GT Alert

U.S. Supreme Court Rules That Neutral No-Rehire Policy is Legitimate, Nondiscriminatory Reason Under the ADA for Employer’s Refusal to Rehire Former Employee

January 2004
By John Scalia and Michael Buddendeck, Greenberg Traurig, Tysons Corner Office

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In just its second decision addressing the substantive protections of the Americans with Disabilities Act (“ADA”), the U.S. Supreme Court last month held that an employer’s no-rehire policy constitutes a legitimate, nondiscriminatory reason under the ADA for refusing to rehire a former employee, as long as the policy is applied equally to all rehire applicants previously terminated for misconduct.

"The decision... left unanswered whether the ADA confers preferential rehire rights on disabled employees lawfully terminated for violating workplace conduct rules. The Court’s failure to address this important issue disappointed many employers and other observers who had been hoping for additional guidance concerning the tension between neutral employment policies and the ADA’s reasonable accommodation requirements."

The Court’s unanimous decision in Raytheon Company v. Hernandez (U.S. No. 02-749, December 2, 2003) means that employers who apply a non-pretextual, neutral no-rehire policy generally will not be liable for “disparate treatment” claims under the ADA1. The decision fell short of addressing whether such a neutral no-rehire policy runs afoul of the ADA based on a “disparate impact” theory of liability, and left unanswered whether the ADA confers preferential rehire rights on disabled employees lawfully terminated for violating workplace conduct rules. The Court’s failure to address this important issue disappointed many employers and other observers who had been hoping for additional guidance concerning the tension between neutral employment policies and the ADA’s reasonable accommodation requirements.

The Facts of the Raytheon Case

Mr. Joel Hernandez worked for Raytheon (and its predecessor company) for 25 years, until he tested positive for cocaine use. Mr. Hernandez’ illegal drug use violated company workplace conduct rules, and the company gave him the option to resign or face involuntary termination. Mr. Hernandez opted to resign, and the company inserted a note in his personnel record indicating that he quit in lieu of being discharged for workplace misconduct. Two years later, claiming to be rehabilitated, Mr. Hernandez applied to be rehired. However, Raytheon, like many employers, had in place a policy that prohibited the rehiring of former employees who had been terminated for workplace misconduct. As a result of its policy, Raytheon determined that Mr. Hernandez was not eligible to be rehired.

The Procedural History of the Case

Following the rejection of his application for rehire, Mr. Hernandez took the matter up with the Equal Employment Opportunity Commission (“EEOC”), claiming he had been discriminated against in violation of the ADA. (Although illegal drug use is excluded from coverage under the ADA, rehabilitated addicts are protected under the Act.) After the EEOC conducted an investigation and issued a right-to-sue letter, Mr. Hernandez filed suit against Raytheon based on the disparate treatment theory that the company denied his application because it regarded him as being a drug addict and/or because of his prior record of drug addiction.

Raytheon sought to have Mr. Hernandez’ disparate treatment claim dismissed through summary judgment, claiming its blanket policy was not discriminatory because the company applied it equally to all former employees terminated for misconduct. In response, Mr. Hernandez for the very first time made the alternative argument that even if Raytheon’s no-rehire policy was facially neutral (and thus did not violate the ADA in a disparate treatment case), it nevertheless had a disparate impact on rehabilitated drug users, such as Mr. Hernandez, in violation of the ADA. The District Court granted Raytheon’s motion for summary judgment on Mr. Hernandez’ disparate treatment claim and refused to address his disparate impact argument because it had not been raised in a timely manner in the litigation.

On appeal, the Court of Appeals for the Ninth Circuit agreed with the District Court that Mr. Hernandez did not raise his disparate impact claim in a timely manner. The Ninth Circuit also determined that Raytheon’s neutral no-rehire policy was lawful on its face. Yet the Ninth Circuit nevertheless reversed the District Court’s decision, holding that Raytheon’s otherwise lawful no-rehire policy was insufficient to deny Mr. Hernandez’ application because the policy had a disparate impact on recovering drug addicts under the ADA.

The Supreme Court’s Decision

The Supreme Court granted review of the case. The specific question before the Court was whether the ADA confers preferential rehire rights on disabled employees who had been lawfully terminated for violating their employer’s workplace conduct rules. The Court never reached the question, however. Determining that in the proceedings below the Ninth Circuit had improperly applied a disparate impact analysis to a disparate treatment claim, the Court vacated the Ninth Circuit’s judgment and remanded the case to the Ninth Circuit for further proceedings with instructions to apply the correct legal analysis.

In reaching its decision, the Supreme Court noted the analytical differences between disparate treatment and disparate impact claims under the ADA, and emphasized the need for courts to distinguish between the two. Applying a disparate treatment analysis, the Supreme Court determined that “[Raytheon’s] no-rehire policy is a quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules. If [Raytheon] did indeed apply a neutral, generally applicable no-rehire policy in rejecting [Hernandez’] application, [Raytheon’s] decision not to rehire [Hernandez] can, in no way, be said to have been motivated by [Hernandez’] disability.” (By contrast, had Mr. Hernandez timely brought a disparate impact claim, Raytheon would have had to articulate some “business necessity” for its no-rehire policy.)

The Significance of the Raytheon Decision

The Court’s Raytheon decision surprised and disappointed many observers in failing to resolve the perplexing issue presented by many facially neutral employment policies – namely, the extent to which those policies (such as no-rehire, attendance and leave of absence policies) must be disregarded or modified to accommodate persons who are disabled under the ADA. Nonetheless, the Raytheon decision is important for clarifying that applying a neutral no-rehire policy generally protects an employer from intentional discrimination (disparate treatment) claims under the ADA. The Raytheon decision also provides an opportunity for employers to revisit their policies (such no-rehire, attendance and leave of absence policies) to make sure they are drafted and implemented in an ADA-compliant manner. In particular, the Raytheon decision drives home the following points:

• Don’t be afraid to discipline employees for misconduct. The ADA does not stand in the way of an employer disciplining or terminating an employee for workplace misconduct, regardless of whether that employee’s misconduct is due to his disability.

• Make sure your company’s policies are applied in an even-handed, neutral manner to all employees, regardless of whether they are disabled under the ADA.

• Ask yourself whether your company has any neutral policies that, in application, have a disparate impact on disabled employees, and, if so, whether you can articulate a “business necessity” for that policy.

• Consider consulting qualified employment law counsel to conduct an audit of your company’s employment policies and practices to determine whether you are in compliance with the ADA.

Footnotes

1 To understand the Court’s decision fully, it is necessary to understand that a claim of unlawful discrimination under the ADA can be predicated on either of two theories of liability. The first (and more common) theory of liability is one of “disparate treatment,” generally centering on a claim that a disabled individual has been intentionally singled out and treated less favorably than other similarly situated persons because of that individual’s disability. Disparate treatment claims, by their very nature, require proof of intentional discrimination. The second theory of liability is based on a claim of “disparate impact,” and challenges practices that are neutral and fair on their face but that have a discriminatory impact on disabled persons in application. In contrast to disparate treatment claims, disparate impact claims can be established without any proof of intentional discrimination.

© 2004 Greenberg Traurig

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