Suits filed by the Equal Employment Opportunity Commission against two New York banks last week could revolutionize the way companies provide health benefits.
The government agency charged that Chase Manhattan Corp. and Staten Island Savings Bank discriminated by treating employees with mental disabilities differently than those with physical disabilities.
The banks denied any wrongdoing, but civil rights lawyers said this could be a watershed case.
"If the EEOC prevails, the cost of long-term disability insurance is going to skyrocket," predicted Ellen L. Lyons, an associate in the Washington office of the Skadden, Arps, Slate, Meagher & Flom law firm. "It will be harder for employers to offer it and harder for employees to afford it."
Ms. Lyons noted that employers and insurance companies commonly distinguish between mental and physical disability benefits. According to the EEOC suits, the banks offer employees with physical disabilities benefits until age 65, but Chase only offers workers with mental disabilities benefits for 18 months and Staten Island Savings for 24 months.
The suits open a new front in the industry's fight against discrimination charges. The Department of Labor is investigating several banks for employment discrimination, and the Justice Department has brought 13 suits alleging lending bias.
"This is a worrisome trend," said Richard J. Ritter, a former Justice Department lawyer who now consults for the Washington Lawyers Committee for Civil Rights and Urban Affairs. "It is time for lenders to take a much closer look to ensure against discrimination."
One lawyer who follows the EEOC said the banks may have a hard time winning. Americans with Disabilities Act rules explicitly require companies to offer similar mental and physical disability benefits, the lawyer said.
James L. Lee, a regulatory staff attorney with the EEOC's New York office, said the agency plans to pursue even more cases if these suits prove successful.
"It is the agency's position that employers cannot make distinctions between physical and mental disabilities," Mr. Lee said. "This currently appears to be a widespread practice."
Mr. Lee noted that the penalties for violating the Americans with Disabilities Act can be severe.