Transgender employees can sue state benefits administrator under Title VII
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Friday, May 18, 2018

Transgender employees can sue state benefits administrator under Title VII

By Nicole D. Prysby, J.D.

Transgender employees’ Title VII claims against the state entities administering health plans and deciding coverage may go forward, held a federal district court in Wisconsin. The employees sued their employer as well as the state entities responsible for administering benefits and deciding on coverage, alleging discrimination because the state employee health plan did not cover gender reassignment surgery. The court found that the employees had standing because although the agency deciding coverage was autonomous from the agency administering benefits, they were related entities. In addition, the administering agency could provide relief that would redress the employees’ injuries. And though the entities were not the direct employer of the employees, they were agents for purposes of Title VII by virtue of their role in providing benefits (Boyden v. Conlin, May 11, 2018, Conley, W.).

Background. The plaintiffs, both transgender women, asserted various claims for excluding gender transition care from coverage under the group health insurance plan for state employees. The women worked for the University of Wisconsin system. The Wisconsin Department of Employee Trust Funds (ETF) administers group health insurance for state employees, but the terms of the policy are set by the Wisconsin Group Insurance Board (GIB), which is an autonomous entity within ETF. GIB made the decision to exclude gender transition-related care and ETF was bound by the decision.

Article III standing. The employer and ETF argued that GIB is the sole defendant empowered to make coverage decisions and the injury to the employees was not caused by nor redressable by any other defendant. Therefore, they argued, claims against all defendants other than ETF should be dismissed for lack of standing. The court agreed as to the employer defendants, as no acts or omissions by those entities were alleged and the employees did not argue that the employers administered the insurance policy.

However, the court found that the employees’ injuries could be fairly traced to ETF. While GIB is legally distinct from ETF, that did not affect standing. What mattered was that GIB is responsible for setting the terms but ETF was empowered with administering the policies and it was thus a proper defendant. The court also found that the employees had demonstrated redressability, in that there were a number of possible rulings against ETF that would provide redress, such as an order requiring ETF to pay for treatment or contract for insurance coverage apart from GIB approval. In other words, the requested relief was capable of wholly resolving the employees’ injuries.

Section 1983 claim. The court considered the employees’ Section 1983 claim against the secretary of the ETF in his individual capacity and his assertion that the complaint failed to sufficient allege his personal involvement. It rejected that argument, finding that the complaint adequately alleged his personal involvement because it pointed out that he was in charge of the administration of ETF and of promulgating all rules for administration of health insurance plans. The court also rejected the argument that the claims should be dismissed because of Eleventh Amendment immunity, because the claims against the administrator were for injunctive relief and he had some connection with the enforcement of the relief by virtue of his position at ETF.

Title VII claims. ETF argued that the Title VII claims against it should be dismissed because it did not intentionally discriminate against the employees. The court disagreed, finding that the employees alleged that ETF played an active role in discrimination. For example, one of the employees appealed the coverage decision to ETF. While it was unclear what ETF could have done, this was a question best resolved after discovery. The court also found that ETF’s intent was irrelevant; the disparate treatment could be determined from the terms of the policy. ETF and GIB also argued that the claims should be dismissed because neither was an employer for purposes of Title VII. The court disagreed, finding that because ETF and GIB were empowered to provide benefits, they were agents for purposes of the Title VII employer determination.

ACA claims. The court dismissed the Patient Protection and Affordable Care Act claims against GIB, as the complaint did not allege that GIB receives federal funds. Although it alleged that ETF receives federal funds, the federal funds could not necessarily be traced to GIB. In addition, the court rejected ETF’s motion to stay the ACA claim against it. ETF argued that the claim should be stayed pending the outcome of litigation in another court as to the legality of HHS regulations that define the sex discrimination provision in the ACA to include gender identify discrimination and HHS’s intent to revise those regulations. Because the employees’ ACA claim focused on the language of the ACA itself, not its accompanying regulations, the adoption of new regulations would not be controlling authority.

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