Non-disabled employee wins ADA case

On June 26, the Ninth Circuit Court of Appeals ruled on a very important case of disability discrimination. The Court held that an employee who was not, in fact, disabled, but who the employer "regarded as disabled" as a result of his workers compensation claim, is still protected from discrimination.

In Holihan v. Lucky Stores, the employee was on medical leave of absence when he started working two other jobs. The company terminated his employment. He reapplied for employment but there were no openings at his level. Rather than accepting a lower job, the employee sued. The Court of Appeals allowed the case to go forward.

This case could have significant impact on management's response to employees with disabilities. It indicates that even where management applies policies consistently for legitimate business reasons, there is potential liability. Managers and HR should have legal counsel involved in even routine decisions about firing employees who have been on workers compensation.

Case Synopsis

Richard D. Holihan worked for Lucky's supermarkets for about 25 years. He had an excellent record as a store manager, and was named the company's all-time profit producer. However, during one three-month period in 1992, he was the subject of numerous employee complaints for hostility and abusiveness, including manhandling, berating and threatening employees.

As a result of these complaints, his managers met with him and asked if there were any "problems" he was having that Lucky could help him with. He denied the complaints against him and denied having any problems. Management decided to transfer Holihan to another store with no history of personnel problems.

Over the next three months, there were 51 separate complaints from 13 different employees about Holihan's abusive behavior at the new, previously complaint-free, store. These complaints alleged that he threw food off of shelves and ordered employees to clean it up, repeatedly threatened to fire the entire staff for no valid reason, and violated money handling and other office procedures.

Management then offered Holihan a choice of either suspension pending Lucky's investigation into the allegations, or a standard leave of absence if he contacted Lucky's Employee Assistance Program (EAP) for counseling. Holihan contacted the EAP and began a medical leave of absence. The EAP referred Holihan to Dr. Jonathan Strickler, a psychologist, who diagnosed Holihan as "experiencing stress related problems precipitated by work" and recommended he not return to work for about 6 months. This diagnosis was forwarded to Lucky.

Holihan requested three extensions of his leave for a total of eight months, which Lucky provided. However, during the time he was on leave, Holihan began pursuing two other business activities. He prepared to open a sign-making business, finding suppliers and training himself in sign and banner production. He also obtained a real estate license and began selling real estate, attending sales meetings, holding open houses, and showing homes to potential buyers. Holihan worked up to 80 hours per week pursuing these two business activities.

Holihan requested another extension on his leave of absence, but Lucky denied it and fired him. In its termination letter, Lucky explained that Holihan had already exceeded the six months of leave allowed under Lucky's leave policy.

About 6 months later, Holihan reapplied for a job at Lucky. Lucky agreed to rehire him, but only as a clerk because no store manager positions were open at the time. Lucky told Holihan that he could apply for a store manager position once one became available, but Holihan refused the offer.

Holihan then filed a complaint in the district court alleging Lucky discriminated against him on the basis of his disability.

The Court of Appeals held that Holihan was not disabled under the Americans with Disabilities Act (ADA) because his mental impairment did not substantially limit any of his major life activities. Even if Holihan couldn't perform his store manager job, the fact that he worked in the sign-making business and in real estate showed that he was not disabled.

However, the Court went on to hold that even if Holihan were not actually disabled, the ADA prohibits discrimination against individuals "regarded as" disabled. If Lucky regarded Holihan as disabled, Holihan would have a "disability."

Since Lucky knew about the doctors' reports diagnosing Holihan with depression, anxiety and stress, Lucky could have regarded Holihan as suffering from a disabling mental condition that substantially limited his ability to work. Therefore, the Court ordered Lucky to go to trial on the case.

RICHARD D. HOLIHAN, v. LUCKY STORES, INC., No. 95-55409, 9th CA, (96 C.D.O.S. 4714)

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.