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Legal Report March 2004


ADA. In an employment discrimination case, the United States Supreme Court has overturned a lower court’s ruling and remanded the case. A federal appeals court had ruled that a company’s blanket rule of refusing to rehire employees who had been fired or who quit to avoid being fired could violate the Americans with Disabilities Act (ADA) if the employee in question had been terminated because of a drug addiction. The Supreme Court disagreed, ruling that the hiring policy was a legitimate reason for failing to rehire the plaintiff.

In July of 1991, Joel Hernandez was given a drug test at his workplace, Hughes Missile Systems Company, where he had been employed for 25 years. (Hughes has since been acquired by Raytheon Company, which has become the petitioner in this case.) Hernandez tested positive for cocaine.

The company knew that Hernandez had also had an alcohol problem. Raytheon gave Hernandez the option of resigning, which he did. The reason for the resignation given in Hernandez’s file was “quit in lieu of discharge.”

On January 24, 1994, Hernandez applied to Raytheon to be rehired for his former position. Along with his application, Hernandez submitted two reference letters: one from the pastor of his church and another from a counselor attesting that Hernandez attended Alcoholics Anonymous (AA) regularly and was committed to his recovery.

Hernandez’s application was forwarded to the company’s labor relations department and was reviewed by Joanne Bockmiller. Because the application indicated that Hernandez had worked for Raytheon in the past, Bockmiller pulled his file. When she saw the “quit in lieu of discharge” note, Bockmiller determined that Hernandez was ineligible for rehire because of the company’s blanket policy of not rehiring employees that were fired or that resigned in lieu of termination.

Hernandez filed a charge with the Equal Employment Opportunity Commission (EEOC), claiming that his application was rejected because of his disability—his drug and alcohol addiction. The EEOC sent a letter to Raytheon informing the company that it intended to sue for discrimination under the ADA.

Raytheon responded to the EEOC by letter indicating that Hernandez’s application had been rejected because Hernandez had used drugs while previously employed and had “shown a complete lack of evidence indicating successful drug rehabilitation.”

Raytheon also went on to state its policy of refusing to rehire any employee who had been terminated for violation of company rules and regulations. The company filed for summary judgment—a hearing based on the facts of a case, without a trial—arguing that Hernandez had failed to establish a case of discrimination because he never claimed to be disabled.

The U.S. District Court for the District of Arizona granted the summary judgment without comment. Hernandez appealed the decision.

The U.S. Court of Appeals for the Ninth Circuit found in favor of Hernandez, ruling that he could pursue his ADA case against Raytheon. The court ruled that Hernandez in fact did not claim to be disabled; he claimed that Raytheon considered him disabled when it refused to rehire him because it perceived he was a drug addict.

The court also noted that while Bockmiller claimed not to have known about Hernandez’s history of drug use, this position was questionable. The court noted that Bockmiller would have seen the letter of recommendation regarding AA attendance and would have been aware that Hernandez was a recovering alcoholic.

The court ruled that Hernandez could pursue his case and that the burden of proof shifted to Raytheon, which had to show that it had a nondiscriminatory reason for not rehiring Hernandez. Raytheon appealed the decision.

The Supreme Court overturned the lower court’s decision. According to the Court, once a prima facie case of discrimination had been established, the next question for the appellate court to consider was whether Raytheon had a legitimate, nondiscriminatory reason for its actions. In evaluating the record of case, the Court ruled that violating workplace rules could be considered a legitimate, nondiscriminatory reason for refusing to rehire Hernandez. (Raytheon v. Hernandez, U.S. Supreme Court, No. 02-749, 2003)

E-mail privacy. The U.S. Court of Appeals for the Third Circuit has upheld a lower court’s decision regarding the privacy of an employee’s e-mail messages. In the case, the appellate court ruled that a company did not violate federal wiretapping laws when it read an employee’s e-mail because company officials read the messages stored in a server. The wiretap statute can only be applied, ruled the court, if the e-mail messages are intercepted during transmission.

