Kentucky Employment Law Blog

Pregnancy Discrimination Act Marks 30 Year Anniversary

Today marks the 30 year anniversary of the Pregnancy Discrimination Act.  In recognition of this milestone, the National Partnership for Women and Families has released a report, The Pregnancy Discrimination Act: Where We Stand 30 Years Later, on the PDA's effects and proposes some improvements.  Highlights include the following:

• charges of pregnancy discrimination to the EEOC increased 65% from 1992 to 2007 with this increase disproportionately attributable to pregnancy discrimination aimed at women of color
• working in a historically female occupation does not significant decrease the likelihood of pregnancy discrimination
• pregnancy discrimination complaints have risen at a rate faster than that by which women have entered the workforce
• overt, direct pregnancy discrimination was not as uncommon as other forms of discrimination with cases including a hotel manager who was repeatedly demoted after announcing her pregnancy and a senior management representative stated that pregnant women were inappropriate for management positions and missed to much work, a maternity clothing specialty store settled a lawsuit based on its policy of not hiring pregnant applicants and a rising star at another company was told to consider her options and had her management training canceled after she announced her pregnancy
• social science research has revealed predominant social attitudes that pregnant women should favor family over their job

Robert L. Abell
www.RobertAbellLaw.com

Employee May Recover Under ERISA Value of Wrongfully Withheld 401(k) Contributions Plus The Amount They Would Have Grown

Many individuals have 401(k) accounts through their employment and their employer contributes also to their account.  But what can an employee do if their employer does not make the contributions they have promised?  This question was answered in Leister v. Dovetail, Inc., Nos. 07-2242, 07-3615, 07-3671 (7th Cir. October 23, 2008).  Leister was employed by Dovetail and, after a few years employment, discovered that Dovetail had not made its matching contributions to her 401(k) account.  She brought suit to recover the value of these withheld contributions.  The court ruled that Leister was entitled to recover the unpaid contributions together with a reasonable estimate of how those contributions, had they been made, would have grown.  The court added that this calculation should also consider that the benefits would not have been taxable until withdrawn; therefore, the court directed that the valuation of the account should include this tax benefit minus the cost of the future tax liability discounted to present value. 

Robert L. Abell
www.RobertAbellLaw.com

Retirement Plan Manager Breached Fiduciary Duty By Secretly Increasing Retirees' Medical Insurance Premiums

A retirement plan manager breached its fiduciary duty under ERISA by increasing without notice to the plan's participants their medical insurance premiums, the United States Court of Appeals ruled in Orth v. Wisconsin State Employees Union, No. 07-2778 (7th Cir. October 22, 2008).  When the plaintiff, Orth, retired a collective bargaining agreement provision required the plan to apply the monetary value of his accrued and unused sick leave toward his portion (10%) of his medical insurance premium.  However, the plan manager without notifying Orth or other retirees increased his premium portion to 100%, a practice that Orth learned of when the plan manager told him to send more money to pay his medical insurance premium.  This court ruled that this change breached the plan manager's fiduciary duty because ERISA required the plan manager to notify the retirees of any changes to their plan.  Also, the court noted that ERISA requires that "a plan's participants and beneficiaries must be notified in writing of all modifications to the plan."  Therefore, the court concluded that the change was "doubly unlawful -- as unwritten and as secret."  

The court also ruled that Orth was properly awarded restoration of his accrued sick leave benefits.  In addition, the court upheld an award of attorneys' fees to Orth, asserting that the "use of deceptive conduct toward the retired employees as a basis for trying to duck liability was shabby."  And the court added that "one purpose of allowing an award of attorneys' fees to a prevailing plaintiff is to disable defendants from inflicting with impunity small losses on the people whom they wrong." 

Robert L. Abell
www.RobertAbellLaw.com

Injured Workers May Sue Under Racketeering Law Based On Scheme To Deny Them Workers Compensation Benefits

Injured workers may pursue civil claims for damages under the federal racketeering law known as RICO (Racketeer Influenced Corrupt Organizations) based on a scheme to wrongfully deny them workers compensation benefits the Sixth Circuit ruled today in Brown v. Cassens Transport Co., No. 05-2089. The plaintiffs, a group of six injured workers, claimed that their employer, Cassens Transport Company, the company that administered Cassens's workers compensation claims, Crawford & Company, and a doctor, Saul Margules, "employed mail and wire fraud in a scheme to deny them worker's compensation benefits."  More specifically, the injured workers alleged that "Cassens and Crawford deliberately selected and paid unqualified doctors, including Margules, to give fraudulent medical opinions that would support the denial of worker's compensation benefits, and that defendants ignored other medical evidence in denying them benefits."  A copy of the workers' complaint can be read here. 

The court, in reversing a district court decision dismissing the case, ruled that the workers had pleaded a pattern of racketeering activity based on the following commonalities of the defendants' acts: (1) the common purpose of reducing "Cassens's payment obligations towards worker's compensation benefits by fraudulently denying worker's compensation benefits to which the employees are lawfully entitled"; (2) the common result of denying "worker's compensation benefits to certain Cassen's employees who are entitled to such benefits under Michigan law"; (3) common participants including worker's compensation officials at Cassens and Crawford and "Margules, a doctor who the plaintiffs allege, with regard to some of the predicate acts, fraudulently recommended ineligibility of benefits at the request of Cassens and Crawford"; (4) common victims in the injured employees eligible for but wrongfully denied worker's compensation benefits; and (5) similar methods of commission, the fraudulent application of legal standards to wrongfully deny worker's compensation benefits to eligible employees.  The court further held that the defendants' predicate acts were continuous under both closed- or open-ended theories because they had gone on for a time span "well over three years" and were alleged to have been defendants' standard way of doing business: "fraudulently denying benefits to which the employees are entitled through the use of fraudulent communications by mail and wire." 

The court also addressed two other RICO issues.  First, that reliance by the injured workers on defendants' fraudulent misrepresentations was not an element of a civil RICO claim based on a Supreme Court ruling in Bridge v. Phoenix Bond & Indem. Co., No. 07-210 (June 9, 2008).  Second, the workers pleaded a compensable RICO injury because "the defendants' fraudulent acts were a 'substantial and foreseeable cause' of the injuried alleged by the plaintiffs: the deprivation of their workers' compensation benefits and expenses for attorney fees and medical care." 

This case outlines a path by which injured workers may obtain relief from schemes by employers, insurance companies and doctors aimed not at dealing with the true and real facts but at wrongfully denying benefits to truly and legitimately injured workers.  It should also raise a flag of caution for those insurance companies and doctors that reflexively oppose and deny the claims of truly and legitimately injured workers.

The Kentucky Justice Association published an article authored by Robert L. Abell on this case in its January/February 2009 issue of its publication, The Advocate, "Injured Workers May Pursue Civil RICO Claim Based on Enterprise To Deny Them Workers' Compensation Benefits.

A federal judge in Colorado recently certified a class action by injured Wal-Mart workers in that state regarding that company's handling of workers compensation claims, see Workers Comp Suit Against Wal-Mart Certified As Class Action.

Robert L. Abell
www.RobertAbellLaw.com