Employers may be Liable for Decisions Made by Third Parties Concerning Transgender Employees

A Federal Court in Texas has issued a ruling that could signal broad effects for employers.  In Baker v. Aetna Life Ins. Co., 228 F. Supp. 3d 764, 768 (N.D. Tex. 2017), the Northern District of Texas refused to dismiss a Title VII claim against an employer based on a decision made by the company’s third-party health benefits plan administrator.  Following the reasoning of this decision, an employer may be required to exercise a heightened level of due diligence to protect against claims based on transgender status.

Charlize Baker, the plaintiff in this case, was an employee of L-3 Communications Integrated Systems, LP, and participated in the company sponsored health insurance program administered by Aetna Life Insurance Company.  Baker had a long and well-documented medical history of suffering from Gender Dysphoria.  As she transitioned from male to female, she submitted an insurance claim related to her breast augmentation surgery.  That claim was denied.

The sole reason given for the denial of her claim was that the plan did not cover breast implant surgery for individuals born male.  The plan, however, would provide coverage for a mastectomy for a female transiting to male.  Baker filed suit against both the insurance provider and her employer claiming violation of the Affordable Care Act, the Employee Retirement Income Security Act (“ERISA”), and Title VII of the Civil Rights Act (“Title VII”).  Both defendants filed motions to dismiss Baker’s complaint.

The court dismissed the Affordable Care Act and ERISA claims against both defendants.  The court also dismissed Baker’s Title VII claim against Aetna based on the fact Baker failed to allege that in denying the claim, the insurance company was acting on L-3’s behalf with respect to an employment practice.  The court allowed, however, the Title VII claim against L-3 as the employer to proceed.

The court reasoned that insurance coverage is a benefit of employment related to the overall compensation an employee receives.  By providing insurance coverage that would cover breast augmentation for an employee transitioning to male, but not one transitioning to female, the employer may have engaged in intentional and deliberate gender discrimination.

This case is significant because it does not follow the typical pattern seen in Title VII claims concerning transgenderism.  Most plaintiffs attempt to show discrimination due to a failure to conform to traditional gender norms and/or stereotypes following the decision of the US Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228, 228, 109 S. Ct. 1775, 1778, 104 L. Ed. 2d 268 (1989)(female employee of an accounting firm found to be denied a promotion because she did not act feminine enough).

Instead, the plaintiff in this case compared herself to individuals transitioning to male as evidence of unequal, disparate treatment.  In doing so, she was able to offer direct evidence of discrimination allowing her to skip much of the Title VII framework that often creates problems for plaintiffs.  Additionally, in framing her case this way, she was able to sustain a claim that the employer deliberately and intentionally violated Title VII as it was the party that chose which benefit plans would be available for its employees.

Based on Baker, employers may have a responsibility to review any perks or benefits they provide to their employees to ensure they are Title VII compliant.  The strong possibility exists that in selecting a health benefits plan, it never even occurred to L-3 to have the plans reviewed to determine if they could have a discriminatory impact.  Having an attorney review all benefits before they are offered or altered is the best way for a business to avoid potential lawsuits.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.

Learn more aboutTimothy Bubenik
Tim represents management in all areas of labor and employment law.