Sixth Circuit Dismisses ADEA Claims by Employees Who Claimed They Were Terminated For Budget Reasons Rather than For Violating Confidentiality Policy.

Today, the Sixth Circuit affirmed the dismissal of claims by two employees who alleged that they had been terminated on account of their age because the new CEO had sought to increase turnover among (more expensive) employees with more seniority so that he could hire less expensive, newer employees. Allen v. Highlands Hospital Corp., No. 07-6414 (10/21/08). The plaintiffs admitted to the conduct which the hospital explained motivated it to terminate their employment, but the plaintiffs denied their conduct was the actual reason for their termination. Indeed, the court was sympathetic that the plaintiffs had not actually violated patient confidentiality as alleged, but still gave more weight to the hospital’s argument that it held an honest belief that the plaintiffs had violated its HIPAA policy based on a thorough investigation by the human resources department. In any event, the court found that there was no evidence that the hospital’s business strategy to reduce its budget for employee compensation had a disparate impact on older employees and did not constitute direct evidence of age discrimination.

The plaintiffs were terminated for violating the hospital’s HIPAA policy when one of the plaintiffs obtained the x-rays of her own granddaughter (at the parent’s request) from the other plaintiff without having a signed authorization from the parent of the granddaughter. The grandmother plaintiff had been told by another employee that the parent’s signature was mandatory, but there was no written policy governing the situation. Moreover, the plaintiff grandparent then forged the parent’s signature on the authorization form, back-dated the form and placed it in the medical record (which may have shown knowledge of her own guilt in violating an unwritten policy). Both employees were terminated for violation of the HIPAA policy, which the hospital considered to be a major offense.

The Court acknowledged that the hospital’s actions in this case were unduly harsh: “the facts of this case are not a “textbook example” of a privacy violation for which a hospital would usually take such serious action against its long-time employees. The record shows that [plaintiff] was not only the biological grandmother of the patient, but also was involved in her care and guardianship (although [plaintiff] was admittedly not [the granddaughter’s] legal guardian). Moreover, [the hospital] does not dispute that [the mother], as [the granddaughter’s] mother and legal guardian, in fact gave [plaintiff] verbal authorization to retrieve the x-rays. The plaintiffs have thus undoubtedly pointed to a weakness in the Hospital’s policy, if for no other reason than that this case highlights the potential ambiguity caused by the lack of detail in the employee manual’s prohibition against an unauthorized release. But the fact that the Hospital would benefit from developing a more detailed policy on this issue does not mean that [the plaintiffs] have succeeded in creating a genuine issue of material fact about whether HHC’s stated reason for terminating them was a pretext designed to hide age-based discrimination. We thus agree with the Hospital that, in determining if the plaintiffs have raised a genuine issue of material fact as to pretext, we should consider not whether [the plaintiffs] actually breached patient confidentiality, but rather whether the Hospital had an honestly held belief that they had committed a Group I offense.”

To support their age discrimination claims, the plaintiffs produced evidence that the hospital’s new CEO sought to increase employee turnover among more senior (and presumably more expensive) employees. According to the court, the hospital’s budget manager testified “one of [the CEO’s] strategies was to terminate employees based on seniority to facilitate the hiring of new, less costly employees. In fact, [the CEO] increased the annual turnover rate from 2% to 28%. [The budget manager] did not know whether the cost-cutting measures had a disproportionate effect on older employees, but she said that [the CEO’s] focus was at all times on improving HHC’s financial situation.” In any event, the Court of Appeals found that this testimony did not constitute direct evidence of age discrimination.

“Indeed, the Supreme Court in Hazen Paper Co. v. Biggins, 507 U.S. 604 (1993), has specifically held that the strategies discussed by [the budget manager] are permissible methods for employers to cut costs: When the employer’s decision is wholly motivated by factors other than age, the problem of inaccurate and stigmatizing stereotypes disappears. This is true even if the motivating factor is correlated with age . . . . On average, an older employee has had more years in the work force than a younger employee, and thus may well have accumulated more years of service with a particular employer. Yet an employee’s age is analytically distinct from his years of service. An employee who is younger than 40, and therefore outside the class of older workers as defined by the ADEA, see 29 U.S.C. § 631(a), may have worked for a particular employer his entire career, while an older worker may have been newly hired. Because age and years of service are analytically distinct, an employer can take account of one while ignoring the other, and thus it is incorrect to say that a decision based on years of service is necessarily ‘age based.’”

Moreover, the court found insufficient evidence that the CEO’s budget practice had a disparate impact on older workers either. The hospital’s expert produced evidence that the hospital’s increased turnover did not result in a disproportionate reduction in the number of employees over the age of 40. “ Nor is the plaintiffs’ disparate-impact claim salvaged by the allegation that the number of terminations of those over 40 years of age increased from 14.3% to 62.5% of all terminations between 2002 and 2003. As the district court noted, this data is not statistically significant because the pools from which those percentages were drawn were very small—i.e., there were only 21 terminations in 2002 and 16 terminations in 2003.”

Finally, “[t]he plaintiffs, however, have failed to satisfy their burden of isolating and identifying a specific employment practice that disproportionately impacts employees who are at least 40 years old. As we have already explained, the plaintiffs have at best alleged that HHC desired to reduce costs associated with its highly paid workforce, including those costs associated with employees with greater seniority. But the plaintiffs have not established that this corporate desire evolved into an identifiable practice that disproportionately harms workers who are at least 40 years old. Because Allen and Slone have simply “point[ed] to a generalized policy,” as opposed to specific practice, they have therefore failed to raise a genuine question of material fact with respect to their disparate impact claim.”

The plaintiffs also produced evidence that a the supervisor of a hospital contractor told one of its employees that the employee should start looking for another job because it looked as though all of the older employees would be let go. The court also rejected this as direct evidence that the plaintiffs were terminated on account of their age because the solitary statement was not made by their supervisors and was, instead, made in connection with another employer.

Insomniacs can read the full decision at http://www.ca6.uscourts.gov/opinions.pdf/08a0381p-06.pdf.


NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.