Richard Fraser began working for Nationwide Mutual Insurance Company in early 1986. Later that year, he signed a standard agreement to become an exclusive agent with the company. Under the agreement, Fraser committed himself to selling only Nationwide products. However, in all other respects he was treated as an independent contractor.

In 1990, Fraser began leasing computer hardware and software from Nationwide for use in his office. The lease agreement stated that the equipment remained the property of Nationwide and that any use of the e-mail software could be monitored by Nationwide to “protect against unauthorized use.”

In 1996, Fraser and other Nationwide agents formed a Pennsylvania chapter of the Nationwide Insurance Independent Contractors Association (NIICA). The association had been in existence in other states for many years. However, Nationwide refused to officially acknowledge NIICA. Soon after the Pennsylvania chapter was formed, Fraser was elected as an officer and charged with creating and writing a chapter newsletter.

One of NIICA’s missions was to expose and stop certain Nationwide business practices that the agents believed were illegal. In the fall of 1996, Fraser raised some of these concerns with the Pennsylvania Insurance Department. In 1998, Nationwide reached an agreement with the Pennsylvania authorities that the company would cease the illegal practices and pay a fine. These efforts and results were widely reported in the media.

Shortly after the settlement, the company sent a memo warning agents not to engage in “inappropriate communications” with state insurance departments, the media, or state legislatures.

The same year, Nationwide implemented a new business plan that would allow customers to buy insurance directly from the company without working through an agent. To make NIICA’s objections to this policy clear, Fraser drafted a letter at the behest of the Pennsylvania chapter.

The letter, which was to be sent to Nationwide’s competitors, asked whether other insurance companies would be interested in acquiring the policyholders of the approximately 200 NIICA members in Pennsylvania. In drafting the letter at a NIICA meeting, the agents noted that they did not intend to separate from Nationwide but to send a warning that they would leave if Nationwide did not reverse its new business plan.

A copy of the letter reached Nationwide’s senior managers. To determine whether the memo had actually been sent to the company’s competitors, senior managers along with the company’s director of electronic communications and corporate counsel searched the company’s e-mail server. They opened several stored e-mails sent and received by Fraser and other agents. They eventually found an e-mail exchange between Fraser and a former Nationwide agent indicating that the letter had been sent to at least one competitor.

The company terminated Fraser’s agent agreement on September 2, 1998. Fraser appealed the decision to the company’s review board. The review board upheld the termination.

Fraser filed a lawsuit in the U.S. District Court for the Eastern District of Pennsylvania alleging that Nationwide violated federal wiretapping laws when it read his e-mail messages without his consent. The court granted Nationwide summary judgment—a decision based on the facts of a case without a hearing.

The appellate court agreed with the decision and affirmed that the company did not violate federal law because it read stored e-mail messages and did not intercept the e-mail during its transmission. (Fraser v. Nationwide Mutual Insurance Co., U.S. Court of Appeals for the Third Circuit, No. 01-2921, 2003)


Pipeline safety. The Department of Transportation has issued a final rule requiring that pipeline operators develop programs to protect the integrity of pipelines in areas where a rupture or leak could do the most harm to the public or property. The rule mandates that after developing a program to protect such high-risk segments of the pipeline, owners conduct periodic assessments, correct any problems, and then continually monitor the effectiveness of the program.


E-mail. A bill designed to limit the amount of unsolicited e-mail sent via the Internet has been signed into law (P.L. 108-187). The act defines unsolicited e-mail as any message with the primary purpose of commercial advertisement or promotion of a commercial product or service. Such messages must include a notice that they are an advertisement or solicitation and must provide a valid return e-mail address to allow recipients to opt out of future messages. The sender has 10 days to stop sending messages after the opt-out request has been received.

The act makes it illegal to send e-mail with false or deceptive subject headings. Also illegal under the new law is any commercial electronic message that contains sexually oriented material. (Specific definitions of such material are to be set by the Federal Trade Commission.) Criminal penalties are set out for those who knowingly transmit spam through another person’s computer without authorization.

