The Equal Employment Opportunity Commission's Use of the Collateral Source Rule in Federal Sector Discrimination Cases ( 2024 )

(Slip Opinion)
The Equal Employment Opportunity Commission’s
Use of the Collateral Source Rule in Federal
Sector Discrimination Cases
When the Equal Employment Opportunity Commission awards past pecuniary damages
against a federal agency pursuant to 42 U.S.C. § 2000e-16(b), it may apply the collat-
eral source rule to decline to deduct insurance benefits that a claimant received through
the Federal Employees Health Benefits program.
August 12, 2024
MEMORANDUM OPINION FOR THE ACTING GENERAL COUNSEL
DEPARTMENT OF AGRICULTURE
This dispute concerns whether the Equal Employment Opportunity
Commission (“EEOC”) may award past pecuniary damages against feder-
al agencies pursuant to the “collateral source rule.” That longstanding
common law rule measures damages without regard to payments or bene-
fits a plaintiff receives from an independent (i.e., collateral) source. Plain-
tiffs thus can recover their full damages even when insurance or other
payments might cover some or all of those damages—though insurers
may in turn have rights to these recoveries.
The Department of Agriculture (“USDA”) brought this dispute to our
Office after the EEOC Office of Federal Operations (“OFO”) applied the
collateral source rule in a Rehabilitation Act case involving the USDA.
Tien E., EEOC DOC 2020001343, 2021 WL 3419376 (July 15, 2021).
OFO found that USDA had unlawfully denied an employee a reasonable
accommodation and determined that the employee could fully recover her
provable medical expenses without regard to whether those expenses had
been paid by her insurance under the Federal Employees Health Benefits
(“FEHB”) program. Id. at *3–6. When USDA sought reconsideration,
arguing that OFO could not lawfully apply the collateral source rule,
EEOC declined the request on the ground that USDA had not previously
raised the argument. Tien E., EEOC DOC 2021004572, 2023 WL
3040327, at *5 (Apr. 11, 2023). EEOC noted, however, that in prior cases
it had “held that a federal Agency is required to pay a Complainant’s
medical bills” without regard to health insurance coverage. Id. at *5 n.3.
USDA now seeks our views on whether EEOC may apply the collateral
source rule to decline to deduct, from a claimant’s past pecuniary damag-
1
48 Op. O.L.C. __ (Aug. 12, 2024)
es award, FEHB health insurance benefits. USDA argues that such awards
fall outside the scope of what Congress authorized EEOC to require
federal agencies to pay and that the awards also conflict with EEOC’s
own guidance. Memorandum for Zachary C. Schauf, Deputy Assistant
Attorney General, Office of Legal Counsel, from Janie Hipp, General
Counsel, USDA, Re: Request for Opinion on the EEOC’s Use of the
Collateral Source Rule in Federal Sector Discrimination Cases (June 2,
2023) (“June 2 USDA Memo”). For the reasons that follow, we disagree. 1
I.
A.
Title VII of the Civil Rights Act of 1964 forbids employment discrimi-
nation based on race, color, religion, sex, and national origin. See Pub. L.
No. 88-352, § 703, 78 Stat. 241, 255–57 (codified as amended at 42 U.S.C.
§ 2000e-2). In 1972, Congress extended Title VII to cover employment in
the federal government. See Equal Employment Opportunity Act of 1972,
Pub. L. No. 92-261, sec. 11, § 717, 86 Stat. 103, 111–12 (codified as
amended at 42 U.S.C. § 2000e-16). That extension gave EEOC authority to
enforce Title VII against the federal government “through appropriate
remedies, including reinstatement or hiring of employees with or without
back pay.” 42 U.S.C. § 2000e-16(b). The Rehabilitation Act of 1973
forbids employment discrimination by federal agencies on the basis of
disability and incorporates Title VII’s remedies. See Pub. L. No. 93-112,
§ 501, 87 Stat. 355, 390–91 (codified as amended at 29 U.S.C. § 791);
29 U.S.C. § 794a(a)(1).
1 USDA has not sought our views on EEOC’s decision to reject USDA’s collateral
source argument on procedural grounds, see Tien E., 2023 WL 3040327, at *5, and we do
not address that issue. Rather, consistent with USDA’s request, we address solely the
more general question concerning EEOC’s substantive authority to award the type of
damages at issue here—the sort of “dispute between two executive agencies on a question
of law” our Office typically resolves. Authority of the Equal Employment Opportunity
Commission to Impose Monetary Sanctions Against Federal Agencies for Failure to
Comply with Orders Issued by EEOC Administrative Judges, 27 Op. O.L.C. 24, 26–27
(2003); see, e.g., id. (considering whether EEOC exceeded its statutory authority in
imposing particular monetary sanctions). In addressing that question, we received views
from the Merit Systems Protection Board, the Civil Rights Division, and the Federal
Programs Branch of the Civil Division, in addition to USDA and EEOC.
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EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
In the Civil Rights Act of 1991, Congress for the first time permitted
victims of intentional employment discrimination under Title VII and the
Rehabilitation Act to recover “compensatory and punitive damages.” See
Civil Rights Act of 1991, Pub. L. No. 102-166, § 102, 105 Stat. 1071,
1072 (codified at 42 U.S.C. § 1981a(a)(1)–(2)). Congress, however,
precluded awards of “punitive damages” against “a government, govern-
ment agency or political subdivision.” Id. § 1981a(b)(1). Moreover,
although section 1981a by its terms concerns actions in court, the Su-
preme Court in West v. Gibson, 527 U.S. 212 (1999), held that this provi-
sion also renders compensatory damages an “appropriate remed[y]” that
EEOC may award in administrative proceedings, id. at 217 (quoting
42 U.S.C. § 2000e-16(b)).
Congress authorized these damages to reinforce the “twin statutory ob-
jectives” that Title VII pursued from the start—deterring employers from
discriminating and compensating employees who faced discrimination.
