Wis.LIRC ER Decision: Motola - July 31, 1996 -- Marital status discrimination - insurance benefits for married couples where both are employes of the employer

STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

CONNIE J. MOTOLA, Complainant

CITY OF NEW BERLIN, Respondent

FAIR EMPLOYMENT DECISION
ERD Case No. 9451674

An administrative law judge (ALJ) for the Equal Rights Division of the Department of Workforce Development (Department of Industry, Labor and Human Relations prior to July 1, 1996) issued a decision in this matter. A timely petition for review was filed.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on the applicable law, records and evidence in this case, the commission makes the following:

FINDINGS OF FACT

1. The Respondent, the City of New Berlin ("City"), provides health insurance coverage for its employes through a group health insurance policy, and it has done so for some years.

2. The Complainant, Connie J. Motola, was first employed by the City in 1977 as a dispatcher in the City's Police Department, and she has been employed in that position since then.

3. When Motola was hired by the City in 1977 she was unmarried. At that time she was provided health insurance coverage as an enrollee under the City's group health insurance policy. She was enrolled for "single" coverage which extended only to her own medical needs.

4. In 1980 Motola married Richard Motola, who was employed by the City as a police officer. Richard Motola was also being provided health insurance coverage as an enrollee under the City's group health insurance policy at that time, enrolled for "single" coverage.

5. Following their marriage, Connie Motola and Richard Motola both continued to receive health insurance coverage under the City's group health insurance coverage as separate enrollees with "single" coverage.

6. In June, 1984, Connie Motola was pregnant. Anticipating the birth of their child, she and her husband contacted the City and requested "family" health insurance coverage so that there would be coverage for the child.

7. In response to the Motolas' request, the City changed the enrollment status of both Connie and Richard Motola in July 1984. Richard Motola's status was changed so that he was enrolled under the City's group health insurance policy for "family coverage," which provided coverage for Richard Motola and his legal dependents, including his spouse (Connie Motola) and child(ren). Connie Motola's status was changed so that she was no longer an enrollee under the group health insurance policy and was entitled to coverage only by virtue of being a dependent under the "family coverage" enrollment of Richard Motola.

8. At all times since 1984, Connie and Richard Motola have continued to be employed by the City, Richard Motola has continued to be an enrollee under group health insurance plan(s) offered by the City to its employes with "family coverage" status providing coverage for himself and for his spouse (Connie Motola) and child(ren) as dependents, and Connie Motola has continued to be covered by the employer's group health insurance plan(s) only by virtue of being a dependent under the "family coverage" enrollment of Richard Motola.

9. At all times material herein, the City has been party to a collective bargaining agreement with the New Berlin Public Employes Union, Local 2676, governing the terms and conditions of employment of certain employes of the City of New Berlin, which provides in relevant part that "[i]n the event an employe has a spouse that is also a City employe, that employe and the employe's spouse will be entitled to only one family health insurance contract between them from the City." From the evidence that this is sometimes referred to as the "Motola clause," it is inferred that this provision was negotiated around the time of the birth of Connie and Richard Motola's child and their request for "family coverage," specifically to address their situation.

10. In applying the "Motola clause," the City has allowed married couples who are both City employes to elect which one of them will be designated as the enrollee for the "family coverage" under the group health insurance plan (and, thus, which one of them will be covered under the group health insurance plan only as a "dependent" of that enrollee).

11. At various times since the mid-1980's, the City offered its employes the option of selecting coverage under one of two or more different health insurance plans. At such times, application of the "Motola clause" would have the effect of precluding two employes who were married to one another from having coverage for their own medical needs under different plans.

12. At the present time, the City provides its employes only one health insurance plan, through a group insurance policy between the City and Prime Care Health Plan, Inc. ("insurer"). The policy is entered into by the City on behalf of individual enrollees, who are employes of the City. The policy provides health benefits to enrollees and to their dependents, defined as including an enrollee's legal spouse and unmarried dependent children.

13. So long as their legal marital status continues, the rights of the spouse of an enrollee to health insurance benefits under the plan, are no different from the rights of their spouse (the enrollee) to health insurance benefits under the plan.

14. If their legal marital status changes, then effective with the end of the month in which that change occurs, the rights under the plan of a person who had been the spouse of an enrollee, differ to at least some extent from the rights of their former spouse (the enrollee) to health insurance benefits under the plan.

