Lie Rejecter: Employer's Fraud Defense to Disabled Employee's Claim Fails

It's no secret that in formulating their defense to employment claims, employers often seek to discredit employees' allegations through the employees' own contradictory statements or positions taken. This issue arises most frequently in the disability discrimination context, where, to prevail, an employee must prove that he was able to perform the essential functions of his position, with or without accommodation. But if the employee has sworn to another entity, agency, or court that he is disabled and therefore incapable of working (so that he can get certain unemployment or disability benefits, for example), does this seemingly obvious contradiction sound the death knell on his discrimination claim? Maybe not.

In Scott v. Rama, Inc., No. 13-01750 (S.D. Ind. March 16, 2015) Darrell Scott worked for employer Rama, Inc. as a lube tech. His job entailed doing oil changes for customers' vehicles, and included checking air filters, transmission fluid, oil levels, and brake fluid. Scott had a history of back problems, and after being involved in a car accident, these problems became worse. He claims that Rama terminated him after it received information from his doctor which indicated that he should not engage in activities which required him to bend, sweep, and lean forward. He claims that he should not have been terminated because he could still perform the essential functions of his position. 

Scott filed a charge with the EEOC, and then filed suit against Rama for alleged violations of the Americans with Disabilities Act. In response, Rama filed an answer generally denying Scott's allegations, but also asserting counterclaims against him for fraud and abuse of process. Specifically, Rama alleged that Scott fraudulently misrepresented that he could perform the essential functions of his job when he applied for the job back in 2006, as this representation was contradicted by Scott's more recent filing of applications for unemployment and disability benefits wherein he claimed he was disabled and unable to work. Scott then filed a motion to dismiss the employer's counterclaim. 

The U.S. District Court for the Southern District of Indiana granted Scott's motion. Recall that this dispute arose at the pleadings stage, in that Scott was claiming that Rama failed to state sufficient facts to support its fraud claim. Thus, the court's inquiry focused on precisely what was alleged by Rama in its counterclaim. 

Here, the court found that while Rama claimed that Scott lied when he said he could perform the tasks required of the position of lube tech, nowhere did Rama allege that Scott was not able to perform those tasks during the six years he worked there before he got into the car accident. 

In order to prove fraud in Indiana, a party must demonstrate: “(1) a material misrepresentation of past or existing fact which (2) was untrue, (3) was made with knowledge of or in reckless ignorance of its falsity, (4) was made with the intent to deceive, (5) was rightfully relied upon by the complaining party, and (6) which proximately caused the injury or damage complained of.” Doe v. Howe Military Sch., 227 F.3d 981, 990 (7th Cir. 2000). The court found that, at best, the allegations demonstrated that Scott made a misrepresentation regarding future facts or the fact that he would be able to perform the essential functions of his job going forward. This was insufficient to support a claim of fraud. 

Additionally, the court held, just because Scott may have had a disability at the time he applied for work at Rama does not mean that his statement about his ability to perform the essential functions of his position was false. Further, the court noted, a claim for disability benefits under the social Security Act is not necessarily inconsistent with an ADA claim. 

The employer was, therefore, unsuccessful at attempting to defeat the employee's disability claims on this basis. Again, because this matter addressed the pleading stage of the case, the employer still has the opportunity to address this issue substantively going forward. For instance, if in discovery or deposition responses the employee makes contradictory assertions, the employer may be able to move for summary judgment. 

This is becoming a more common strategy in defense of disability discrimination claims. Employers should always compare employees' allegations and sworn statements in the context of litigation with doctors' notes and other documents filed with state and government agencies relating to benefits to determine whether there is a basis on which to challenge the claim. While the employer, in this case, attempted to use the employee's alleged fraud as an offensive tactic in a counterclaim, it is not precluded from pursuing its defense on this basis. 

Please contact your Hinshaw employment attorney if you have any questions about this case.