Suits In The WorkPlace

Doctors As Employees

    Doctor-hospital relationships are typically characterized as independent contractor arrangements.  The hospital provides access (“privileges”) to physicians who then treat their patients using the hospital's facilities.  The hospital does not dictate how patients are treated, although there is usually some type of quality assurance mechanism in place to monitor the physician's overall performance, as required by state or federal law.  A recent decision out of the Second Circuit shows how even this type of traditional relationship can evolve into an employment relationship that subjects the hospital to liability under the federal discrimination law.  The case also provides a useful guide on how not to manage claims of sexual harassment by physicians against the hospital staff.

     A female physician was a board-certified gastroenterologist and internist with privileges at the defendant hospital.  At the hospital, she was required to comply with so-called Staff Rules and Regulations and Hospital By-Laws.  She was also required to participate in quarterly staff meetings and spend a certain amount of time both on call treating hospital patients as the need arose, as well as maintaining follow-up treatment regimens for the patients she saw during this time.  She was subject to the hospital quality assurance program.  This program involved practitioner review of problematic cases and also a peer review process examining individual physicians whose cases had been flagged through the quality assurance mechanism.  One of the things that the plaintiff alleged was that the quality assurance program included detailed requirements as to when and how her work was to be performed and, in some cases, focused on maximizing profits, rather than patient care. 

     The plaintiff alleged she was repeatedly sexually harassed by the hospital's Chief of the Gastroenterology Division.  She complained of what has now become the standard litany in these types of cases:  unwanted and inappropriate remarks; comments about her clothing, appearance and attractiveness; and being physically cornered by this doctor and asked if she was available for him on weekend afternoons. 

      One of the enduring characteristics of sexual harassment defendants is their absolutely overwhelming lack of originality. 

     After the plaintiff refused his advances and reported them to the hospital president and chief of staff, two things happened.  First, the hospital did nothing about the harassing division chief.   Second, the hospital allegedly began an organized campaign to force her out. 

     Had the hospital simply removed her privileges, this case might not have gotten any further.   But the hospital president, and other physicians began a systematic review of all of the plaintiff's cases, even those already peer reviewed and approved.  In doing this, the hospital violated its own usual protocols, examining her cases in greater depth than it did for other physicians.  Other doctors, aware of the campaign against her, stopped referring patients to her, and some even confided to her that she was a target because of her complaint against the division chief. 

     Ultimately, the hospital ordered her to undergo a three-month "re-education" and mentoring program.  Note to HR practitioners -- for those of you establishing corrective action programs for your employees, try not to name them in a manner reminiscent of the concentration camps for political dissidents used in communist dictatorships.

     The re-education program focused on redirecting a plaintiff's practice of medicine into a more suitable style and method.  Ultimately, because no one in their right mind at this hospital wanted to be associated with her, there was no physician mentor and the requirement vanished when the hospital was sold to another organization.  The plaintiff sued when she could not get another job.

     Although the district court found that the plaintiff doctor was not an employee but an independent contractor, the Second Circuit reversed on appeal.  The Court determined that the hospital's quality assurance program mandated performance of certain procedures, selections of specific medications, and a focus on "lost revenue", notwithstanding the physician recommendations for treating a patient.  It also noted that the "re-education" program was aimed directly at the critical "manner and means" by which the plaintiff physician accomplished her work.  In evaluating the key issue of balance between the employee's judgment and the employer's control, the court determined that the plaintiff raised issues of material fact about whether the hospital's control overrode the employee's judgment.  The court noted that it was significant that the hospital's review of the plaintiff's practice did not result in the termination of her contract or a simple ultimatum to improve her patient treatment outcomes, but rather in a detailed program that was expressly designed to change the methods by which she arrived at diagnoses and treatment.

     In other words, when the hospital moved into the role of supervising how the physician did her job, it was stepping into the shoes occupied by an employer, not a contract supervisor.

     This is an excellent case to review for healthcare organizations, but it also provides solid guidance for anyone who is operating an independent contractor workforce.

It Probably Wouldn't Have Hurt to Ask

Terminating Benefit Payments: What ERISA Really Says

    Because the federal ERISA statute is basically a tax law, many employment litigators stay as far away from it as possible.  ERISA cases continue to proliferate, however, and that trend should continue given:  (a) the "graying" (or, in my case, the "graying" and "balding") of the population; (b) the skyrocketing costs of disability medical care, making this a big target for reduction by the disability plan administrators; and (c) the corresponding skyrocketing value of the cases, which attracts lawyers like my mailbox attracts credit card offers.

     The 4th Circuit recently delivered an opinion on a very difficult denial of benefits case.  The opinion is remarkable for the clarity of its discussion as to what standards courts have to apply in evaluating these cases.  The plaintiff, a victim of severe rheumatoid arthritis, quit her job because her condition made it impossible to perform her work as an order processor.  After receiving benefits for five years, and after an intervening car accident caused serious injuries to her back, the disability benefits plan administrator determined that she was no longer eligible for disability and terminated her benefits. 

    No fewer than nine physicians reviewed her medical file on behalf of the plan, while the plaintiff had three highly qualified specialists, who also were her treating physicians, on her side of the table.  The plan physicians all determined that the plaintiff was no longer disabled under the terms of the plan and supported the termination of the benefits decision.  The three treating physicians -- and remember, none of the plan physicians had actually examined the plaintiff -- all opined that she did meet the definition of disability under the plan and that benefits should be reinstated.  Looking through all of this material over the course of two additional appeals, the plan administrator upheld the decision to terminate the disability benefits, and the plaintiff sued. 

