Court Says Rehabilitation Act Section 504 Covers Contractors

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By Jay-Anne Casuga and Matthew Loughran

Feb. 8 — A recent decision holding that independent contractors working for health-care providers who receive federal assistance may bring disability discrimination lawsuits under Section 504 of the Rehabilitation Act “is absolutely something that hospitals have to be concerned about,” an attorney who counsels providers on employment matters told Bloomberg BNA.

Robert R. Niccolini, of Ogletree, Deakins, Nash, Smoak & Stewart PC in Washington, said the ruling deepens a circuit split on the issue. The U.S. Court of Appeals for the Fifth Circuit Feb. 1 joined the Ninth and Tenth circuits in ruling that independent contractors may sue entities that receive federal assistance under Section 504 because the Rehabilitation Act doesn't incorporate the employer-employee relationship requirement found in Title I of the Americans With Disabilities Act.

“While the Americans with Disabilities Act clearly doesn't apply to independent contractors, the fact that there is now a clear split in the circuits with regard to the Rehabilitation Act magnifies the complexity of the analysis to determine whether an accommodation is necessary,” Niccolini said.

The Fifth Circuit's ruling revived Rochelle Flynn's suit against Distinctive Home Care Inc., saying Section 504's plain text explicitly authorizes employment bias suits against “a wide variety of entities, including non-employers.”

The ruling “closes a gap that federal contractors were exploiting when it came to potential discrimination claims by independent contractors with disabilities,” R. Chris Pittard, of Forte & Pittard in San Antonio, told Bloomberg BNA.

Pittard, who represented Flynn, observed that Title VI of the 1964 Civil Rights Act and the Civil Rights Act of 1866 (42 U.S.C. § 1981) cover independent contractor workers who fall within other protected classes. Title VI prohibits discrimination on the basis of race, color and national origin in programs and activities receiving federal financial assistance. Disabled independent contractors, however, “were not likewise protected or at least not protected to the same degree,” he said.

“This opinion certainly helps to level the playing field and allows independent contractors with disabilities to bring suit if they feel they have been subjected to discrimination from the entity receiving federal funds.”

Worker Was Contract Pediatrician

Distinctive Home Care had a federal contract with the U.S. Air Force to provide medical services at the Lackland Air Force Base in San Antonio. It subcontracted with Spectrum Healthcare Resources Inc., which served as a point of contact with medical professionals who worked on an independent contractor basis.

Flynn was an independent contractor pediatrician who worked at Lackland under those contractual arrangements.

In mid-May 2013, Flynn was diagnosed with Autism Spectrum Disorder-M (ASD-M), a condition formerly known as Asperger's Syndrome. Around the same time, various Distinctive Home Care and Spectrum officials raised concerns about Flynn's performance after they received complaints about Flynn from patients and co-workers.

Flynn contended that her disability might explain some of the performance concerns, and she eventually asked for accommodations. The Air Force declined to accommodate Flynn and Distinctive Home Care and Spectrum removed Flynn from her duties as an independent contractor.

Flynn brought a disability discrimination suit under Section 504 of the Rehabilitation Act, but the U.S. District Court for the Western District of Texas granted summary judgment to Distinctive Home Care.

The court found that Section 504 applies to only employees and not independent contractors.

Circuit Split

On appeal, the Fifth Circuit vacated the grant of summary judgment and remanded the case to the district court for further proceedings.

The court observed that there is a circuit split over whether independent contractors can bring an employment discrimination suit under Section 504 against an entity with which they don't share an employer-employee relationship.

The Eighth Circuit in Wojewski v. Rapid City Reg'l Hosp. Inc., 450 F.3d 338 (8th Cir. 2006), held that the Rehabilitation Act incorporates Title I of the ADA, which requires that a defendant be a plaintiff's employer. The Eighth Circuit said both Title I of the ADA and Section 504 of the Rehabilitation Act barred employment bias suits by independent contractors, who aren't employees .