Albemarle Paper Co. v. Moody, 422 U.S. 405, 417, 421 (1975). On the
one hand, such damages “raise the cost of . . . intentional discrimination,
thereby providing employers with additional incentives to prevent” it.
H.R. Rep. No. 102-40 pt. 1, at 65 (1991) (emphasis omitted); see Civil
Rights Act of 1991 § 2, 42 U.S.C. § 1981 note (finding that “additional
remedies under Federal law are needed to deter . . . intentional discrimina-
tion in the workplace”). On the other, such damages “are necessary to
make . . . victims whole for the terrible injury to their careers, to their
mental and emotional health, and to their self-respect and dignity.” H.R.
Rep. No. 102-40, at 64–65; see Civil Rights Act of 1991 § 3, 42 U.S.C.
§ 1981 note (explaining that one purpose of the 1991 Act was “to provide
appropriate remedies for intentional discrimination . . . in the workplace”).
B.
The collateral source rule addresses a longstanding damages problem:
how to treat injury-related payments “from sources that have nothing to
do with the defendant,” such as the “plaintiff’s own insurance, job bene-
fits, or donations by friends.” 3 Dan B. Dobbs et al., The Law of Torts
§ 482 (2d ed. 2011). The “traditional rule” is that payments from such
“collateral sources” are “none of the defendant’s business,” id., and “do
not have the effect of reducing the recovery against the defendant,” Re-
statement (Second) of Torts § 920A cmt. b (Am. L. Inst. 1979); accord
3
48 Op. O.L.C. __ (Aug. 12, 2024)
Collateral Source Rule, Black’s Law Dictionary 262 (6th ed. 1990) (“[I]f
an injured person receives compensation for his injuries from a source
wholly independent of the tort-feasor, the payment should not be deducted
from . . . damages[.]”); In re U.S. Off. of Pers. Mgmt. Data Sec. Breach
Litig., 928 F.3d 42, 65 (D.C. Cir. 2019) (similar).
In the United States, courts have recognized the collateral source rule
since at least The Propeller Monticello v. Mollison, 58 U.S. 152 (1855).
There, the defendant (a steamship) argued that the plaintiff (a schooner
that the steamship had rammed) could not recover because, thanks to
insurance, it had already been fully compensated. Id. at 155. The Court
rejected that argument based on a doctrine that, even in 1855, it regarded
as “well established at common law”—that “the trespasser has no con-
cern” with the plaintiff’s “contract with the insurer.” Id. A few years later,
the Supreme Court of Vermont canvassed the common law authorities and
reached the same conclusion: A plaintiff’s “policy of insurance” was
“collateral to the remedy against the defendant” and thus “money received
by the plaintiff” from this policy should not “operate as a defense.” Har-
ding v. Town of Townshend, 43 Vt. 536, 538 (1870). Since then, the rule
has been “well-settled and reasonably uniform across the country, at least
in its broad outlines,” absent modification by statute. Restatement (Third)
of Torts: Remedies § 10 cmt. b (Am. L. Inst., Tentative Draft No. 2, 2023);
accord Dan B. Dobbs & Caprice L. Roberts, Law of Remedies § 3.2 (3d ed.
2018) (explaining that “[t]he traditional collateral source rule is that these
collateral benefits do not affect the measurement of plaintiff’s damages,”
and that absent statutory modification, “the rule remains in good stand-
ing”). Hence, under the “common law,” “it is the tortfeasor’s responsibil-
ity to compensate for all harm that he causes, not confined to the net loss
that the injured party receives.” Restatement (Second) of Torts § 920A
cmts. b, d.
The collateral-source rule has been justified as avoiding “windfall[s]
for the tortfeasor” and as preserving the benefit of the bargain between the
plaintiff and the third-party payor. Id. cmt. b. These same bargains, more-
over, will often eliminate the double compensation that the doctrine on its
face may be seen to permit. “Insurance proceeds are the most common
collateral source,” Collateral Source Rule, Black’s Law Dictionary 330
(11th ed. 2019), and insurers are often entitled to reimbursement from the
tort victim’s judgment or to subrogation of the victim’s claims, Restate-
4
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
ment (Third) of Torts: Remedies § 10 cmt. b; see US Airways, Inc. v.
McCutchen, 569 U.S. 88, 96–97 (2013).
In particular, a reimbursement provision “requires an insured employee
who receives payment from another source (e.g., the proceeds yielded by
a tort claim) to return healthcare costs earlier paid out by the carrier.”
Coventry Health Care of Missouri, Inc. v. Nevils, 137 S. Ct. 1190, 1194
(2017). A subrogation provision results in the “transfer of the right to a
third-party payment from the insured employee to the carrier, who can
then pursue the claim against the third party.” Id. Although reimburse-
ment and subrogation differ, the terms are often used interchangeably to
describe insurers’ ability to seek repayment from the insured or third
parties. Here, EEOC and USDA agree that all FEHB insurers have reim-
bursement and subrogation rights. See Letter for Zachary C. Schauf,
Deputy Assistant Attorney General, Office of Legal Counsel, from Carol
R. Miaskoff, Legal Counsel, EEOC at 12–13 (Aug. 9, 2023) (“EEOC
Memo”) (setting forth relevant subrogation and reimbursement provi-
sions); Memorandum for Zachary C. Schauf, Deputy Assistant Attorney
General, Office of Legal Counsel, from Janie Hipp, General Counsel,
USDA at 3 n.4 (July 28, 2023) (“July 28 USDA Memo”) (acknowledging
subrogation rights).
