Supreme Court Reverses Ninth Circuit Court and Finds That a No-Hire Policy is a Legitimate Nondiscriminatory Reason for Refusing to Rehire Former Employee Terminated for Violating Work Rules

Volume 2, Issue 18
December 8, 2003

In a victory for employers, the United States Supreme Court reversed a prior decision by the United States Court of Appeals for the Ninth Circuit, which had found a company's no-rehire policy was unlawful as applied to employees who were lawfully forced to resign for illegal drug use but have since been rehabilitated, thus violating the Americans With Disabilities Act ("ADA"). The Supreme Court found that the Ninth Circuit applied the wrong legal standards and ignored the fact that an employer's no-hire policy is a "quintessential legitimate, nondiscriminatory reason for refusing to rehire an employee who was terminated for violating workplace conduct rules."

The case involved Raytheon and a former employee, Joel Hernandez, who was forced to resign after he tested positive for cocaine and admitted that his behavior violated the employer's work rules. Over two years later, Hernandez applied for rehire and attached letters from his pastor about his active church participation and from an Alcoholics Anonymous counselor about his regular attendance at meetings and his recovery. Raytheon's Labor Relations Department rejected Hernandez's application after a review of its personnel file on Hernandez, based on the company's policy against rehiring employees who were terminated for workplace misconduct. The particular company employee who made the decision testified at deposition that she did not know that Hernandez was a former drug addict when she rejected his application.

Hernandez filed an ADA disparate treatment lawsuit alleging that Raytheon rejected his application because of his record of drug addition and/or because he was regarded as being a drug addict. In response to Raytheon's summary judgment motion, Hernandez for the first time argued that if the employer actually applied a neutral no-rehire policy in rejecting his application, its decision still violated the ADA because of the policy's adverse impact on rehabilitated drug addicts seeking reemployment. The district court granted Raytheon's motion for summary judgment on the disparate treatment claim and found that the adverse impact claim had not been timely pleaded or raised. The Ninth Circuit agreed that the adverse impact claim was untimely, but concluded that Raytheon had not met its burden in providing a legitimate, nondiscriminatory reason for its employment action because its no-rehire policy, although lawful on its face, was unlawful as applied to former employees legally forced to resign for illegal drug use, but later rehabilitated.

The Supreme Court held that the Ninth Circuit improperly applied an adverse impact analysis to Hernandez's disparate treatment claim. The Supreme Court has consistently distinguished between disparate treatment claims, which arise when an employer treats some people less favorably than others because of a protected characteristic, and adverse impact claims, which involve facially neutral employment practices that fall more harshly on one group than another and cannot be justified by business necessity. Hernandez was limited to the disparate treatment theory that Raytheon refused to rehire him because of his record of disability and/or it regarded him as disabled. Thus, the Supreme Court held that Raytheon's use of its neutral no-rehire policy plainly satisfied its obligation to provide a legitimate, nondiscriminatory reason for refusing to rehire Hernandez. Therefore, the only remaining question for the Ninth Circuit to examine was whether there was sufficient evidence of pretext from which a jury could conclude that Raytheon made its employment decision based on Hernandez's status as disabled despite its stated explanation. Such evidence could consist of proof that the company did not consistently follow its re-hire policy. The case has now been sent back to the Ninth Circuit for further consideration upon application of the proper legal standards.

This case is an important win for all employers seeking to enforce no-rehire policies as the Supreme Court firmly held that such policies are a quintessential legitimate and nondiscriminatory reason for refusing to rehire former employees. Employers still must be careful to consistently enforce their no-rehire policies without exception if the policies are to be defensible because inconsistent enforcement/use of the no-rehire rule can be evidence of "pretext", i.e., evidence that the rule's use was only to hide an employer's unlawful discrimination. There is also a possibility, albeit rare, that a former employee could successfully maintain an adverse impact claim if a company's no-rehire policy disproportionately affected rehabilitated drug users and there was no evidence of a business necessity for the rule.

Raytheon Co v. Hernandez, No. 02-749, slip op. (Dec. 2, 2003).

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.