Ellen Donovan McCann is senior counsel in the leave and accommodation practice group of Littler, the world’s largest employment and labor law practice representing management.
A recent decision by the U.S. District Court for the District of Oregon could have significant implications for employers facing lawsuits that allege both federal and state claims where plaintiffs are seeking large punitive damages awards.
Background of the case
After a train conductor for Union Pacific Railroad Co. dislocated his shoulder and underwent physical therapy, his medical provider released him to return to work with no restrictions. However, without personally evaluating his condition, Union Pacific refused to allow him to return to work due to concerns that he might reinjure his shoulder climbing ladders, which was an essential function of the job.
This decision was made pursuant to the company’s “1% rule,” which prohibited employees from working in safety-sensitive jobs if there was a 1% chance per year of “sudden incapacitation.” Even though the employee’s medical providers released him to return to work with no restrictions, the company classified any employee who had anterior shoulder dislocation as having a permanent restriction which would then prohibit the employee from returning to a safety-sensitive job. As a result, he was not permitted to return to work at Union Pacific.
Legal proceedings
The employee sued Union Pacific for disability discrimination under both the Americans with Disabilities Act and its state equivalent, Oregon’s disability discrimination law.
He argued that Union Pacific’s policies screened out and had a disparate impact on disabled employees since no individualized assessment was performed concerning an employee’s ability to perform their job.
He alleged that he was automatically assigned a restriction by the company and then prohibited from returning to work due to the 1% rule, despite the fact that his providers concluded that he had no restrictions. A jury returned a verdict in his favor, awarding $952,863 in front and back pay, $1 million dollars in noneconomic damages and $25 million dollars in punitive damages.
Appeal
Union Pacific challenged the appropriateness of the award of back pay and punitive damages. It also alleged the award far exceeded the ADA statutory compensatory and punitive damages cap of $300,000 that applies to large employers, claiming that both back pay and punitive damages were subject to the cap.
The court rejected Union Pacific’s claims and held that the ADA damages cap applies only to punitive and compensatory damages, such as emotional distress and noneconomic damages, not to back pay or front pay. After reviewing the facts of the case, the court found that the jury award of back pay was supported by sufficient evidence and affirmed the combined back and front pay award of $952,863.
Agreeing with the jury that the 1% policy was unlawful because it screened out individuals regardless of their actual condition, the court also affirmed the award of punitive damages. To support its finding, the court relied on evidence introduced at trial that Union Pacific did not evaluate the worker individually but rather relied on its policy, which treated all employees with the same condition as having a restriction.
Because the court found that Union Pacific was aware of antidiscrimination laws and its policy was facially discriminatory, it upheld the award of punitive damages. Significantly, the court held that egregious conduct was not required to establish that punitive damages were appropriate. Rather, the court opined that intentional discrimination is enough to establish liability for punitive damages.
The court also refused to reduce the jury award to the ADA compensatory and punitive damages cap because the jury found that the company violated both the ADA and Oregon law. Since the jury form did not allocate damages between the claims, the court concluded that the most reasonable assumption was that the jury awarded the same damages on both the state and federal claims. Although the damages could not be awarded twice, the court found that it had authority to allocate the damages to either claim.
Since the 9th Circuit previously held that compensatory damages allocated by the court to claims other than federal claims are not subject to the ADA damages cap, the court allocated the damages so that damages that exceeded the ADA cap were allocated to the state claims. As a result, the court allocated $300,000 of the punitive damages awarded to the ADA claim and the remaining $24.7 million dollars to claims under Oregon law. The court awarded all the back and front pay to the ADA claim and the $1 million dollars in compensatory damages to the state law claim, upholding the total award of $26,952,863.
Employer takeaways
Employers should pay close attention to this case. While the court stayed execution of the judgment until the exhaustion of the appellate process, it is noteworthy that the court held that it did not need to find that Union Pacific engaged in egregious conduct to uphold punitive damages.
It only needed to find intentional discrimination to support a punitive damages award, and its intentional discrimination finding was based on Union Pacific’s imposition of permanent restrictions on the employee rather than an individualized determination.
In rejecting claims that the punitive damages award was excessive, the court recognized that punitive damages are aimed at punishing and deterring unlawful conduct and given that Union Pacific’s daily profit was $18.5 million dollars, the court felt that the $25 million-dollar punitive damages award was not grossly excessive.
Finally, the court allocated the damages in a way that preserved every single penny of the jury verdict. Employers should certainly keep this case in mind when assessing risk of disability discrimination cases in the future.