C.
For nearly 30 years, since shortly after Congress authorized EEOC to
award compensatory damages under Title VII, EEOC has applied the
collateral source rule to such awards. See Margaret L., EEOC DOC
0120150582, 2018 WL 2017627, at *6 (Apr. 17, 2018); Robert E. Wallis,
EEOC DOC 01950510, 1995 WL 869201, at *12–13 (Nov. 13, 1995). In
Wallis, where EEOC first explained its decision to do so, the Commission
relied on a treatise on remedies that cited common law sources, federal
judicial decisions under the Jones Act and the Federal Tort Claims Act
(“FTCA”), and EEOC’s own decisions applying the rule to hold that
unemployment benefits could not be used to offset back pay (despite
those benefits resulting from the defendant agency having paid an insur-
ance premium). Wallis, 1995 WL 869201, at *12–13 (citing Dan B.
Dobbs, Law of Remedies § 3.8(1) (2d ed. 1993); Berg v. United States,
806 F.2d 978 (10th Cir. 1986); Scott Dana, EEOC Appeal No. 01921641
(June 11, 1993); Sylvia Collick-Brown, EEOC Appeal No. 01910904
5
48 Op. O.L.C. __ (Aug. 12, 2024)
(Mar. 26, 1991)). The Merit Systems Protection Board, which decides
some employment discrimination cases, has also recognized the collateral
source rule for decades. See, e.g., Reid v. U.S. Postal Serv., 80 M.S.P.R.
405, 407 (1998).
II.
Because this dispute concerns EEOC’s authority to award monetary
relief against the government, it implicates the distinctive principles that
govern waivers of sovereign immunity. Such waivers “must be unequivo-
cally expressed in statutory text.” Lane v. Pena, 518 U.S. 187, 192
(1996); see Dep’t of Agric. Rural Dev. Rural Hous. Serv. v. Kirtz, 144
S. Ct. 457, 466, (2024). “Ambiguity exists,” and Congress has not legis-
lated with the clarity required, “if there is a plausible interpretation . . .
that would not authorize money damages against the Government.” FAA
v. Cooper, 566 U.S. 284, 290–91 (2012). Moreover, even where Congress
has expressly waived immunity as to some types of damages, the same
principles govern questions about “the scope of th[e] waiver.” Id. at 291.
The “scope of Congress’ waiver” thus must be “clearly discernable from
the statutory text in light of traditional interpretive tools” and, if it is not,
the statute receives “the interpretation most favorable to the Govern-
ment.” Id. The same principles also apply to agency adjudications, includ-
ing “whether an agency can itself grant a particular form of relief.” EEOC
Authority to Order Federal Agency to Pay for Breach of Settlement
Agreement, 38 Op. O.L.C. 22, 27 (2014); see Authority of the Equal
Employment Opportunity Commission to Impose Monetary Sanctions
Against Federal Agencies for Failure to Comply with Orders Issued by
EEOC Administrative Judges, 27 Op. O.L.C. 24, 27–28 (2003) (citing
Authority of USDA to Award Monetary Relief for Discrimination, 18 Op.
O.L.C. 52 (1994)).
This “clear statement rule,” however, is not a “magic words” require-
ment. Kirtz, 144 S. Ct. at 466; see Lac du Flambeau Band of Lake Superi-
or Chippewa Indians v. Coughlin, 143 S. Ct. 1689, 1695 (2023); Cooper,
566 U.S. at 291. Hence, “[a]lthough this canon . . . requires an unmistaka-
ble statutory expression of congressional intent,” “Congress need not state
its intent in any particular way.” Cooper, 566 U.S. at 291; see Richlin
Security Service Co. v. Chertoff, 553 U.S. 571, 589 (2008). The “question
is simply whether, upon applying ‘traditional’ tools of statutory interpre-
6
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
tation, Congress’s” waiver is “‘clearly discernable.’” Lac du Flambeau
Band, 143 S. Ct. at 1696 (citation omitted).
Here, Congress has expressly authorized EEOC to order against feder-
al agencies “appropriate remedies . . . as will effectuate the policies of”
the relevant anti-discrimination statutes. 42 U.S.C. § 2000e-16(b). And
West holds that this waiver unambiguously permits EEOC to award the
money damages Congress has authorized under section 1981a. 527 U.S.
at 217. Section 1981a, in turn, authorizes “compensatory . . . damages”
but not “punitive damages” against government defendants. 42 U.S.C.
§ 1981a(a)(1), (b)(1). This dispute thus turns on whether past pecuniary
damages awards that, in accordance with the collateral source rule, de-
cline to deduct FEHB benefits unequivocally qualify as the former and
not the latter. EEOC argues that longstanding precedent demonstrates that
damages “assessed pursuant to the collateral source rule” are not “puni-
tive damages” but rather “a form” of “compensatory damages.” EEOC
Memo at 4. USDA claims the opposite, focusing on one key fact: The rule
allows complainants with FEHB health insurance to recover costs they
“did not pay . . . out of [their own] pocket.” June 2 USDA Memo at 5.