Based on the Findings of Fact made above, the Commission makes the following:

CONCLUSIONS OF LAW

1. The Respondent, City of New Berlin, is an employer within the meaning of the Wisconsin Fair Employment Act.

2. The Respondent's policy that two employes who are married to one another will be entitled to only one, "family coverage" health insurance enrollment, does not constitute prohibited marital status discrimination within the meaning of the Wisconsin Fair Employment Act.

3. The Respondent did not discriminate against Connie J. Motola on the basis of marital status, within the meaning of the Wisconsin Fair Employment Act.

Based on the Findings of Fact and Conclusions of Law made above, the Commission makes the following:

DECISION

The decision of the administrative law judge is reversed. The complaint of Connie J. Motola against the City of New Berlin is dismissed.

Dated and mailed: July 31, 1996
motolco . rrr: 110 :

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

/s/ David B. Falstad, Commissioner

MEMORANDUM OPINION

Introduction -- This case presents the recurring issue of whether it is prohibited marital status discrimination under the Wisconsin Fair Employment Act for an employer to impose restrictions on the rights of its employes to obtain otherwise available health insurance coverage because the employe's spouse also has (or is entitled to have) health insurance coverage. There are no material factual issues presented. The parties' arguments concerning whether Connie Motola's "insurance was canceled" in 1985, and whether she subsequently received less in "compensation" from the City (1 ), are disputes about the characterization or legal interpretation of uncontested facts. In addition, the commission's resolution of the underlying marital status discrimination issue makes those disputes irrelevant.

Cases bearing on the issue presented -- Over the years, the commission has issued a number of decisions interpreting the "marital status" discrimination provisions in the Wisconsin Fair Employment Act. See, e.g., Bourque v. Wausau Medical Center (LIRC, 02/10/84); Birk v. Georgia-Pacific (LIRC, 08/03/90, aff'd. sub nom. Birk v. LIRC, Milw. Co. Cir. Ct. 01/04/91); Andree v. C.T. & I. Corp. of Wis. (LIRC, 08/29/91); Miner v. Blunt, Ellis & Loewi (LIRC, 05/29/91), aff'd. sub nom. Miner v. LIRC (Rock Co. Cir. Ct., 04/07/92); Scheife v. Apple Chevrolet (LIRC, 09/11/91); Vaisman v. Aldridge, Inc. (LIRC, 10/21/91). A number of the commission's decisions in this area have dealt specifically with the issue of insurance coverage plans which take into account whether a covered employe has a spouse. See, e.g., Hartmann & Lavine v. Mueller Food Services (LIRC, 9/10/85), aff'd. sub nom. Hartmann & Lavine v. LIRC (Washington Co. Cir. Ct., 07/18/86); Dacquisto v. Fred Knapp Engraving (LIRC, 11/30/90); Kortesma et al. v. School District of Maple (LIRC, 10/26/90), rev'd sub nom. Braatz et al. v. LIRC (Douglas Co. Cir. Ct., 06/12/91), aff'd., Braatz et al. v. LIRC, 168 Wis. 2d 124, 483 N.W.2d 246 (Ct. App. 1992), aff'd., 174 Wis. 2d 286, 496 N.W.2d 597 (1993). In addition, two cases which originated with other administrative agencies, Phillips v. Wisconsin Personnel Commission, 167 Wis. 2d 205, 482 N.W.2d 121 (Ct. App., 1992), and Kozich v. Employee Trust Funds Bd., 203 Wis. 2d 363, 553 N.W.2d 830 (Ct. App. 1996), also touch on this issue.

In the decisions involving the significance of marital status to insurance coverage, two different rationales have been invoked, depending on the circumstances. One rationale is that certain distinctions are not based on "marital status" at all, but on other characteristics. The other rationale is that while certain differential treatment is based on "marital status," there are reasons to believe that the legislature did not intend to make that kind of differential treatment unlawful when it passed the prohibition on "marital status" discrimination. Because this latter rationale, which has come to be referred to as the "implied exception" theory, is important to the commission's decision in this matter, it is worthwhile to review its history.

