By Brandi O. Brown, J.D.

A favorable jury verdict on due process claims of a former healthcare executive for the District of Columbia, who alleged that she was tried and convicted in the press as the result of leaks to the press by her employer, and then fired without due process, will not be disturbed by the D.C. Circuit. Because the District failed at trial to make its legal argument against the exec’s stigma-plus claim in its Rule 50(a) motions, it could not “renew” it on a Rule 50(b) motion. The court also rejected the employer’s contention that a two-year gap in employment was categorically insufficient to establish that the executive was deprived of her liberty interest. The appeals court affirmed the district court’s judgment refusing to set aside the verdict (Campbell v. District of Columbia, June 29, 2018, Griffith, T.).

Reports of steering bids. In 2010, in response to the Patient Protection and Affordable Care Act, the District of Columbia’s Department of Health Care Finance formed the Health Care Reform and Innovation Administration. The executive, who had held several high-level positions in the industry prior to that time, was made director of the Administration but was later promoted to chief operating officer for the whole Department. Subsequently the Administration was told that the COO had been violating normal bidding procedures by steering contracts to particular contractors. The Department Director spoke to one such contractor and was told the COO had contacted the contractor without solicitation and then urged it to partner on a bid with another, politically connected contractor. The Director told his chief of staff, the Mayor, and HR.

Leaks to the news. HR put the COO on leave but would not answer her questions about what allegations had been made against her. She asked for, but was denied, an opportunity to refute any allegations. Just a few days later, the Mayor’s staff allowed a reporter to review the Director’s emails to the Mayor’s office regarding the investigation, and the Director subsequently provided the reporter with additional background. The next morning the paper published a story about it, with the headline “Health Care Finance COO Fired over Contract Steering Allegations.” The first time the employee became aware of the specific allegations against her was when reading that article—later on the same day she was fired. The Director later shared the emails with the Washington Post, which published a story with the headline “D.C. Official Is Fired over Contract Allegations.”

Jury verdict. The COO, sued alleging violations of her Fifth Amendment due-process rights based on unlawful termination of her employment and the employer’s leak of untrue allegations about her to the press. She was only able to secure a full-time job within her chosen field nearly two years after she was fired. She pursued both “reputation-plus” and “stigma-plus” due process claims. A reputation-plus claim is based on the government taking adverse actions and defaming an employee, while a stigma-plus claim is based on the government taking certain adverse actions—like the termination here—and those actions create a stigma or disability foreclosing the employee’s ability to enjoy other employment opportunities. The district court denied Rule 50(a) motions made by the District during the five-day jury trial, and the employer then made a renewed motion under Rule 50(b) after the jury returned a verdict in the exec’s favor on the stigma-plus claim. The district court denied the motion and the District appealed.

“Speech argument” not made in prior motions. On appeal the District put all of its weight behind one argument—that the COO’s stigma-plus claim should fail as a matter of law because it was based on the government’s speech, rather than its termination action, and, thus, that it was a reputation-plus claim in disguise. Because the jury had rejected a reputation-plus claim, the employer reasoned, this claim should fail as well. However, the appeals court explained that it did not need to resolve this particular argument, which it referred to as the “speech argument,” because the District never brought it up before the Rule 50(b) motion; it was raised only in the Rule 50(b) argument after the verdict, but by then it was too late.

The District’s attempts to “sidestep” this problem, by arguing that it was preserved by other arguments it had made, were unpersuasive. Moreover, the appeals court noted that the jury instructions were “flatly inconsistent” with the speech argument now being advanced by the District, yet it had never objected to those instructions. If it “had been advancing the speech argument,” as it claimed now that it was, “one might expect” the District to have objected to those instructions because they allowed the jury to find a stigma-plus claim based on discharge of the COO “in conjunction with its ‘speech.’” However, the District did not object.

No categorical rule. In addition, the District repeated an argument that it had made in its Rule 50(a) motions—that the COO had not been foreclosed from working in her chosen profession because she found full-time work within two years of her discharge. The District argued then, and again on appeal, that two years of unemployment are categorically insufficient to establish deprivation of her liberty interest based on government action with the “broad effect of largely precluding [her] from pursuing her chosen career.”