That fact, per USDA, pushes such awards “beyond make-whole relief”
that qualifies as compensatory, July 28 USDA Memo at 4, and renders
them “punitive,” June 2 USDA Memo at 5; July 28 USDA Memo at 2
& n.1. For the reasons that follow, we agree with EEOC.
A.
We start with the Supreme Court’s decision concerning the FTCA in
Molzof v. United States, 502 U.S. 301 (1992)—which both forecloses
USDA’s argument that applying the collateral source rule turns a damages
award into “punitive damages” and provides a blueprint for assessing
whether such an award qualifies as “compensatory damages.” The FTCA,
like section 1981a, waives sovereign immunity but excludes “punitive
damages.” 28 U.S.C. § 2674. And like USDA, the government in Molzof
argued that this carve-out excluded “any damages other than those award-
ed for a plaintiff’s actual loss,” including damages the government
deemed “excessive” or “duplicative.” Molzof, 502 U.S. at 306. Such
damages, the government said, were “punitive in effect” and so constitut-
ed “punitive damages.” Id.7
48 Op. O.L.C. __ (Aug. 12, 2024)
Unanimously, the Court disagreed. The Court explained that the FTCA
“prohibits awards of ‘punitive damages,’ not ‘damages awards that may
have a punitive effect.’” Id. And the Court emphasized that “punitive
damages” is “a legal term of art that has a widely accepted common-law
meaning.” Id. Punitive damages are “awarded to punish defendants for
torts committed with fraud, actual malice, violence, or oppression,” based
“upon the degree of the defendant’s culpability” and with the amount tied
to “the nature of the defendant’s conduct.” Id. at 307 (quotation marks
omitted). The Court therefore applied the “cardinal rule of statutory
construction” that when “‘Congress borrows terms of art’” with such deep
roots, Congress “‘presumably knows and adopts’” the “‘widely accepted
definitions.’” Id. (quoting Morissette v. United States, 342 U.S. 246, 263
(1952)). Because the Molzof award did “not depend upon any proof that
the defendant . . . engaged in intentional or egregious misconduct,” and its
“purpose [wa]s not to punish,” it did not constitute “punitive damages”
under “traditional common-law principles.” Id. at 312.
So too here. We see no basis for interpreting “punitive damages” dif-
ferently in section 1981a than in the FTCA. Instead, we apply the same
traditional common law definition of punitive damages that Molzof
embraced. And under that definition, EEOC awards calculated in accord-
ance with the collateral source rule are not “punitive damages.” Such
awards are not based on the defendant’s malice or a finding that its
conduct merited punishment. See, e.g., Helfend v. S. Cal. Rapid Transit
Dist., 465 P.2d 61, 69 (Cal. 1970) (rejecting argument that such damages
are punitive and noting that “if the collateral source rule were actually
punitive, it could apply only in cases of oppression, fraud, or malice”).
Rather, they are pegged to “the harm suffered because of the agency’s
discriminatory action,” proved “through appropriate evidence.” Tien E.,
2021 WL 3419376, at *4.
B.
Molzof does not resolve whether awards calculated via the collateral
source rule constitute “compensatory damages.” The FTCA bars punitive
damages from being awarded against the federal government, but other-
wise, the government’s liability “is generally determined by reference to
state law.” Molzof, 502 U.S. at 305. Molzof thus had no occasion to con-
sider, and indeed expressly reserved judgment on, a hypothetical statute
8
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
providing “that the United States ‘shall be liable only for compensatory
damages.’” Id. at 307–08. But when we apply Molzof’s methodology to
this question, it demonstrates why EEOC’s position is correct.
1.
Although section 1981a does not define “compensatory damages,” that
phrase, like “punitive damages,” has a long common law pedigree. Carey
v. Piphus, 435 U.S. 247, 257 (1978). Thus, following Molzof, we apply
the “cardinal rule of statutory construction” that when “‘Congress bor-
rows terms of art’” with such deep roots, Congress “‘presumably knows
and adopts’” the “‘widely accepted definitions.’” Molzof, 502 U.S. at 307(quoting Morissette, 342 U.S. at 246); accord Cooper Indus., Inc. v.
Leatherman Tool, 532 U.S. 424, 432 (2001). And the well-established
meaning of “compensatory damages” at common law encompasses dam-
ages that, in accordance with the collateral source rule, decline to deduct
insurance benefits.
At common law, “‘[c]ompensatory damages’ are the damages awarded
to a person as compensation, indemnity or restitution for harm sustained.”
Restatement (Second) of Torts § 903. They are such damages “as will
compensate the injured party for the injury sustained, and nothing more;
such as will simply make good or replace the loss caused by the wrong or
injury.” Compensatory Damages, Black’s Law Dictionary 390 (6th ed.
1990). The phrase “compensatory damages” can also be synonymous with
“actual damages,” Cooper, 566 U.S. at 306–07, which Black’s Law Dic-
tionary defines to mean “compensation for [an] actual and real loss or
injury, as opposed on the one hand to ‘nominal’ damages, and on the
other to ‘exemplary’ or ‘punitive’ damages,” Actual Damages, Black’s
Law Dictionary 390 (6th ed. 1990).
These definitions make clear that compensatory damages are based on
the “injury sustained.” In that respect, they can be read to support apply-
ing the collateral source rule: When a claimant incurs medical expenses,
those expenses are a measure of the harm sustained and remain so regard-
less of whether the claimant receives reimbursement. But the definitions
also suggest that compensatory damages “make good or replace the
loss”—something that arguably would not be necessary if an injured
individual has received payment from a collateral source.
