Issue 44

Zatuchni & Associates Newsletter

RECENT CASES

Federal District Court of Washington Rules That Employer's Failure to Provide Coverage for Contraceptives Is Sex Discrimination

In a case that may have far reaching implications on employers, the court in Erickson v. Bartell Drug Co., No. COO-1213L (W.D. Wash. 2001) recently ruled that a company's exclusion of coverage for contraceptives in an otherwise comprehensive prescription plan constitutes sexual bias in violation of Title VII. This is the first time the issue has been placed before a federal court.

The prescription plan of the defendant Bartell Drug Co. covered all prescription drugs and certain preventative drugs and devices, such as blood pressure and cholesterol-lowering drugs, hormone replacement therapies, prenatal vitamins, and drugs to prevent allergic reactions, breast cancer, and blood clotting. The plan specifically excluded contraceptive devices.

The court held this exclusion was unlawful because "Title VII requires employers to recognize the differences between the sexes and provide equally comprehensive coverage, even if that means providing additional benefits to cover women-only expenses." In reaching this conclusion, the court relied heavily on Congress's enactment of the Pregnancy Discrimination Act ("PDA") in 1978. The court found that in enacting the PDA, Congress embraced a broad interpretation of Title VII "which not only recognized that there are sex-based differences between men and women employees, but also required employers to provide women-only benefits or otherwise incur additional expenses on behalf of women in order to treat the sexes the same."

At present, the decision in Erickson applies only in the State of Washington. It is too early to determine if the case will start a trend and whether the court's reasoning will be accepted in other jurisdictions. It is safe to assume, however, that the door has been opened to suits based on denial of coverage for contraceptives and that employers can expect more litigation on the issue in the near future.

Front Pay Awards Under Title VII Are Not Subject to Damages Cap

So held the United States Supreme Court this month in Pollard v. E.I. du Pont de Nemours & Co., No. 00-763 (2001). The Court ruled that front pay is not an element of "compensatory damages," and that therefore the statutory cap applicable to compensatory damages cannot limit the amount of a front pay award.

Front pay is the money awarded to an employee for lost compensation after the judgment in lieu of reinstatement. (In contrast to "back pay," which compensates the employee for wages lost prior to judgment.) The Supreme Court found that front pay has been a traditionally available remedy under Title VII since the initial enactment of the Civil Rights Act of 1964.

In the Civil Rights Act of 1991, Congress expanded the remedies available under Title VII to include compensatory and punitive damages. Congress, however, set a statutory cap on compensatory damages in the amount of $300,000.00.

Writing for a unanimous Court, Justice Thomas ruled that the allowance of compensatory damages in 1991 was meant to be in addition to any relief already authorized by Title VII, and was not intended to curtail any of the previously available remedies. Since front pay was a type of relief authorized prior to the Civil Rights Act of 1991, it is by definition excluded from being a component of compensatory damages. Since front pay is not an element of compensatory damages, it is not subject to the statutory cap.

The Court's decision significantly increases employers' exposure to damages under Title VII, particularly with respect to high salaried employees. Historically, employers viewed $300,000.00 as the outer limit of their exposure under the statute (apart from back pay). There is now effectively no statutory limit on what an employee can recover if he or she cannot be reinstated or cannot otherwise mitigate his or her lost compensation.

Employers That Wish To Subject LAD Claims To Arbitration
Must State So With Specificity

This is the rule set forth by the New Jersey Supreme Court in Garfinkel, M.D. v. Morristown Obstetrics & Gynecology Associates, P.A., 168 N.J. 124, 2001 WL 649859 (2001).

More and more often, employers insert arbitration clauses in their employment contracts. Arbitration is generally cheaper and faster than litigating in court. The arbitration provision in the employment contract between David A. Garfinkel, M.D. and his employer, a Morris County obstetrics practice, stated that it applied to "any controversy or claim arising out of, or relating to, this Agreement or the breach thereof . . ."

After Dr. Garfinkel was terminated from his employment, he sued his employer in state court for sex discrimination under the New Jersey Law Against Discrimination (LAD). The employer sought to dismiss the action on the basis that the parties agreed to arbitrate all claims relating to Dr. Garfinkel's employment.

Although courts generally read arbitration provisions very broadly, the New Jersey Supreme Court seems to have carved out an exception with respect to statutory civil rights claims. The court found that arbitration clause at issue was "insufficient to constitute a waiver of plaintiff's remedies under the LAD." The Court noted that the "language does not mention, either expressly or by general reference, statutory claims redressable by the LAD."

In light of this decision, employers must be much more careful in drafting arbitration provisions to ensure their application to all employment-related claims. The Court advises that arbitration clauses "should at least provide that the employee agrees to arbitrate all statutory claims arising out of the employment relationship or its termination." Additionally, the language should clearly reflect "the employee's general understanding of the type of claims included in the waiver, i.e. discrimination claims."

Employee Cannot Sustain Discrimination Claim Based Merely on Second-Hand Rumors of Harassment Elsewhere in the Workplace

Diane Leibovitz sued the New York Transit Authority for sexual harassment under Title VII, claiming that she was emotionally traumatized when she learned from a co-worker that certain other female employees were subjected to harassment. In Leibovitz v. New Your City Transit Authority, Nos. 98-7757, 99-7313 (2nd Cir. 2001), the Second Circuit Court of Appeals ruled that Ms. Leibovitz could not establish a cause of action under such circumstances.

It was undisputed that Ms. Leibovitz was herself never the target of any harassment, was not present when any of the harassment supposedly occurred, and did not even know of the harassment while it was ongoing. Ms. Leibovitz's action was based solely on hearsay statements from a co-worker that a supervisor harassed another female employee who worked elsewhere in the organization. Ms. Leibovitz's injury, therefore, was wholly "psychological."

The court ruled that Ms. Leibovitz failed to show that the "terms and conditions" of her employment were adversely affected, which is required to sustain a sexual harassment claim. According to the court, "he only way to characterize Leibovitz's environment as hostile or abusive is by expanding the concept of environment to include venues in which she did not work. Such a characterization would open the door to limitless employer liability, and allow a recovery by any employee made distraught by office gossip, rumor or innuendo."

The court cautioned, however, that where the employee plaintiff herself is the target of harassment, incidents of harassment directed against other employees can be relevant in supporting the plaintiff's claim.

Disclaimer

The information contained in this Newsletter does not constitute legal advice. Zatuchni & Associates, LLC tries to provide quality information, but we make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained herein. As legal advice must be tailored to the specific circumstances of each case, and laws are constantly changing, nothing provided herein should be used as a substitute for the advice of competent counsel.