As had the district court, the appeals court rejected this argument. In the two years the executive had applied for over 30 jobs and was only able to obtain two temporary jobs, both outside of her chosen profession. Evidence indicated that her difficulty finding work was related to the negative publicity around her discharge. Moreover, the District failed to cite any binding or persuasive authority supporting its “two-year rule.” In fact, the appeals court noted, some precedent suggested that fewer than two years could be sufficient. Even if a categorical approach were appropriate, the court asked, why should it be set at two years rather than one, or some other, higher number? The court affirmed.

By Kathleen Kapusta, J.D.

Age was a necessary but insufficient factor in a county’s decision to terminate part-time rehired retirees who were 65 years old or older, the Seventh Circuit stated, finding no evidence the county employer engaged in unlawful discrimination. Affirming summary judgment against their ADEA claims, the appeals court explained that a combination of current employment and participation in a supplemental insurance program was the decisive factor that distinguished the population of terminated employees from the larger workforce. Summary judgment was also affirmed against their equal protection claim (Carson v. Lake County, Indiana, July 26, 2017, Hamilton, D.).

The plaintiffs, retirees who had been rehired part time, received a Medicare supplemental health insurance policy through Aetna that was paid for by the county. In 2013, Aetna informed the county that current employees, including rehired retirees, could not participate in the supplemental insurance plan without the county risking either forfeiting its supplemental insurance coverage altogether or incurring substantial costs to bring the plan into compliance with federal rules and regulations governing group health insurance.

The criteria. After consulting with an employee benefits attorney who confirmed Aetna’s position and advised the county “not to rehire any retirees,” or, alternatively, to rehire them full-time and offer them regular benefits, the county, in 2013, terminated 28 part-time rehired retirees. In its letter to the retirees, the county explained that they were selected for termination because they met each of four criteria: (1) they had retired from county service and were later rehired part-time; (2) they were age 65 or older; (3) they were receiving Medicare as their primary insurance; and (4) they were enrolled in the Aetna supplement. A much larger group of employees age 65 or older who were not enrolled in the supplement continued their employment with the county.

Plaintiffs, a subset of the 28 part-time employees who were terminated, sued the county for age discrimination in violation of the ADEA and the Fourteenth Amendment Equal Protection Clause. The parties filed cross-motions for summary judgment and the district court granted the county’s motion.

Not facially discriminatory. Arguing on appeal that the county’s decision was discriminatory on its face, the plaintiffs asserted that since all part-time employees who were terminated were age 65 or older, and since age was one of the criteria listed in the termination letter, “age was a but-for cause, as their age was a necessary condition for the defendant’s decision to terminate them.” The problem with this argument, said the court, was that age was not the impetus for the decision.

Noting that the plaintiffs shared four characteristics—they were (1) age 65 or older, (2) enrolled in Medicare for their primary health insurance coverage, but also were (3) rehired retirees, and (4) most important, enrolled in the Aetna supplemental policy—the court explained that the county did not terminate them because of their ages. Rather, it terminated them because they were enrolled in a retiree-only insurance plan in which current employees could not participate.

Not a proxy. The plaintiffs also argued that Medicare eligibility, and presumably enrollment in a Medicare supplement, may function as a proxy for age, such that an employer’s decision to terminate an employee based on such insurance coverage is a form of implicit age discrimination. The court, however, found no evidence that the county engaged in any prohibited stereotyping. The county did not “suppose a correlation” between the plaintiffs’ Medicare status and age and “act accordingly,” the court observed, pointing out that instead it fired only those employees who were enrolled in the Aetna supplement, leaving unaffected a large number of employees age 65 or older who had not enrolled in the supplement. The undisputed facts, said the court, showed that economic and regulatory pressures—not generalizations about the capabilities of elderly employees—drove the county’s decision,

Government policy. Moreover, the court noted, even a government policy that affects different age groups differently may not necessarily discriminate because of age. Explaining that the question is fact sensitive, the court found that here there was “no evidence of stereotypical assumptions, the likes of which Congress sought to suppress through the ADEA.” Rather, the county asserted a clear non-age-related rationale for its policy: an effort to reserve affordable health insurance for retirees. And while the county could have explained its predicament to the small group of affected part-timers and then offered each a choice between continued insurance or continued employment, that did not change the “bottom-line result in this ADEA case,” said the court, noting that the county “could not fire its employees because of their age, but we see no evidence of such disparate treatment in the record.”