9
48 Op. O.L.C. __ (Aug. 12, 2024)
The history of compensatory damages, however, resolves any ambigui-
ty by definitively showing that damages calculated pursuant to the collat-
eral source rule were compensatory damages as the common law under-
stood that idea. We have already explained that the rule was “well
established at common law” when The Propeller Monticello applied it in
1855 and that, in the nearly 170 years since, it has remained the settled
common law rule for calculating damages. Supra Part I.B. But more than
that, the collateral source rule has long constituted the common law’s
default for calculating compensatory damages. Take, for example, the
Supreme Court’s second encounter with the rule in The Atlas, 93 U.S. 302(1876). In that case, which also concerned ship collisions, the Court began
with the proposition that “the measure of compensation” for the faultless
ship (a canal boat damaged in a collision) should “be equal to the amount
of injury received.” Id. at 310. Then, the Court held that the at-fault ships
(two tug boats that caused the collision) were not “entitled to deduct . . .
any sum which the [faultless ship] has received from an underwriter on
account of the same injury.” Id. And the Court explained that this did not
offend the rule that “[n]one can recover compensation twice in respect of
the same injury.” Id. That was because “what the plaintiff recovers under
his policy of insurance is not compensation for damages, but a payment
under a contract independent of the claim against the wrong-doer.” Id.
This reasoning explains why the collateral source rule applies to com-
pensatory damages: “insurance is an indemnity,” not compensation for
harm. Id. Hence, the collateral source rule simply declares that, by the
common law’s lights, it is “none of the defendant’s business” that the
plaintiff may have been able to defray those costs using insurance, gov-
ernment benefits, or gifts. Dobbs et al., Law of Torts § 482. Indeed, the
Supreme Court reaffirmed the same principle in 1951 when it empha-
sized that “[t]o decline to deduct state unemployment compensation
benefits in computing back pay is not to make the employees more than
whole” where “payments to the employees were not made to discharge
any liability or obligation of respondent.” NLRB v. Gullett Gin Co., 340
U.S. 361, 364 (1951).
Cases like The Atlas and Gullett Gin are consistent with a long line of
sources that have understood the collateral source rule as incorporated
into the measure of compensatory damages at common law. The 1939
Restatement (First) of Torts, for example, embraces the rule when dis-
10
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
cussing “compensatory damages for specific types of harm,” stating that
“[t]he value of medical services made necessary by [a] tort can ordinarily
be recovered although they have created no liability or expense to the
injured person.” Restatement (First) of Torts § 924 cmt. c (Am. L. Inst.
1939); see id. Introduction, p. viii (explaining that the Restatement aimed
to “present an orderly statement of the general common law of the United
States”). Likewise, the Restatement (Second) of Torts describes the rule as
reflecting “the tortfeasor’s responsibility to compensate for all the harm
that he causes, not confined to the net loss that the injured party receives.”
Restatement (Second) of Torts § 920A cmt. b. Another leading contempo-
rary treatise discusses “the traditional rule . . . that compensation from
‘collateral sources’ . . . does not go to reduce the defendant’s obligation to
pay damages.” Dobbs et al., Law of Torts § 482.
Moreover, the specific type of collateral payments that spurred USDA’s
request to our Office—medical expenses covered by health insurance—
have long been a paradigm case for the rule: “The usual case” for the rule
“is one in which plaintiff is injured by defendant’s tort but suffers no
actual medical expense loss because those expenses are paid for by plain-
tiff’s own medical insurance.” Dobbs & Roberts, Law of Remedies § 3.8.
And “[i]n these cases, the rule is quite firm that defendant must pay for
the reasonable value of medical services reasonably required even though
plaintiff’s own insurance has paid for such services.” Id.
“This, then, is the background against which Congress legislated in en-
acting Title VII, and these are the default rules it is presumed to have
incorporated, absent an indication to the contrary in the statute itself.”
Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338, 347 (2013) (relying
on common law default rules to define the causation standard for Title VII
retaliation claims); see Molzof, 502 U.S. at 307. We therefore think it
clear that when section 1981a permits the award of “compensatory dam-
ages,” it does not require the exclusion of medical costs paid by a claim-
ant’s health insurance. 2
2 USDA highlights cases suggesting that the collateral source rule applies to actions
based in tort but may not apply in some contract actions. See June 2 USDA Memo at 5
(citing, for example, Jaffe v. Demich, No. 16-CV-0245, 2018 WL 4252416, at *7 (S.D.
Ca. Sept. 6, 2018); Green Constr. Co. v. Kan. Power & Light Co., 759 F. Supp. 740, 744
(D. Kan. 1991), aff’d, 1 F.3d 1005 (10th Cir. 1993); Travelers Cas. and Sur. Co. v.
Dunmore, No. CIV. S-07-2493, 2010 WL 5200940, at *7 (E.D. Ca. Dec. 15, 2010);
11
48 Op. O.L.C. __ (Aug. 12, 2024)
2.
Statutory structure and history reinforce our view that “compensatory
damages” include awards that do not deduct medical costs covered by
health insurance. In addition to generally authorizing compensatory dam-
ages, section 1981a also sets forth “[e]xclusions from compensatory dam-
ages.” 42 U.S.C. § 1981a(b)(2) (heading). Specifically, “[c]ompensatory
damages . . . shall not include backpay, interest on backpay, or any other
type of relief authorized under” certain other remedial provisions. Id.
