Hylind v. Xerox Corp.

Citations: 31 F. Supp. 3d 729; 2014 U.S. Dist. LEXIS 92937; 123 Fair Empl. Prac. Cas. (BNA) 1281; 2014 WL 3419475Docket: Civil No. PJM 03-116

Court: District Court, D. Maryland; July 9, 2014; Federal District Court

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Eileen M. Hylind brought a lawsuit against Xerox Corporation for sexual discrimination and retaliation under Title VII of the Civil Rights Act of 1964. Following a jury trial, she was awarded $300,000 in compensatory damages (capped by the Court) and $896,509 in economic damages for back pay. The Court decided to offset payments Hylind received from Xerox’s disability plan against her back pay award. Both parties appealed, and the case was remanded by the Fourth Circuit, specifically to determine the extent of the offset related to disability payments.

The Court had previously established that the period of disability linked to Xerox's conduct extended from 1995 to 2002, totaling eight years, and determined that back pay should be calculated based on Hylind's average salary from the four years prior to her work discontinuation in 1995, adjusted for expected increases. The Court ruled that disability benefits received during the back pay period should reduce her salary and benefits award, but not payments received after this period.

On appeal, the Fourth Circuit upheld most of the district court's decisions but reversed the decision to offset disability payments from Hylind's back pay award, referencing the ruling in Sloas v. CSX Transp. Inc. that benefits from a defendant can still be considered a collateral source. Upon remand, the Court held a teleconference and a motions hearing to address the issue of offsetting disability benefits. Both parties declined further discovery, asserting that sufficient evidence existed in the record for a decision. Hylind provided documentation, but its admission status during the trial remained unclear.

Xerox was given the option to contest or accept documents submitted by Hylind, ultimately choosing to file an affidavit with additional documentation. The Court allowed Hylind to depose the affiant and submit a written response. During the October 2013 hearing, Xerox identified its disability policy as "Personnel Manual, Personnel Policy Number 502.1.2," which the Court noted was merely a summary and requested the actual policy. After the hearing, Xerox provided the true disability plan titled "Xerox Medical Care and Long Term Disability Income Plan," which indicated that the Personnel Manual governed long-term disability benefits.

The Court reviewed the materials and determined that disability payments should not have been deducted from Hylind's back pay award, concluding that an annual total of $34,819.00 for eight years, amounting to $278,552, should be added back. Thus, the total back pay owed to Hylind from 1995 to 2002, including these disability payments, is $1,445,781. The Court referenced the collateral source rule, which states that back pay for Title VII plaintiffs aims to restore them to their pre-discrimination position. Under this rule, compensation from independent sources should not reduce the back pay award, ensuring tortfeasors do not benefit from the plaintiff's other compensations while also preventing overcompensation. The rule also serves to protect plaintiffs who have secured insurance.

Tortfeasors cannot offset compensation available to plaintiffs through collateral sources, as this would disadvantage plaintiffs who pay insurance premiums, leading to a net loss. Allowing such offsets undermines the deterrent function of tort law and may bias juries, who might perceive that awarding damages would result in overcompensation. The Fourth Circuit, in Sloas, clarified that benefits from a tortfeasor could be considered collateral unless specifically intended to compensate for injury. The focus should be on the nature of the compensation rather than its source. Benefits are viewed as collateral unless they are payments made to indemnify the employer against liability. To determine if a benefit funded by the tortfeasor is collateral, courts apply a five-part test from Allen v. Exxon Shipping Co., which considers factors such as employee contributions, collective bargaining agreements, coverage of injuries, payment contingencies based on service length, and language regarding set-offs for tort judgments. Other cases have also utilized this test to determine the status of disability benefits. The argument that the Sloas decision creates a narrow test is rejected in favor of the broader, multi-factor Allen framework to assess whether employer-provided disability benefits function as indemnification or as collateral benefits.

The Fourth Circuit emphasized that the focus should be on the nature of the disability payments rather than their source. On remand, Xerox has the burden to prove that the collateral source rule does not apply. Relevant case law indicates that an employer may waive the right to offset disability payments against damages if they do not object at trial. The burden is typically on the employer, especially if their actions caused the employee's discharge, but there is a contrasting case where a plaintiff must demonstrate contributions to Medicare to invoke the collateral source rule.

The Allen factors are applicable, particularly regarding whether Hylind contributed to the benefit plan. The employer's contribution suggests that payments may not be considered a collateral source if intended to indemnify the employer. However, payments from a defendant do not automatically disqualify them as a collateral source. Evidence shows that Hylind's disability payments originated from Xerox, which has stated through an affidavit that the disability benefit is fully self-insured and self-funded by the company. Neither an insurance company nor Hylind contributed to the plan. Although an insurance company may manage the plan, Xerox bears all costs. The summary of benefits confirms that Xerox pays the full cost of disability income, with short-term benefits covering full pay for up to five months and long-term benefits capped at 60% of pre-disability pay. Hylind contends that she meets the contribution requirement through her contributions to the medical and dental portions of the Xerox Medical Care and Long Term Disability Income Plan, which also provides benefits to employees and their dependents.