Burden-shifting framework. The court also rejected the plaintiffs’ contention that they could prove their disparate treatment claim through the McDonnell Douglas burden-shifting frame-work, finding that they could not even establish a prima facie case as they could not show they were treated less favorably than similarly situated employees outside their protected class. Noting that they were among the small group of rehired retirees who were employed part-time and insured under Medicare and the Aetna supplement, the court pointed out that all such employees were fired, all (regardless of age) who remain employed by the county are not enrolled in the Aetna supplement, and all retirees who benefit from the supplement are no longer employed by the county.

Disparate impact. As to their disparate impact claim, in which they alleged they were the victims of an impermissibly discriminatory policy, the court pointed out that the undisputed facts showed the county took an adverse action against a subset of older workers not because of their age but because it wished to preserve its supplemental insurance plan and to comply with federal law. Those reasonable factors other than age amply supported the county’s decision.

Equal protection. Finally, the court found that the plaintiffs’ equal protection argument failed for essentially the same reason that their McDonnell Douglas burden-shifting argument failed: They did not identify a suitable comparator group. Observing further that the Equal Protection Clause subjects age-based distinctions to rational-basis review, the court pointed out that the county chose to terminate a group of at-will part-time employees whose continued employment would have imperiled its fragile financial situation or jeopardized an insurance plan that benefited plaintiffs and many other retirees. Noting that the county’s choice preserved plaintiffs’ eligibility for the supplemental insurance, the court found that the choice was rational.

By Pamela Wolf, J.D.

Wasting no time following his inauguration on January 20, President Donald Trump signed an executive order aimed at unraveling his predecessor’s signature act, the Patient Protection and Affordable Care Act (ACA). The move prompted widespread concern on top of the anxiety already mounting over exactly what will happen to health care coverage all across the nation under a Trump Administration supported by a Republican-dominated Congress that has already put the wheels in motion to roll back so-called “Obamacare.”

How broad is the order? To help break down the executive order and understand its implications for both employers and employees, Employment Law Daily reached out to benefits ace Joy M. Napier-Joyce, a principal in the Baltimore, Maryland, office of Jackson Lewis P.C. “While the Executive Order does not have the power to repeal the ACA, it clearly expresses a directive to agencies to delay, exempt, defer and otherwise not enforce certain provisions of the law that are within their discretion,” she explained.

Napier-Joyce noted that many have considered the order largely targeted at penalty relief for individuals who failed to maintain the necessary coverage under the ACA’s individual mandate. “The Order, however, encourages much broader relief to all who are burdened by the law’s requirements, although it does not specifically mention employers,” she explained.

What does mean for employers? As to how the order will impact employers, the Jackson Lewis attorney said we’re going to have to wait to see how the federal agencies react to it. “Employers will be most interested in knowing whether the IRS will act to delay ACA reporting requirements, which they have done in the past and is within their discretion without formal rulemaking processes,” she pointed out. “Employers will also be eager to understand how the IRS, HHS, and DOL plan to enforce other ACA requirements pending repeal and to what extent the agencies will go beyond their discretion via the rulemaking process to pull back regulatory requirements prior to legislative action.”

“One of the byproducts of the order and its timing will be to further unsettle or destabilize the health insurance market, which will ultimately impact employers in the coverage they offer,” according to the benefits expert.

Pressure on Congress. Napier-Joyce also suggested that the executive order puts additional pressure on Congress to come up with a repeal/replace plan quickly. “Several members of Congress have expressed the desire to make sure that any replacement plan is carefully designed to mitigate some of the negative effects of the repeal,” she observed.

Ripple effect among states. Turning to a broader impact of the executive order, and perhaps more generally, the move to unravel Obamacare, Napier-Joyce said, “We may also see states begin to act to fill in the gaps in terms of coverage mandates that may be lost in the dismantling of the ACA.” She pointed for example, to the executive order issued by New York Governor Cuomo that requires insurers to cover contraceptives and medically necessary abortions under health insurance policies issued in New York.

Stay tuned. Undoubtedly, other impacts of President Trump’s first executive action on the Obamacare front will soon become evident as stakeholders focus their radar. “We are carefully watching agency reactions to the executive order as they both directly and indirectly impact employers,” Napier-Joyce said.