§ 1981a(b)(2). Section 1981a also imposes “[l]imitations” on “the amount
of compensatory damages” and specifies that awards “for future pecuniary
losses, emotional pain, suffering, inconvenience, mental anguish, loss of
enjoyment of life, and other nonpecuniary losses,” together with “punitive
damages . . . , shall not exceed” designated caps. Id. § 1981a(b)(3). Final-
ly, section 1981a expressly precludes damages where recovery is availa-
ble under 42 U.S.C. § 1981, which “forbid[s] all ‘racial’ discrimination in
the making of private as well as public contracts.” Saint Francis Coll. v.
Al-Khazraji, 481 U.S. 604, 609 (1987) (citation omitted); see 42 U.S.C.
§ 1981a(a)(1). Section 1981a, however, does not exclude awards calculat-
ed based on the collateral source rule from recoverable compensatory
damages. Nor does it impose any caps on recoveries for past pecuniary
costs, which clearly encompass healthcare costs.
The absence of any such limits, moreover, is particularly significant set
against the 1991 legal landscape. Federal courts at the time were routinely
applying the collateral source rule under the pre-1991 Title VII provisions
authorizing back pay and other equitable relief. See, e.g., EEOC v. Ford
Motor Co., 645 F.2d 183, 195 (4th Cir. 1981) (applying collateral source
Melendez v. Colo. Cas. Ins. Co., No. 12-CV-46, 2013 WL 7201117, at *3 (D. Wy.
Apr. 11, 2013)). The damages that section 1981a authorizes for Title VII violations,
however, are not aptly analogized to contract damages; they are far more like tort. In
United States v. Burke, 504 U.S. 229 (1992), the Supreme Court held that recoveries
under the pre-1991 version of Title VII did not constitute “a tort-like ‘personal injury’”
recovery largely because Title VII then did “not allow awards for compensatory or
punitive damages,” id. at 238. Burke “contrast[ed]” the pre-1991 Title VII with Title VIII,
“whose fair housing provisions allow for jury trials and for awards of compensatory and
punitive damages” and therefore “sounds basically in tort.” Id. at 240 (quoting Curtis v.
Loether, 415 U.S. 189, 195 (1974)). By analogy, the compensatory and punitive damages
authorized by section 1981a likewise sound in tort.
12
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
rule to hold that unemployment compensation may not be deducted from a
Title VII back pay award), rev’d on other grounds, 458 U.S. 219 (1982);
Brown v. A.J. Gerrard Mfg. Co., 715 F.2d 1549, 1550 (11th Cir. 1983)
(“[T]he deduction of unemployment payments from Title VII back pay
awards should be consistently disallowed.”). True, there was some disa-
greement around the margins concerning whether particular types of
payments (like unemployment benefits) were collateral or direct and
whether, when adjudicators exercised equitable powers, applying the
collateral source rule was mandatory or discretionary. See, e.g., Kauffman
v. Sidereal Corp., 695 F.2d 343, 347 n.2 (9th Cir. 1982) (noting open
question as to whether employer-funded unemployment benefits are
collateral); Hunter v. Allis-Chalmers Corp., Engine Div., 797 F.2d 1417,
1428 (7th Cir. 1986) (holding that “it is within the discretion of the dis-
trict judge whether to deduct unemployment benefits from backpay,” but
noting that the majority of circuits hold that unemployment benefits may
never be deducted). But given this history, we think it unlikely that when
Congress in 1991 expanded Title VII remedies by authorizing compensa-
tory damages, it intended to supplement section 1981a’s express statutory
limitations with an additional unwritten exception entirely precluding the
application of the collateral source rule.
This understanding of section 1981a finds further support in the 1991
state-level landscape. The collateral source rule generated substantial
policy debate, and many jurisdictions limited its application in certain
types of actions (like medical malpractice or product liability) or against
certain types of defendants (like public entities)—and some largely abro-
gated it (though even these jurisdictions generally continued to apply the
doctrine when subrogation or reimbursement rights existed and the doc-
trine thus was unlikely to yield recovery that might be thought excessive).
See Daena A. Goldsmith, A Survey of the Collateral Source Rule: The
Effects of Tort Reform and Impact on Multistate Litigation, 53 J. Air L. &
Com. 799, 806–08, 816, 819 (1988). Although these changes might be
thought to show a weakening of the collateral source rule, we think they
further undermine USDA’s position. These reforms underscore that the
collateral source rule has endured unless and until legislatures have ex-
pressly displaced the rule—and that Congress, despite these state models,
chose not to do so in section 1981a even as it limited recoverable damages
in other respects.
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48 Op. O.L.C. __ (Aug. 12, 2024)
USDA observes that the legislative history of the Civil Rights Act of
1991 does not contain “any reference to, or debate concerning,” the col-
lateral source rule. USDA July 28 Memo at 2–3. But giving weight to this
legislative silence would undermine rather than support USDA’s position:
Even as the collateral source rule remained the common law’s well-settled
default leading up to the 1991 Act’s passage, and even as some states at
that time had modified the rule by statute, no one in Congress appears to
have suggested that the 1991 Act departed from that default. In all events,
the Supreme Court has cautioned that “just as it is error to displace sover-
eign immunity based on inferences from legislative history without clear
statutory direction . . . , so it is error to grant sovereign immunity based on
inferences from legislative history in the face of clear statutory direction
waiving that immunity.” Kirtz, 144 S. Ct. at 471. So USDA’s arguments
are doubly unavailing.
For all these reasons, we think this case is an apt one for the rule that
“[w]here Congress explicitly enumerates certain exceptions to a general
[rule], additional exceptions are not to be implied, in the absence of
evidence of a contrary legislative intent.” TRW Inc. v. Andrews, 534 U.S.