The "implied exception" rationale was articulated at least as long ago as the commission's decision in Hartmann & Lavine v. Mueller Food Services (LIRC, 9/10/85). In that case, an employer's health insurance program required employes to contribute to part of the premium through payroll deduction; the result was that employes with the same gross wage received a lower take-home if they had family insurance coverage. The employer (with the agreement of the union) then instituted a plan whereby married employes who had family insurance coverage were given a higher gross pay rate so that their take-home pay ended up being the same as that of their unmarried co-workers who were only paying a share of a single coverage premium. Two single employes claimed that this was marital status discrimination in pay. The Commission's decision in Hartmann & Lavine held that while extending greater health insurance benefits to married employes than to single employes was differential treatment (i.e., discrimination) based on marital status, the legislature did not intend that the prohibition on marital status discrimination would cover that kind of differential treatment based on marital status. In so holding, the Commission relied significantly on the fact that the State of Wisconsin, as an employer, itself followed policies that involved differential treatment of employes with respect to eligibility for health insurance coverage depending on their marital status. Hartmann & Lavine was appealed to circuit court, where the Commission's decision was affirmed. Hartmann & Lavine v. LIRC (Washington Co. Cir. Ct., 7/18/86). The circuit court expressed agreement with the Commission's analysis, that consideration of the State's own practices as an employer required the conclusion that the legislature did not intend to make it unlawful to provide greater health insurance benefits to married persons.

The first of the reported cases dealing with the issue of marital status discrimination in provision of insurance benefits, Phillips, concerned a claim that it was marital status discrimination for an employer to provide family health insurance coverage which extended to the adult opposite-sex spouse of an employe, while not offering similar coverage extending to the adult same-sex companion of a lesbian employe. The court of appeals affirmed lower court and agency decisions, that this did not constitute marital status discrimination. In so doing, the court of appeals seemed to be invoking both an "implied exception"-type rationale, see, 167 Wis. 2d at 217-18, and the rationale that the distinction drawn in the case was not actually one based on "marital status" at all, see, 167 Wis. 2d at 219-20. However, the supreme court subsequently characterized the court of appeals decision in Phillips as having been based on the latter rationale:

The fact that the state offers dependent health insurance benefits to an employee's spouse but not to an employee's adult companion does not support LIRC's implied exception theory. Phillips, 167 Wis. 2d at 220, held that this practice does not constitute marital status discrimination. The court reasoned that "[i]t is only where similarly situated persons are treated differently that discrimination is an issue." Id. at 219. Even though an employee and an adult companion may "have a committed relationship that partakes of many of the attributes of marriage in the traditional sense," a spouse and a companion are not similarly situated. Id. at 220. This is so because Wisconsin law imposes a mutual duty of general support upon married couples, but there is no comparable duty of support imposed upon adult companions.

Braatz v. LIRC, 174 Wis. 2d at 294. Thus, as explained by this subsequent supreme court decision, Phillips should be seen as a decision relying principally on the rationale that the distinction involved was not one based on marital status.

The Braatz case itself concerned the question of whether an employer could restrict the health insurance benefit options of an employe, if the employe was covered by insurance coverage their spouse had through employment elsewhere. In Braatz, the employer's policy provided, in part, that all single employes were entitled to single coverage under the plan, unmarried persons who had the care, custody or support of any minor children were entitled to family coverage, and married employes were entitled to family coverage, but a married employe whose spouse was eligible for family coverage at his or her place of work would have the option of carrying either the district's policy or the spouse's policy but not both. The commission found that there was no violation of the Wisconsin Fair Employment Act. On review, it argued both an "implied exception" theory, and the theory that the distinction drawn in the employer's policy simply did not distinguish on the basis of "marital status" at all. (2 )

Ultimately, the court rejected both of the commission's theories. What is important for the proper resolution of the case which is now before the commission, however, is to appreciate exactly what the rejected "implied exception" theory of the commission was, and the exact reason that the court rejected it.

The "implied exception" theory which the commission relied on in Braatz was to the effect that health insurance benefits generally were implicitly excepted from the WFEA's prohibition on marital status discrimination, and what the court rejected definitively was the idea that there was such a general exception. See, 174 Wis. 2d 292, 293. The court expressly declined to decide the question of whether the legislature's adoption of certain limitations in its plan for state employes' health insurance could be construed to create an implied exception for similar limitations; it simply noted that even if that were the case, the limitations contained in the School District of Maple's plan were different from those contained in the state plan:

"Even if we assume arguendo that [the state's] policy indicates that there is an implied exception to the WFEA's prohibition against marital status discrimination, the school district of Maple's policy would not fall within this exception. The state's policy is not the same as the Maple policy. The state's policy only applies where both spouses are employed by the state. Maple's policy applies no matter where the employe's spouse is employed".