     The trial court reversed the plan administrator, finding that the three examining physicians were substantially more persuasive than the plan's nine doctors who reviewed the file.  The plan administrator appealed.

     The 4th Circuit panel reversed the trial court and upheld the denial of benefits.  In doing so, the panel noted the key point for these types of cases -- namely, that the plan administrator is entitled to wide and deferential latitude when a court is reviewing the decision to deny disability benefits.  Under the language of most benefit plans, courts use what is referred to as an "abuse of discretion" standard of review.  This basically means that the plan administrator's decision should be upheld as long as the decision is supported by substantial evidence, careful reasoning, and adherence to the statute and the language of the plan document itself. 

     In other words, as long as the plan can show that it intelligently evaluated evidence both for and against its ultimate decision and has a reasonable basis for its action, a court may not disturb the plan's determination. 

     I can tell you from experience that these cases are some of the most difficult civil matters a company will ever deal with because of the equivocal evidence and often extremely sympathetic situations of the people whose benefits are being reduced or terminated.  The social policy basis for this logic is clear, however, in the court’s opinion.  "[W]hatever the call on our compassion in a particular case, ... the fact is that the 'price' [of greater coverage] would almost certainly [be] lower benefits levels and lower levels of plan formation."  ERISA judgments must take into account the fact that a compassionate yet improper award of benefits in one case will reduce the overall pool of benefits and ultimately runs the risk of dissuading employers from offering any plans at all.

So Much for the Neutral Reference Policy

    Employment lawyers are constantly advising their clients that candor in references for ex-employees is rarely a good idea.  It's not that we want our clients to mislead companies unlucky enough to hire the cast-offs, it's just that giving a reference that actually provides useful information (versus the neutral reference’s bland recitation of dates of employment, job title and, perhaps, salary) has so much baggage attached to it. 

     So it's refreshing when a law firm actually steps out on the reference ledge every now and then. 

     The firm of Kasowitz, Benson, Torres & Friedman LLP ("KBTF" for obvious reasons) got slightly miffed when it read in a story that the lawyer it removed for cause last December got a new job, and that he had been recruited away by his new firm, a competitor in the intellectual property litigation market.  Rather than seething in private, one of the name KBTF partners issued a press release telling the world that KBTF fired the attorney for cause because of "extremely inappropriate personal conduct." 

     Wow -- not just "inappropriate personal conduct," but "extremely" inappropriate personal conduct.  Further fanning the flames, KBTF also noted that it fired its former partner following a thorough, weeklong investigation, and that the firm's action was part of its zero-tolerance policy for this type of misconduct.  Makes you wonder if the former lawyer/employee is still combing the tar and feathers out of his hair.  Did I mention that all of these folks are in New York?

     The last time I can recall a law firm firing off a press release with negative information about a lateral move was several years ago, when a Latham & Watkins recruit found himself being pilloried by his former firm for sexual harassment allegations and low billable hours.  I'll let you guess which one was a bigger sin for the former employer.  The ensuing lawsuit settled for somewhere between $5 million and $10 million, according to the legal press.  I am now wondering whether KBTF's former counsel will follow a similar path.  I guess that's one way of generating new business.

IM, R U?

    The dangers of email in a litigation context are well documented.  Because email appears to be transitory, but actually can exist in some form for years, businesses are constantly advising their managers not to put something in an email message that would embarrass them if it came out on the front page of the local paper. 

     Instant Messaging, or "IM", tends not to have the same concerns associated with it.  Unlike email, IM messages are typically erased when the conversation terminates.  They are more ephemeral than even cell phone text messages and it's unusual to find a case in which IM'ing plays a substantial role as evidence.

     Of course, all of this is leading up to just such a case.  The plaintiff, seeking immediate employment following college graduation, took a job with a temp agency that placed her with a cell phone company.  She worked in the administrative group and was supervised by a front-line manager.  Within six months, the plaintiff left her job, telling her temp employer that she could no longer work there because she could not endure the manager's conduct.  Specifically, she alleged in her lawsuit that she was being sexually harassed, assaulted, falsely imprisoned, and constructively discharged.

     Up to this point, a familiar tune.  What makes this case stand out is the fact that while she was employed, the plaintiff and the manager engaged in frequent sexual bantering on IM, which the plaintiff apparently copied and pasted into a more permanent record.  The trial court quotes pages and pages of this flirting, some with fairly graphic details. 

       After wading through all of this, the first impression you get is that these people deserve each other, even though one had a steady boyfriend and the other was married.  The second impression is that it's almost impossible to imagine something more embarrassing than having this kind of sappy dialogue published in a federal court opinion.  The final impression, one that is shared by the court, is that whatever sexual banter was present in the office, it was present in a mutual form.  In other words, the IM, which the plaintiff submitted as evidence of sexual harassment against her, clearly shows that the conduct she complained of was not only welcome, it was encouraged.

     The company dodged a bullet on this one, although I suspect that the manager no longer works there.  The moral of this story is that no matter how impermanent these messages may seem, if someone wants to, they can be made permanent very easily.  IM is no protection against a terminal case of foolishness. 

NLRB Issues Key Decision Affecting Employer Email Policies

The following is the text of another client alert our L&E team sent out yesterday. 

On Sunday, December 16, the last day of the term of NLRB Chairman, Robert Battista, the Board issued a long awaited decision on employer e-mail policies. The Guard Publishing Co., 351 NLRB No. 70 (2007). This decision represents a significant change in the way the NLRB addresses the rights of employers to control their property. Since the decision applies to all private employers, whether they are union or nonunion, companies should review promptly their e-mail and related policies.