19, 28 (2001) (quoting Andrus v. Glover Const. Co., 446 U.S. 608, 616–
17 (1980)). Indeed, even though Congress in some sense disfavored future
pecuniary damages and nonpecuniary damages, it allowed their recovery
(subject to limits). Yet USDA’s view would entirely exclude damages
calculated pursuant to the collateral source rule even where subrogation or
reimbursement rights exist—an approach that, as far as we are aware, no
jurisdiction has adopted.
3.
Finally, other federal statutes provide further support for our view. Cf.
Cooper, 566 U.S. at 292–93 (looking to usage of “actual damages” in
other statutes). At least twice, Congress has expressly addressed compen-
sation and the collateral source rule together in the same statute. In the
Justice for United States Victims of State Sponsored Terrorism Act,
Congress created a fund for certain victims of state-sponsored terrorism
but specified that applicants who had received “any payment [of at least]
30 percent of the total compensatory damages owed to such applicant . . .
from any source other than this Fund shall not receive any payment from
the Fund” until other eligible applicants had received at least 30 percent
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EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
of their own compensatory damage awards. Pub. L. No. 114-113,
§ 404(b)(3)(B)(i), 129 Stat. 2242, 3007, 3011 (emphasis added). The
statute defines “any source other than the Fund” to include “all collateral
sources, including life insurance, pension funds, death benefit programs,
payments by Federal, State, or local governments, and court awarded
compensation related to the act of international terrorism that gave rise to
a claimant’s final judgment.” Id. § 404(j)(6), 129 Stat. at 3016–17. In
addition, in the September 11th Victim Compensation Fund of 2001,
Congress directed a special master to provide “compensation” to eligible
individuals but specified that the special master “shall reduce the amount
of compensation . . . by the amount of the collateral source compensation
the claimant has received or is entitled to receive.” Pub. L. No. 107-42,
§ 405(b)(6), 115 Stat. 230, 237, 239. A “collateral source” includes “all
collateral sources, including life insurance, pension funds, death benefit
programs, and payments by Federal, State, or local governments related to
the terrorist-related aircraft crashes of September 11, 2001.” Id. § 402(4),
115 Stat. at 237.
These statutes underscore that Congress knows how to express its in-
tention to depart from the common law default concerning collateral
sources. As important, the exclusions from these statutes presuppose that
measures of compensation in the first instance will by default include (for
example) healthcare costs that are covered by insurance. Otherwise, it
would not make sense to specify that payments from such collateral
sources would defray part of “the total compensatory damages owed,”
Pub. L. No. 114-113, § 404(b)(3)(B)(i), 129 Stat. at 3011, or “reduce the
amount of compensation” otherwise owed, Pub. L. No. 107-42,
§ 405(b)(6), 115 Stat. at 239.
III.
USDA advances two additional arguments for why EEOC must deduct
FEHB health insurance benefits from a claimant’s past pecuniary damag-
es. Below, we explain why we disagree with each.
A.
First, as USDA observes, the collateral source rule does not apply to
“direct” payments—that is, when the “defendant, or someone acting on
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48 Op. O.L.C. __ (Aug. 12, 2024)
behalf of a defendant, makes a payment to . . . plaintiff, in full or partial
compensation for plaintiff’s losses.” Restatement (Third) of Torts: Reme-
dies § 10 cmt. d; see Restatement (Second) of Torts § 920A (“If a tort
defendant makes a payment toward his tort liability, it of course has the
effect of reducing that liability.”). And here, USDA argues that payments
by FEHB are direct because the government “pays over half of the annual
cost of the FEHB program” and the Office of Personnel Management
(“OPM”) “exercises extensive control over FEHB.” July 28 USDA Memo
at 3 & n.4.
USDA’s arguments, however, do not show that payments by FEHB in-
surers are “direct” under the collateral source rule. Even when an employ-
er-defendant has contributed to a benefit or paid for it entirely, courts
generally look to “the exact nature” of the benefit to determine whether it
is collateral. Sloas v. CSX Transp., Inc., 616 F.3d 380, 390 (4th Cir. 2010)
(quoting United States v. Price, 288 F.2d 448, 449 (4th Cir. 1961)). If a
benefit is “part-and-parcel of . . . employees’ compensation package,” as
with “fringe benefits or deferred compensation,” courts generally deem
the payments collateral, even if the employer has contributed a portion of
the cost. Davis v. Odeco, Inc., 18 F.3d 1237, 1244–45 (5th Cir. 1994). By
contrast, if the employer-defendant “provides a benefit to the plaintiff
‘specifically to compensate him for his injury,’” Sloas, 616 F.3d at 390(quoting Price, 288 F.2d at 449), or as “a prophylactic measure against
liability,” Davis, 18 F.3d at 1244–45, then the benefit may be direct.
Here, while the federal government pays a substantial portion of the cost
of the FEHB program, FEHB benefits are clearly part of the “comprehen-
sive compensation and benefits package” that the government provides to
employees. Office of Personnel Management, Federal Employee Compen-
sation Package, https://www.opm.gov/policy-data-oversight/pay-leave/pay-
administration/fact-sheets/federal-employee-compensation-package/ (last
visited July 5, 2024). Nothing in the facts available to us suggests that
their primary purpose is to provide coverage in the event that the employ-
ing agency tortiously causes injury. See, e.g., Hall v. Minn. Transfer Ry.
