Employers Unprepared For Disability Act Changes

Cathy Padalino, vice president and EPL product manager for Chubb & Son in Warren, N.J., explained the revisions brought a clarification of what constitutes a disability. "Bending, for example, is now considered a major life activity," she said. "There's a whole litany of things that are enumerated in that law."

Under the ADA, a disability is defined as a physical or mental impairment that substantially limits one of more major life activities, and the revisions, while retaining the disability definition, expand the definition of major life activities.

The U.S. Equal Employment Opportunity Commission, in a notice explaining the changes that went into effect on Jan. 1, notes that major life activities now include activities like walking that were already recognized by the EEOC, and new ones, like reading, bending and communicating. In addition, major life activities now include major bodily functions, such as functions of the immune system, normal cell growth, digestive, bowel, bladder and reproductive functions, among others, the EEOC reports.

"What that means for employers is whenever an employee is seeking an accommodation or a leave of absence, it really falls on the shoulders of our employers that they assume a disability and treat them in accordance with the ADA," Ms. Padalino said. "Some of these conditions are a real challenge for the employer because they're not always physically evident," she said.

Mr. McCalmon, who is also founder of The McCalmon Group, which works with carriers in the delivery of specialty risk control services, doesn't think many employers, other than Fortune 1000 firms with sophisticated risk management processes, are prepared for the changes.

He said his conversations with smaller employers reveal they think of "disabled" as someone who is deaf, can't speak, or is in a wheelchair. "The new ADA is extremely broad and includes Adult Attention Deficit Hyperactivity Disorder. That's hard for an employer to grasp," he said.

The EEOC in its announcement also notes that the revisions to the act direct courts not to engage in "extensive analysis," instead emphasizing "that the definition of disability should be construed in favor of broad coverage of individuals to the maximum extent permitted."

Mr. McCalmon said that in the past, employment suits, especially those related to the ADA, were often thrown out on motions to dismiss before getting to jury trials. He put 2008 summary judgment rates at 80 percent or more.

"But most of those summary judgments were based off the old ADA, where the definition of who is disabled or what is a disability was very narrow," he said. "The new legislation…basically takes away most of the pre-trial motion practice that existed, and makes it very difficult for defense lawyers to get a summary judgment.

"We'll see more ADA claims go to jury trial, but it doesn't necessarily mean [plaintiffs] will win," he predicted. "Juries typically award more for other types of discrimination," Mr. McCalmon said, predicting jumps will come in the number of claims and settlement amounts.

Those jumps, he said, might be offset by lower attorneys' fees–one of the most expensive components of any EPL action. "If you can't do the pre-trial motions, there's a savings there," he said.

Mr. McCalmon and Ms. Padalino, turning to changes coming from the new administration in Washington, both noted that the first bill President Obama signed was the Lilly Ledbetter Fair Pay Act. The act softened the blow of a mid-2007 Supreme Court ruling to employees bringing discriminatory pay actions.

Ms. Padalino said the act clarifies that discriminatory pay decisions occur each time compensation is paid, lessening the impact of a 180-day statute of limitations running from the time the discriminatory act occurred. "Now, the 180 days is based upon every paycheck," she said.

That presents challenges to the defense of these cases, she said, noting that discovery is going to be expensive. "Are the records there? Was the performance documented? Did [employers] keep the documentation and records? And is anyone still there at the company?" are all issues that may impact the defense, she said.

In addition, "we're starting to see a few attorneys using Ledbetter to their advantage in some open pay cases. We're watching that pretty carefully," she said.

Mr. McCalmon was less concerned about the potential impact of the Fair Pay Act on employers and insurers. "There are a lot of statistics that show women are still being paid less than men, but I don't know if the FPA is going to change that [even though] it does allow for more litigation," he said.

"I don't think you're going to see a wave of litigation," he said, noting that while the Equal Pay Act has been around for years, it hasn't generated a lot of claims.

According to EEOC charge statistics for 2008, Equal Pay Act charges totaled 954 in 2008, just 1 percent of total charges for all types of employment discrimination actions. Disability claims, in contrast, account for 20 percent of all charges.

While Mr. McCalmon predicts a rise in individual ADA claims, he believes the big surge among single-plaintiff cases will be retaliation suits.

