It is not unusual for companies of all sizes to outsource their HR functions and/or their benefit administration, though outsourcing their benefits administration is probably more common. What happens if the third party administrator starts making employment decisions for the company whose benefits they are administering? In that situation, there is a risk that the third party administrator will be deemed to be an employer under title I of the ADA with respect to employment discrimination claims and will not be protected by the safe harbor for insurance plans contained within the ADA. This is exactly what happened in an unpublished decision from the District Court of Maine in the case of Brown v. Bank of America, N.A., 2014 WL 901438 (D. Me, March 7, 2014). It is an unpublished decision and so you want to check your own local rules to see just how much influence this decision could have on your matter (if the reader is interested in how District Court decisions come to be published or unpublished, there is an excellent article from 2004 by Karen Swenson entitled Federal District Court Judges and the Decision to Publish, talking about what District Court judges consider in deciding whether to publish a case. It makes for very interesting reading. The citation for that article is 25 Justice System Journal 121).

The Facts

In this case, the plaintiff was sexually assaulted by a coworker, one Mr. Clukey (the offender), at a social event at the University of Maine campus. As a result, she became fearful of returning to work with the offender present and suffered from physical and psychological aftereffects of the assault, including situational depression, posttraumatic stress disorder, panic attacks, and extreme anxiety. The plaintiff tried to reach a workplace accommodation with Bank of America in several different ways, including: moving the offender to a more distant cubicle in the common room in which they worked; setting up a safety plan with the unit of Bank of America responsible for accommodating persons with disabilities; and keeping Bank of America informed by weekly status calls, which had been agreed to by the plaintiff and her manager. None of that worked. In particular: the manager refused the plaintiff’s request to move the offender to a more distant cubicle; The Bank of America department responsible for accommodating persons with disability refused to set up a safety plan for the plaintiff to allow her to return or to even discuss accommodations; and the weekly status calls were never returned. As a result of all this, the plaintiff applied for short term disability and FMLA leave. The plaintiff called Bank of America’s agent, Aetna, to find out what documentation she needed to provide to obtain short-term disability and FMLA leave. Aetna informed her that they needed medical records or counseling records stating why she was unable to perform her job. While Aetna did inform her of that, they didn’t tell the plaintiff that she needed to provide an evaluation from a psychiatrist. Accordingly her short-term disability was denied due to insufficient documentation. She appealed that determination and was denied again and so she got a psychiatric evaluation, and was again denied because the paperwork had been done at the incorrect time. The psychiatric evaluation showed that the plaintiff had posttraumatic stress disorder. On December 8, Aetna informed the plaintiff that they needed further documentation on why she required more leave, and the plaintiff said she would send it and asked them to let her know if that was enough. Aetna never responded to her as to whether more information was needed. Instead, Aetna emailed Bank of America informing them that the plaintiff was being placed on leave of absence closed and directing Bank of America to take action within three days. Three days after that email from Aetna to the Bank of America, the plaintiff received a letter telling her that she would be terminated a week later if she didn’t return to work or provide additional documentation. Plaintiff didn’t respond because there was nothing in the letter suggesting any willingness to talk to her about accommodations. Finally, Bank of America and Aetna did not make any efforts to work with the plaintiff to identify and make reasonable accommodations that would give her an opportunity to return to work.


1. Is Aetna an employer for purposes of title I of the ADA?

2. Is Aetna protected by the safe harbor?

The Reasoning of the Court

Issue 1

1. It is possible for an entity to constructively employ a person even though that person may not be technically an employee. ( Carparts Distribution Center, Inc. v. Automotive Wholesaler’s Association of New England, Inc. 37 F.3d 12 (1st Cir. 1994).

2. Carparts set for three possible theories as to when a person may be constructively employed by another. Those possibilities are: exercise of control; agent of the employer; and interference.

3. With respect to the exercise of control, critical questions are: do the plan providers exist solely for the purpose of enabling the employer to delegate the responsibility to provide health insurance for their employees; do the plan providers have the authority to determine the level of benefits provided to employees and whether any alternative health plans were available to employees; and whether the third party administrator and the employer share in the administrative responsibilities resulting from the employee’s participation in the plan. In this particular case, the plaintiff alleged: 1) Bank of America authorized Aetna to handle disability and FMLA claims for Bank of America; 2) Bank of America directed the plaintiff to provide information to Aetna to justify continued leave and that Aetna interacted with the plaintiff and directed the information she was to produce; and Aetna informed Bank of America that the plaintiff was being placed on leave of absence closed status and directed Bank of America to take action within three days.

4. With respect to the agent of the employer’s theory, that refers to a typical agency relationship where you have the third-party administrators acting on behalf of the employer with respect to providing and administering employee health benefits. On this point, the court refers to the EEOC compliance manual discussing whether an employer controls another so as to establish an employment relationship. The court also references Clackamas Gastroenterology Associates, P.C. v. Wells, P.C., 538 U.S. 440 (2003), where the United States Supreme Court held that a partner may be an employee if the employer was exercising sufficient control over that employee despite the person’s title to the contrary.

5. The court did not review the interference theory because subsequent to Carparts, that theory had been rejected in the First Circuit.

6. The issue of who is an employer will only be rarely resolved on a motion to dismiss.

Issue 2

The ADA does contain a safe harbor for insurers stating that title I of the ADA is not to be construed to prohibit or restrict an organization covered by the ADA from administering the terms of a bona fide benefit plan not subject to state laws regulating insurance. However, the court wasn’t buying it because the plaintiff was not alleging a problem with the administration of the plan, rather she was alleging that Aetna discriminated against her on the basis of disability as an employer because Bank of America delegated to Aetna certain personnel functions normally handled by an employer, such as whether an employee’s disability justified the leave of absence and whether Bank of America should accommodate the disability. Further, once Aetna made that decision, it refused to engage in the interactive process. All of these are employer issues and not issues pertaining to administration of the benefit plan.


1. For those third-party administrators that may be reading this blog, this case could be a real wake-up call. True, the decision is unpublished, but even so, depending upon the jurisdiction, it could be quite persuasive. Also, as Karen Swenson mentions in the article referred to above, unpublished opinions do not have a significantly different likelihood from published opinions of being reversed by a Court of Appeals.

2. If you represent a third-party administrator and you want to prevent liability under title I of the ADA for decisions that you make regarding leave and reasonable accommodations, make sure that it is the employer that has the final responsibility for those decisions. Also, the actual employer of the employee may want to think twice about slavishly following the decisions of third-party administrators in this area.

3. As we have seen many times before, failure to engage in the interactive process when placed on notice that a disability may be involved, is, from the employer perspective, a recipe for disaster and a boon for the plaintiff’s attorney.

4. HR and legal counsel need to work closely together. In addition to that, as a matter of preventive law, a company may want to consider a policy were no employee is terminated except for cause, even if you are in an at will state, and not without review of legal counsel prior to termination. You may find that such a policy, as I found, will not only result in HR and legal counsel working more closely together but also will reduce outside counsel fees dramatically.

5. Of course, training by a person with expertise is always called for.

6. An employer and/or third party administrator needs to fully disclose just what are the requirements for getting FMLA leave or short-term or long-term disability benefits.