Co., 322 F. Supp. 92, 97 (D. Minn. 1971) (“[W]here the insurance policy
is one of general hospital and medical coverage upon which the insured
may make claim without regard to liability on the part of the employer,
such a policy is a fringe benefit maintained by the employer and is in
effect part of the employee’s income for services rendered[.]”). And as to
16
EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
OPM’s “extensive control over FEHB,” USDA does not cite—and we
have not found—any case that has deemed “control” relevant to whether a
source is direct or collateral. Nor does such control appear to bear on the
key question that courts have asked: whether a benefit is “part-and-parcel
of . . . employees’ compensation package,” or instead “a prophylactic
measure against liability.” Davis, 18 F.3d at 1244–45; see Sloas, 616 F.3d
at 390. USDA’s arguments thus do not persuade us that payments by
FEHB insurers are “direct” and fall outside the collateral source rule.
B.
Second, USDA asserts that awarding compensatory damages under the
collateral source rule conflicts with EEOC’s guidance documents, which
USDA argues EEOC must follow under United States ex rel. Accardi v.
Shaughnessy, 347 U.S. 260 (1954). See June 2 USDA Memo at 4–5. But
we do not share USDA’s reading of EEOC’s guidance documents, and
hence we need not weigh whether those documents, if read as USDA
does, would bind EEOC under Accardi.
The two relevant documents are EEOC’s Enforcement Guidance: Com-
pensatory and Punitive Damages Available Under Sec. 102 of the CRA of
1991 (July 14, 1992), https://www.eeoc.gov/laws/guidance/enforcement-
guidance-compensatory-and-punitive-damages-available-under-sec-102-
cra (“EEOC’s Enforcement Guidance”), and the Equal Employment Op-
portunity Management Directive for 29 C.F.R. Part 1614 (EEO-MD-110)
(Aug. 5, 2015), https://www.eeoc.gov/sites/default/files/migrated_files
/federal/directives/md-110.pdf (“MD-110”). Both documents explain that
employees who establish a claim of discrimination under the relevant
statutes may receive compensatory damages. Then, these documents
explain that “[c]ompensatory damages include damages for past pecuni-
ary loss (out-of-pocket loss), future pecuniary loss, and nonpecuniary
loss (emotional harm).” EEOC’s Enforcement Guidance § II.A; accord
MD-110, at 11-20.
Principally, USDA contends that the references to “out-of-pocket” ex-
penses preclude EEOC from applying the collateral source rule by ex-
cluding amounts paid or reimbursed by other sources. July 28 USDA
Memo at 4; June 2 USDA Memo at 2–5. These references, however, are
too thin a reed to conclude that EEOC departed from centuries of com-
mon law history and barred itself from awarding damages via the collat-
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48 Op. O.L.C. __ (Aug. 12, 2024)
eral source rule—a rule that, as we have explained, EEOC has applied for
more than 30 years. EEOC’s Enforcement Guidance instead seems to use
“out-of-pocket loss” as a shorthand for “past pecuniary damages,” which
encompasses damages awarded pursuant to the collateral source rule, and
to distinguish such damages from harder-to-measure “future pecuniary
loss” and “nonpecuniary loss.” See EEOC’s Enforcement Guidance
§ II.A.1. The MD-110 is similar. Compare MD-110, at 11-23 (“Pecuniary
losses are out-of-pocket expenses incurred as a result of the agency’s
unlawful action, including job-hunting expenses, moving expenses, medi-
cal expenses, psychiatric expenses, physical therapy expenses, and other
quantifiable out-of-pocket expenses.” (emphasis added)), with id. at 11-21
(“Non-pecuniary damages are losses that are not subject to precise quanti-
fication including emotional pain and injury to character, professional
standing, and reputation.” (emphasis added)).
Alternatively, USDA argues that the MD-110’s express reference to the
collateral source rule in the context of back pay indicates that EEOC “only
recognizes the collateral source rule to avoid deductions in backpay stem-
ming from unemployment compensation,” June 2 USDA Memo at 4, and
precludes USDA from applying the rule “to other remedies, such as past
pecuniary damages,” id. at 4 n.3; see also July 28 USDA Memo at 4 n.5.
We again disagree. The MD-110’s express discussion of this general
principle in one context does not imply that the principle does not apply
elsewhere. That is particularly true because EEOC had good reason to
focus on this issue in the back pay context. The statute authorizing back
pay provides that “[i]nterim earnings or amounts earnable with reasonable
diligence by the person or persons discriminated against shall operate to
reduce the back pay otherwise allowable.” 42 U.S.C. § 2000e-5(g)(1); see
id. § 2000e-16(d) (making section 2000e-5(g) applicable in actions against
the federal government). This carve-out thus requires EEOC to decide
whether certain sources that might be characterized as “interim earn-
ings”—including unemployment compensation and awards under the
Federal Employees’ Compensation Act—should reduce a back pay award,
despite the collateral source rule. See, e.g., MD-110, at 11-4 to 11-5. And
while we express no opinion on whether EEOC has correctly interpreted
the carve-out in 42 U.S.C. § 2000e-5(g)(1), this provision explains why its
guidance grapples expressly with the collateral source rule as to back pay
and not as to other remedies.
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EEOC Use of the Collateral Source Rule in Federal Sector Discrimination Cases
IV.
For these reasons, we conclude that Congress has authorized EEOC to
award past pecuniary damages pursuant to the collateral source rule
without deducting medical costs covered by FEHB insurance and that
EEOC’s guidance does not preclude it from doing so.
CHRISTOPHER C. FONZONE
Assistant Attorney General
Office of Legal Counsel
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