Referencing the EEOC charge statistics, he noted that retaliation claims were the second-biggest category behind race for 2008. "Race was always No. 1 historically. It would not surprise me if retaliation takes over race," he said, reasoning that retaliation claims are easier to prove.

In 2008, retaliation charges jumped 23 percent over the prior year to 32,690, accounting for one-third of all charges.

Retaliation suits are fact-based, he said. "Did you retaliate or did you not?" It doesn't even matter if the original complaint–for example, a sexual harassment complaint–has any basis. "If you retaliate against a person for making that complaint, [that person] has a really good lawsuit. There's no pre-trial motion practice that can get it thrown out."

The difficulty in getting retaliation cases thrown out before trial drives settlements higher. "And when you get to a jury, juries understand retaliation. It doesn't take a scientist to explain it to us," Mr. McCalmon said, noting that even children fighting over toys understand the concept.

Mr. McCalmon said the U.S. Supreme Court has decided two major cases on retaliation in the last three years, essentially directing lower courts to assume protections against retaliation exist whether they're written in statutes at issue or not.

Ms. Padalino said, "There has been an evolution of laws that make it easier to bring retaliation claims," noting that even the American Recovery and Reinvestment Act, signed into law in February to jumpstart the economy, contains new protections for whistleblowers.

On the class-action front, Mr. McCalmon predicts that in addition to a likely jump in age discrimination class actions tied to the recession, wage-and-hour is still going to be a big issue.

Wage-and-hour actions, which allege violations of the Fair Labor Standards Act related to overtime pay, break times and other issues, however, are not always covered by carriers, with most providing only defense-cost sublimits. (For a complete discussion of carrier issues, see related article published in the Aug. 25, 2008 print edition of NU.)

Melissa Mattioli, vice president and EPL product manager for Liberty International Underwriters, a unit of Boston-based Liberty Mutual, doesn't foresee any change in carrier attitudes about offering coverage.

"Brokers are always looking for carriers to offer wage-and-hour, [but] it's an exposure that's really hard to get your hands around. It really wasn't the intent of the policy," she added, noting that the intended scope of EPL insurance was to cover discrimination cases, not wage violations.

One trend Ms. Mattioli is watching with interest is the EEOC's expanded focus on the treatment of workers with caregiving responsibilities.

Last month, the EEOC released a 14-page document outlining employer best practices for such workers, she reported.

"The EEOC has concerns about companies discriminating against caregivers–male or female employees that have elderly parents or children," she said. An example might be a male employee that has to drop off his children and is at work at 9 a.m., instead of 7 a.m. like some of his other colleagues.

"The EEOC is finding there's discrimination in the workplace against such caregivers. So they're encouraging companies to retrain managers," she said, noting that the new document details areas of retraining that include the questions to ask or avoid when doing interviews or performance reviews with employees.

"They're finding that the managers maybe aren't trained adequately and may be asking questions like, 'Can you travel? Or who's going to take care of your children?'

"This is something the EEOC is really starting to focus on. They mentioned it on their Web site earlier [in 2007], and now they've actually come out with a 14-page document," Ms. Mattioli said.

In 2007, the EEOC issued its initial guidance explaining circumstances under which discrimination against caregivers might constitute discrimination based on sex, disability or other characteristics that are protected by federal employment discrimination laws.

Caregivers are not a directly protected class, Ms. Padalino noted, suggesting that as a result, the increased attention coming from the EEOC is not as immediately concerning as other issues weighing on the minds of EPL insurers.

"It's not like wage-and-hour or ADA," Mr. McCalmon agreed. "Nevertheless, the White House and the EEOC are pushing to provide more benefits to caregivers beyond the Family Medical Leave Act"–and the mission is "being carried out primarily by the First Lady," he said, noting that many of her speeches refer to stresses of working mothers and calls for sick leave pay.

"I don't know if [caregiving] is a claims driver, but it creates a tension in the workplace," he said.

Experts interviewed for this article had no specific comments on how the Supreme Court might weigh in on employment cases in the future, given President Obama's nomination of Sonia Sotomayor in late May to replace retiring Justice David Souter. Conservative bloggers, however, were highly critical of the choice in the days immediately following the nomination, pointing, among other things, to the single-paragraph dismissal of a reverse discrimination case she penned as an appellate court judge. That case is currently before the U.S. Supreme Court.