Meanwhile, the Ninth Circuit, in Fleming v. Yuma Reg'l Med. Ctr., 587 F.3d 938 (9th Cir. 2009), and the Tenth Circuit in Schrader v. Fred A. Ray, M.D., 296 F.3d 968 (10th Cir. 2002), held that Section 504 doesn't incorporate the ADA's employer-employee requirement.

Effect on Health-Care Employers

The fact that the case was brought pursuant to the Rehabilitation Act means that the immediate impact on health care employers will be somewhat muted, according to Doug Hass of DLA Piper in Chicago. “Because this case involves federal employment, it really isn't the vehicle to expand employer status for health care employers,” he told Bloomberg BNA. “But it shows how this expanded joint employer definition can be used and I wouldn't be surprised to see its reasoning appear in a future case outside of the federal employment context,” he added.

According to Hass, when considered in conjunction with the recent efforts by the Department of Labor and National Labor Relations Board to expand joint employer definitions, the case could be considered a “harbinger” of what is to come for health-care employers whose use of independent contractors results in an economic dependence by the contractor on the employer. “It's hard to tell how far this is going to go; employers will have to assume that some independent contractors will be considered employees for the purposes of federal labor and employment laws based on these economic realities tests as they get traction in courts and not just in agency interpretations,” he said.

“You have to look at the contractor hierarchy as a pyramid with the subcontractors at the bottom, the general contractor in the middle and the company employer on the top; this decision looks like part of the continued push to get access to the deepest pockets, the company at the top of the pyramid,” Hass said.

According to Neil Alexander, Chair of Littler Mendelson's Contingent Worker Practice Group in Phoenix, state laws prohibiting the corporate practice of medicine make it so that “in most states, doctors aren't allowed to be direct employees of the hospitals that they work at; they are required to be independent contractors.”

Section 504's Text Allows Broader Coverage

The Fifth Circuit found the reasoning from the Ninth and Tenth circuits more persuasive than the Eighth Circuit's, ruling that independent contractors can bring suit under Section 504.

The text of Section 504 prohibits discrimination “under any program or activity receiving federal financial assistance.” It defines “program or activity” as including “all of the operations of … an entire corporation, partnership, or other private organization, or an entire sole proprietorship.”

The Fifth Circuit said Section 504 covers “all of the operations of covered entities, not only those related to employment.”

It further agreed with the Ninth and Tenth circuits that the Rehabilitation Act adopts from the ADA “only the substantive standards for determining what conduct violates the Rehabilitation Act, not the definition of who is covered” under that law.

Need for Health-Care Accommodations

Alexander said that the Ninth Circuit and now the Fifth Circuit are “requiring that companies who hire independent contractors, that are also government contractors, have an obligation to engage in the interactive process for identifying reasonable accommodations.”

What really differentiates the requirement to accommodate in health care is the need for added patient safety and privacy, Niccolini said. “Courts tend to give extra deference to hospitals in terms of patient care,” he said.

“What health-care employers have that differentiates them from almost any other employer covered by the Rehabilitation Act is the question of whether an accommodation will affect patient care, patient safety and patient privacy,” Niccolini said. He pointed out that such an appeal to patient safety could be a legitimate defense to a charge under the Rehabilitation Act for a health-care employer.

Alexander echoed this point, telling Bloomberg BNA that “safety and security are the primary considerations when dealing with health-care employers.”

“If you have someone who can't safely and adequately do his job, the direct threat defense can come into play,” he said.

However, he added, employers can't presume that there is no possible accommodation that could allow the independent contractors to do their jobs. “Sometimes I feel like possibilities can emerge when you get the two sides to sit down and talk about it, and that's what is really the purpose behind the interactive process,” Alexander said.

Attorneys representing Distinctive Home Care didn't immediately respond to Bloomberg BNA's request for comment.

Judge W. Eugene Davis wrote the opinion, joined by Judges Rhesa H. Barksdale and James L. Dennis.

Forte & Pittard, San Antonio, represented Flynn. Kemp Smith LLP, Austin, Tex., and PilieroMazza, Washington, represented Distinctive Home Care.

To contact the reporter on this story: Jay-Anne Casuga in Washington at and Matthew Loughran in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at

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