Thus, while a cursory reading of Braatz can seem to support the conclusion that it completely rejected the idea of there being any implied exceptions to the WFEA prohibition on marital status discrimination, the commission is persuaded that it did not do so. Rather, it rejected the idea that there was a general exception for all issues relating to health insurance. It left open the question of whether the legislature's adoption of policies placing certain limitations on health insurance options for state employes whose spouses were also state employes, could justify finding an implied exception for policies by other employers to the extent that they placed similar limitations on health insurance options for its employes whose spouses were also employes of that employer.

That question left open by Braatz, was then decided in Kozich. In that case, the court of appeals adopted the distinction which the supreme court had drawn in Braatz between policies that affected married employes wherever their spouses worked, and policies that affected married employes whose spouses were also employes of the employer. The court then relied almost entirely on the "implied exception" theory: that an exception for such latter situations must be implied into the statute, because it is not reasonable to assume that when the legislature adopted the prohibition against marital status discrimination it intended to make illegal the very scheme it had itself put in place for state employes.

The significance of Kozich -- Kozich was originally (3 ) issued in March of this year, after the parties had briefed this matter. They then submitted brief position statements concerning the case. Basically, the respondent believes that it is controlling and requires reversal of the discrimination decision. The complainant argues that Kozich concerns only a state practice, which has its basis in state statutes and administrative rules. She also argues, that Kozich establishes that courts will only read an implied exception into the marital status discrimination ban when there is specific evidence of a legislative intent to create such an exception, and that there is no such intent here.

Obviously, Kozich arrived at a different result from Braatz; the different result is presumably due to differences in the facts of the two cases. There are two differences between the fact situations presented which may or may not be significant: (1) in Kozich the policy extended only to employes whose spouses were also employed by the same employer, while in Braatz the policy extended to employes whose spouses were employed elsewhere and had insurance coverage through that other employment; and (2) in Kozich the employer was the State, while in Braatz the employer was not. The difficulty in applying Kozich here lies in determining which of these differences constitute material distinctions. If it is the latter, then Kozich is not necessarily controlling here; if it is the former, then it is.

The question of which of the differences from Braatz were material, is not directly answered by Kozich itself. The Kozich court conspicuously mentioned both of the elements that distinguished that case from Braatz -- that it involved a state employment as opposed to local employment situation, and that it involved a policy affecting only persons whose spouses were also employes of the same employer as opposed to persons whose spouses were employed anywhere.

The commission concludes that, as between these two possible bases for distinguishing Kozich from Braatz, it is the latter which must be viewed as significant. It arrives at this conclusion because the alternative -- making a distinction based on the identity of the employer -- is unacceptable.

If the implied exception which Kozich recognized only applies to the state as an employer, then certain conduct which is unlawful if engaged in by a private sector employer would be lawful if engaged in by the state. There is persuasive evidence, however, that the legislature would not have intended such a result.

Originally, the Fair Employment Act contained no definition of the term "employer," and in 1975 the supreme court held that it did not apply to the State as an employer. However, the court expressed grave reservations about that situation:

We agree with the conclusion reached by the circuit court that the state and state agencies are not included within the terms of the Fair Employment Act and that DILHR has no jurisdiction over the employment practices of DPI. . . . We do, however, urgently suggest that the legislature reconsider the problem. The state is the largest single employer within the state. The legislative purpose or public policy as set forth in the Fair Employment Act should apply to all employees whether hired by the state or others. If the legislature does not include them, questions of constitutional equal protection could be raised.

State ex rel. DPI v. DILHR, 68 Wis. 2d 677, 229 N.W.2d 591 (1975) (emphasis added). The legislature evidently agreed with this assessment, for it promptly responded to the court's suggestion by adopting a definition of the term "employer" that expressly included the state. Since 1975, the only difference in the applicability of the Fair Employment Act to the state has been a purely procedural one (administration of the Act for state employes is assigned to the Personnel Commission).

To accept the complainant's argument concerning the significance of Kozich would be to accept the idea, that the legislature decided to recreate a substantive difference between the state as employer and all other employers, in terms of what was lawful or unlawful under the Fair Employment Act. The commission cannot accept that idea. The same legislative purpose and public policy considerations that the supreme court identified in State ex rel. DPI v. DILHR would exist if the Act were construed to allow the State to engage legally in employment practices that would be illegal for any other employer. In addition, the same constitutional questions would be raised. Statutes should, if possible, be construed in such a way that constitutional questions about them do not have to be confronted. David Jeffrey Co. v. Milwaukee, 267 Wis. 559, 576, 66 N.W.2d 362 (1954). To avoid the questions of constitutional equal protection which the supreme court mentioned in State ex rel. DPI v. DILHR, the commission should construe the Act as applying the same standards to other employers as it does to the State as an employer, where this matter of rules relating to insurance policies for married employes is concerned. According to Kozich, the legislature did not intend that the limitations on health insurance coverage eligibility it created for state employes whose spouses were also state employes would be considered unlawful. To maintain the necessary uniformity of application, the same thing must be true for other employers who adopt functionally similar limitations for their employes.

