When advising employers about the legal risks associated with a business reorganization, we generally advise that discrimination claims are less likely when a company closes an entire facility or department as compared to individual layoffs. The differences between the two actions are fairly obvious. Few employers are motivated to close an entire business operation as a means of discriminating against one or two workers. However, as demonstrated by a recent decision from the Second Circuit Court of Appeals, admissions made during the course of litigation can breathe life into discrimination claims that challenge what appear to be straightforward business decisions.

Porter v. Dartmouth-Hitchcock Medical Center involved a physician who suffered from severe spinal issues that required leave followed by a slow return to only part-time work. The hospital eventually closed the plaintiff’s medical unit, which employed four physicians and one nurse, noting a decline in demand for services and accompanying financial issues. The plaintiff sued under the ADA claiming that she was terminated based on disability discrimination as well as retaliation involving complaints she had made involving another physician. The district court dismissed the suit on summary judgment, pointing out that the closure of her division was a legitimate non-discriminatory business reason for her termination.

The Second Circuit disagreed, reversing the dismissal and remanding the case for trial. The court noted that when asked about the reasons for the plaintiff’s termination, the hospital’s chief medical officer stated that her disability precluded her from being retained. This admission alone precludes a grant of summary judgment. Even though the employer may have proffered a legitimate business and financial explanation for the unit shutdown, a jury must decide whether the plaintiff was not offered reassignment to another department due to her medical condition.

This case demonstrates the importance of carefully planning and implementing reductions in force. In many if not most situations, employers carrying out significant layoffs will need to make decisions about employees on medical leave or those who have been granted medical accommodations. Part of this planning involves confirming that individual employment decisions are not made due to impermissible consideration of an employee’s medical status or potential future medical needs.

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