employers to make targeted disability-related inquiries.

In Harrison v. Benchmark Electronics Huntsville, Inc., the Court reversed a district court decision granting summary judgment to an employer who asked a job applicant with epilepsy a series of questions about the medications the prospective employee was taking in relation to the malady, after the applicant failed a pre-employment drug test.  The Court noted that the drug test itself was a permissible pre-offer activity, as it was specifically exempted from the ADA in 42 U.S.C. §12114.  However, once the employer asked questions of the applicant in the presence of an employment decision-maker, including how long he had been disabled, what medication he took, and how long he had taken it, the Court found that a reasonable jury could infer that the questioning was an intentional attempt likely to elicit information about a disability in violation of the ADA, and reversed summary judgment.

The Court cited to legislative history noting that in enacting §12112(d), Congress sought to prevent employers from using pre-employment medical inquiries “to exclude applicants with disabilities – particularly those with so-called hidden disabilities such as epilepsy, diabetes, emotional illness, heart disease, and cancer – before their ability to perform the job was even evaluated.”  While prior decisions restricted the ability to bring an action for violation of this provision only to “qualified individuals with disabilities,” the Court noted that “[i]t makes little sense to require an applicant to demonstrate that he has a disability to prevent his potential employer from inquiring as to whether or not he has one.”  With its ruling, the Court established the right of action in this Circuit, requiring plaintiffs to present evidence of damages, and to meet the basic pleading requirements of Rule 8.

The 11th Circuit Adopts a New Approach for Determining Complete Preemption Under ERISA

ERISA is one of only a few Federal statutes where conflict preemption and complete preemption arise.  Conflict preemption (also referred to as “defensive preemption”) emanates from ERISA’s express preemption provision found in § 514(a) which provides that any state law that “relates to” an ERISA plan is preempted.    Conflict preemption provides only an affirmative defense to state law claims and may not be used as a basis for removal.

Complete preemption (also referred to as “super preemption”) on the other hand differs from conflict preemption, as is it jurisdictional in nature and thus may be asserted as a basis for removal.  For years, to determine the propriety of removal of an action to federal court, the 11th Circuit has applied the four-part test for ERISA complete preemption set forth in Butero v. Royal Maccabees Life Insurance Co., 174 F.3d 1207, 1212 (11th Cir. 1999); namely, (1) “there must be a relevant ERISA plan,” (2) “the plaintiff must have standing to sue under that plan,” (3) “the defendant must be an ERISA entity,” and (4) “the complaint must seek compensatory relief akin to that available under § [502(a)]; often this will be a claim for benefits due under a plan.”

After Butero was decided, the Supreme Court changed the complete preemption analysis in the case of Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S. Ct. 2488 (2004), to require that an inquiry be made into whether there is any other independent legal duty that is implicated by a defendant’s action.  Stated differently, consideration must be given to whether or not there is any legal duty (state or federal) independent of ERISA or the plan terms that is violated.

Rather than the four-part test enumerated in the Butero case, the Supreme Court in Davila set forth a new 2 part test for complete preemption under ERISA: (1) whether the plaintiff could have brought its claim under § 502(a); and (2) whether no other legal duty supports the plaintiff’s claim.  Thus, under the Davila test, a plaintiff’s cause of action is completely preempted by ERISA when a plaintiff is able to bring his claim under ERISA § 502(a) (1) (B) and there is no other independent legal duty that is implicated by the defendant’s action.

On December 30, 2009, in the case of Connecticut State Dental Association v. Anthem Health Plans, Inc., 2009 WL 5126236 (11th Cir. (Fla.) December 30, 2009), the 11th Circuit followed the Supreme Court’s decision in Davila and ruled that the proper test for determining complete preemption under ERISA is the 2 prong Davila test, rather than the Butero test.

Third DCA Rejects Marital Status Discrimination Claim

In a short, straightforward decision, Florida’s Third District Court of Appeal has held that the prohibition against marital status discrimination contained in the Florida Civil Rights Act of 1992 (“FCRA”) does not protect a person based upon the identity of the person’s spouse. Rather, the court clarified that the FCRA only protects persons who belong to the class of individuals who are married. Thus, the employee’s claim that she was discriminated against because she was married to one of the defendant’s three partners (Mr. Fish) was rejected. The full text of Industrial Affiliates, Ltd. v. Fish, may be viewed at: http://www.3dca.flcourts.org/Opinions/3D09-1979.pdf.

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