According to an analysis of the bill by the Center for Democracy and Technology (CDT)—a nonprofit advocacy group—the new bill may help cut down on spam but it also has some shortcomings. For example, CDT notes that the bill lacks any individual right of action. For example, in other legislation—such as that banning junk faxes—individuals are allowed to bring claims only in small claims court, meaning that there can be no class action suits or onerous discovery requirements. The new spam law gives individuals no such right.

Also, the analysis notes that the bill allows spam under certain conditions unless it contains sexually oriented material, which would be banned outright. Such an action, asserts the CDT, might violate constitutional rights to free speech.

Cargo security. The Coast Guard authorization bill (H.R. 2443) that has been approved by the House of Representatives and has been referred to the Senate Committee on Commerce, Science, and Transportation includes a controversial provision. H.R. 2443 would require that Coast Guard representatives review the security plans of all foreign vessels entering U.S. waters. (Under current law, the Coast Guard is required to review the security plans of domestic vessels.) At a hearing before the bill was passed, Coast Guard Commandant Thomas H. Collins contended that the agency does not have the money or personnel to complete the task, which would require reviewing plans for more than 10,000 foreign vessels.

Bioterrorism. A bill (H.R. 2122) that would make biocontainment laboratories and other specialized research facilities available to the government in case of a bioterrorism emergency has been approved by the House of Representatives and has now been taken up by the

Senate. The bill would also allow government agencies to stockpile drugs, vaccines, and other supplies to provide for public health in the case of such an emergency. Under the provision, the Secretary of Health and Human Services and the Secretary of Homeland Security could jointly submit proposals to the president to develop security countermeasures to respond to a specific threat.

Fraud. A bill (S. 731) that would make it illegal to tamper with document authentication features in an effort to commit fraud has been included in P.L. 108-21, the Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today (PROTECT) Act of 2003. Under the new law, it is illegal to tamper with authentication features such as holograms, watermarks, or any other item designed to prove a document is valid and unaltered. The law also makes it illegal to use a false authentication feature—a feature that is genuine in origin but is used without authorization or a feature that has been tampered with.

Nuclear facilities security. A bill (S. 1043) that would require the Homeland Security Department to conduct threat assessments on all nuclear power plants and facilities has been approved by the Senate Environment and Public Works Committee. The bill has now been taken up by the full Senate.

Under the bill, nuclear facilities would be required to revise security procedures and devise emergency response plans based on these assessments and submit them to the government for review.

The bill would also require that each person who has unescorted access to a nuclear facility or radioactive material be fingerprinted and undergo a criminal background check.

One year after enactment of the bill, the government would be required to establish a security response evaluation program to assess each nuclear facility’s security plan. These assessments would be repeated once every three years or more frequently if necessary.

Computer security. A bill (H.R. 3159) that would enhance computer security at government facilities has been approved by the House of Representatives and the Senate Governmental Affairs Committee and has been placed on the Senate calendar for a vote.

H.R. 3159 would require that government agencies take steps to protect their computer systems from peer-to-peer networking within six months of enactment. The bill is designed to protect government information and sensitive documents that might be compromised if peer-to-peer sharing were allowed.

Cargo security. A cargo security amendment added to the Department of Homeland Security appropriations bill, now P.L. 108-90, requires the Secretary of Homeland Security to research, develop, and procure certified systems to inspect and screen air cargo on passenger aircraft at the earliest date possible. Until such technology is procured and installed, the secretary must take all possible actions to enhance the “known shipper” program to prohibit high-risk cargo from being transported on passenger aircraft.

Terrorism. A bill (H.R. 3036) that would increase the penalties for obstruction of justice and utterance of false statements in terrorism cases has been approved by the House Judiciary Committee. To move forward, the bill must now be considered by the full House of Representatives. Under the bill, committing such crimes is punishable by up to 10 years in prison. Current law allows a maximum sentence of five years in prison.



Liability. A bill (H.B. 42) introduced in the Kentucky General Assembly would grant public school teachers immunity from civil lawsuits for any acts or omissions resulting from the supervision, care, or discipline of students. Such immunity would apply when the actions in question were taken in good faith and within the scope of employment. Immunity would not apply in cases of gross negligence, recklessness, or intentional misconduct.

This column should not be construed as legal or legislative advice.