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Federal Court Dismisses Employer’s Claims For Indemnification and Contribution Against Drug Testing Vendor After False Positive Drug Test Result

A federal court in South Dakota granted a motion to strike and a motion to dismiss filed by the Equal Employment Opportunity Commission (“EEOC”) and the laboratory that conducted drug tests for the Defendant employer, holding that the employer was not entitled to seek indemnification or contribution from the laboratory for damages based on a false positive drug test result. EEOC v. M.G. Oil Company, No. 4:16-4131-KES, (D.S.D. August 10, 2017).

On April 8, 2013, Kim Mullaney applied for a job with Happy Jack’s, which is owned by M.G. Oil Company, and was offered a position contingent on a negative drug test. M.G. Oil had contracted with Testpoint Paramedical to analyze the drug tests of prospective employees and inform it whether a test result was negative or positive, after review by a medical review officer.  A medical review officer is a licensed physician who analyzes drug test results and considers whether a positive test result could have been caused by the use of lawful medications.  On April 9, 2013, M.G. Oil sent Mullaney’s drug test to Testpoint for analysis and Testpoint reported that Mullaney’s test was positive.  Assuming that Testpoint had sent the positive test to a medical review officer to determine whether there was a valid legal reason for the positive result, M.G. Oil withdrew its offer of employment to Mullaney.  Mullaney asserted that she was a disabled person under the Americans with Disabilities Act (“ADA”) and that the positive test result was due to a prescription painkiller she took for back pain.  M.G. Oil refused to reconsider its decision.

Mullaney filed a claim of discrimination under the ADA with the EEOC and, after an investigation and failed attempts at resolution, the EEOC brought suit against M.G. Oil. M.G. Oil filed a third-party complaint against Testpoint asserting that it was liable for all or part of any judgment because it had breached its contract with M.G. Oil and was negligent.  Specifically, M.G. Oil asserted that Testpoint was liable because it failed to send Mullaney’s positive drug test to a medical review officer to determine whether there was a valid legal reason for the result prior to reporting the results to M.G. Oil.

The EEOC moved to strike the third-party complaint, and Testpoint moved to dismiss for failure to state a claim. Both argued that claims for indemnity and contribution are not permitted under Title I of the ADA based on the Supreme Court’s holding in Northwest Airlines v. Transport Workers Union, 451 U.S. 77 (1981).  In Northwest Airlines, the Supreme Court determined that a claim for contribution could not be pursued by employers in federal court under Title VII. Northwest Airlines establishes that the right to contribution under a federal statute may be created in two ways: (1) by express or implied language in the statute; and (2) by federal common law. Id. at 90.  The Supreme Court held that neither of those requirements was satisfied in that case.

The EEOC and Testpoint argued that the holding in Northwest Airlines applied to ADA claims because of the similarities in the statutes and the fact that they have the same enforcement provisions.  The Court agreed.  Relying on the Supreme Court’s decision in Northwest Airlines, the Court noted that the “enforcement provisions of the ADA and Title VII do not exist to protect employers, nor do they provide employers with the option to transfer liability by indemnification or contribution.”  As a result, the third-party complaint was dismissed.

This decision underscores how important it is for employers to scrutinize the practices of the vendors they rely upon for drug and alcohol testing services, including collection facilities, laboratories and medical review officers. Employers should confirm, in writing, all policies and procedures that drug testing vendors are expected to follow.

Jackson Lewis P.C. © 2017

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About this Author

Heather C. Panick, Jackson Lewis, Income Tax Lawyer, compensation arrangements Attorney
Associate

Heather C. Panick is an Associate in the Omaha, Nebraska, office of Jackson Lewis P.C.

Ms. Panick has an active ERISA and federal income tax practice involving the representation of clients in tax adversary proceedings before the Internal Revenue Service, United States Tax Court and Second Circuit Court of Appeals relating to payroll, trust fund recovery penalties, employee benefit plans and executive compensation arrangements.  Her practice also includes working with clients and the Internal Revenue Service, Department of Labor and PBGC in...

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