Hylind asserts she contributed to disability benefits for over 60 months, referencing enrollment worksheets she claims to have submitted to the Court, although these were not entered as evidence at trial. These worksheets indicate payments of $17.60 or $15.22 per pay period for "Xerox Long-Term Disability, Option 2-60% of Base Pay.” Gauger, in her deposition, stated she was unsure if these amounts were deducted from Hylind's pay for long-term disability, but confirmed that the long-term disability plan was self-funded with no employee costs. The worksheets date from 2001-2005, while the relevant inquiry years are 1995-2002. The Court may conclude that Hylind did not contribute to the benefits based on Gauger's affidavit; however, the worksheets suggest contributions may have occurred in 2001 and 2002. Given the evidence is inconclusive and Xerox has the burden to prove the plan was entirely self-funded, the Court finds that Xerox has not met this burden regarding the first Allen factor, which favors Hylind.

Regarding whether the benefit plan resulted from collective bargaining, benefits arising from such activity are often deemed fringe benefits, not subject to set-off, as employees are considered contractually entitled to them. Gauger claims the disability plan was not collectively bargained, noting Hylind was not represented by a union. In contrast, Hylind presented a Form 5500, filed by Xerox in 1995, which states that the Medical and Long-Term Disability Income Plan is established under collective bargaining agreements. When asked about a relevant collective bargaining agreement, Gauger deemed it irrelevant since Hylind was a salaried employee.

No evidence was presented that Gauger was shown the Form 5500 during her deposition or questioned about its relevance to Hylind. Neither party provided an actual collective bargaining agreement, particularly one requiring direct premium payments to insurers. Gauger asserted that the plan was not collectively bargained, while Hylind submitted an unauthenticated document implying that Xerox indicated some part of a plan, including medical and dental benefits, was subject to a collective bargaining agreement. However, the existing evidence leans towards supporting Xerox's position. The core issue remains whether the disability payments are merely gratuities or a voluntary arrangement for indemnification against liabilities to injured employees.

Both parties agree that the disability plan covers injuries from both work-related and non-work-related causes, which supports denying a set-off to the employer. If the plan were only for on-the-job injuries, it would be seen as solely benefiting the employer, not as a fringe benefit for employees. In contrast, a plan covering non-work-related injuries suggests it was not established to reduce the employer's liability and is akin to a fringe benefit within the compensation package.

Regarding the contingent nature of payments based on employee length of service, Xerox claims that Hylind was eligible for benefits from the first day of work, indicating that payments are not dependent on length of service, which aligns with the characterization of fringe benefits.

Xerox employees who work at least 20 hours per week are automatically eligible for the disability plan from their first day of employment. Hylind argues that disability payments are contingent on length of service due to higher payments for employees with greater income; however, the court finds that benefits are tied to income, not service length, and cites the case Webber v. Int’l Paper Co. to support this position. The court examines whether the plan includes specific language that would allow for a set-off of benefits against tort judgments. Citing Allen, it suggests that if such language exists, the plan's dominant purpose may be to indemnify the employer against personal injury liabilities. Xerox claims that its Personnel Manual states disability benefits will be reduced by any amounts received for work or services, implying a set-off. However, the court interprets the Benefits Manual more narrowly, indicating that only certain disability benefits from various sources (like Workers’ Compensation and Social Security) can reduce long-term disability benefits, not tort judgments. Hylind counters that the plan's stated purpose is to provide disability benefits to employees, and if these benefits are seen as additional compensation, they should not be deducted from tort damage awards according to precedents like Davis. Ultimately, the court finds no specific language in the plan or Personnel Manual that contemplates a set-off in case of tort judgments, and the existing language primarily covers payments for which Xerox would not need to indemnify itself.

Xerox contended that tort liability fell under the broad definition of compensation, but the Court determined this did not satisfy the Allen requirement for specific indemnification language regarding tort judgments against Xerox. The Court favored Hylind, concluding that disability benefits offset from her back pay were derived from a collateral source, as they were not dependent on her length of service and were not a result of collective bargaining. Key factors included the Plan's coverage of both work-related and non-work-related injuries, and the absence of explicit language in the policy for setoff against tort liabilities. The Court reaffirmed that Xerox had not demonstrated the Plan was intended to reduce liability, viewing it instead as a standard employee benefit.

Consequently, Hylind was entitled to a back pay award of $1,445,781, calculated based on her average salary over the preceding four years, adjusted for expected increases, inflation, and lost benefits. The Court determined that previous deductions for disability payments would no longer apply. Hylind is also entitled to simple post-judgment interest at the federal legal rate from the judgment date, September 17, 2010, compounded annually, based on a rate of 0.26%. Counsel is instructed to submit calculations for the total principal and interest from the judgment date through July 31, 2014.

Hylind is awarded a total of $1,445,781 in back pay for disability payments covering the years 1995 to 2002, along with post-judgment interest at the federal legal rate. An Interim Order will be issued, and a Final Order of Judgment will follow once the court determines the appropriate post-judgment interest. The court previously observed insufficient evidence to apply the Allen test's five factors regarding Hylind's case. Xerox had the opportunity to contest the authenticity of financial worksheets but did not do so, instead arguing that Hylind's contributions to the disability benefits were not evidenced. The court clarified that the Plan's terms depend on a collective bargaining agreement (CBA) applicable to hourly employees, despite Xerox's claims to the contrary. Furthermore, the court referenced a case indicating that the Plan serves as a fringe benefit rather than reducing the employer's liability for employees' non-work-related injuries. For detailed calculations of the back pay award, refer to the attached Exhibit A.