Conclusion -- Braatz teaches that it is marital status discrimination to disadvantage a married employe in respect to health insurance coverage eligibility, based on the fact that his or her spouse is employed elsewhere and has a potential to obtain health insurance coverage for the employe through that other employer. Kozich, however, teaches that the legislature did not intend, in adopting the marital status discrimination provision, to make unlawful the system which the state had in place for handling situations where married couples were both employed by the state. The system employed by the City of New Berlin is not materially distinguishable from the State's system, in terms of the disadvantage at which it can put a married employee whose spouse is also employed by the same employer. If the City's system were found unlawful, it would create a situation in which the State of Wisconsin (as an employer) was not subject to the same substantive standards under the Fair Employment Act as other employers. However, State ex rel. DPI v. DILHR, and the legislature's reaction to that decision, strongly suggest that the legislature does not intend to have different substantive rules about what is lawful under the Act for itself and for other employers. Therefore, the commission concludes that Kozich should be viewed as controlling here.

NOTE: The commission had no disagreement with the material findings of fact made by the Administrative Law Judge. The commission's disagreement with the ALJ involved issues of law. It was therefore unnecessary for the commission to consult with the Administrative Law Judge concerning witness credibility, see, Carley Ford, Lincoln, Mercury v. Bosquette, 72 Wis. 2d 569, 576, 241 N.W.2d 596 (1976), and no such consultation has been held.

cc:
Attorney Aaron N. Halstead
Attorney Elizabeth A. McDuffie

Appealed to Circuit Court, which affirmed. The Cir. Ct. decision was appealed; the Court of Appeals certified it to the Supreme Court.
The Supreme Court affirmed the Cir. Ct. decision sub nom. Motola v. LIRC and City of New Berlin, 219 Wis. 2d 589, 580 N.W.2d 297 (1998).

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Footnotes:

(1)( Back ) The City of New Berlin argued that there was actually no disparate treatment here because Motola received the same level of coverage under her husband's family policy, as she would have had she been covered under her own policy. The ALJ rejected this argument on the basis of a theory that the amount the employer spends on a benefit is the measure of the "compensation" which an employe is deprived of if they are deprived of that benefit, and that since it would have cost the employer more to buy an additional policy for Motola, she was provided less in benefits. The commission believes that the benefit in issue is not the cash paid as a premium (which no employe ever actually receives), but the coverage which the premium purchases and the right to continuing coverage which comes with being an enrollee under the plan. However, the commission agrees with the ALJ, that there was a distinction drawn here based on marital status. Whether or not the distinction has a direct or indirect financial impact, or simply had the effect of imposing different procedural requirements (for example, the steps necessary to ensure continuation of coverage in the event of a change in status), it is nevertheless clear that the employer's policy makes a distinction based on marital status. This makes it potentially subject to the prohibition on marital status discrimination.

(2)( Back ) Although in its arguments to the reviewing courts in Braatz the commission had relied both on the "implied exception" theory and on the theory that the distinction drawn in the case was not based on "marital status," see, Braatz v. LIRC, 168 Wis. 2d 124, 127-28, 483 N.W.2d 246 (Ct. App. 1992), Braatz v. LIRC 174 Wis. 2d 291-92, the commission's original decision in the case had been based only on the "implied exception" rationale. For that reason, the supreme court applied a de novo review standard to the "not based on marital status" theory. 174 Wis. 2d 292. However, the court, acknowledging the commission's experience in interpreting the marital status discrimination provisions of the WFEA, indicated that it would give deference to the commission's "implied exception" interpretation. It would be upheld, the court stated, if it was reasonable and not clearly contrary to the legislative intent. 174 Wis. 2d at 293.

(3)( Back ) After issuing it in March, with a recommendation for publication, in April the court of appeals withdrew its original opinion in Kozich. The opinion which it finally issued in July, which was again recommended for publication, was essentially identical to the original decision insofar as the marital status discrimination issue is concerned. It differed materially only in adding a discussion of a breach of contract theory which had not been addressed in the original decision.