A further cutback of the federal government's power over the states, the 5-4 ruling on a case from Alabama said Congress exceeded its authority when it let state workers file such claims under the 1990 law.
The federal law does not trump states' 11th Amendment immunity against being sued in federal courts, the justices said.
"We decide here whether employees of the state of Alabama may recover money damages by reason of the state's failure to comply with the (employment discrimination) provisions of Title 1 of the Americans With Disabilities Act. We hold that such suits are barred by the 11th Amendment," Chief Justice William H. Rehnquist wrote for the court.
The ruling in the Alabama case added to the court's series of decisions that have increasingly tipped the federal-state balance of power toward the states.
Those decisions have all featured the same 5-4 split among the justices, and that lineup was repeated in Wednesday's decision.
Joining Rehnquist were Justices Sandra Day O'Connor, Antonin Scalia, Anthony M. Kennedy, and Clarence Thomas. Dissenting were Justices John Paul Stevens, David H. Souter, Ruth Bader Ginsburg, and Stephen G. Breyer.
Writing for the four, Breyer said, "The court ... improperly invades a power that the Constitution assigns to Congress."
In January 2000, the justices barred state workers from suing their employers in federal court under the federal Age Discrimination in Employment Act. That ruling said the law could not override states' immunity against being sued in federal court.
The ADA is perhaps best known for requiring wheelchair ramps in buildings across the country.
The law bans job discrimination against the disabled, requiring employers to offer reasonable accommodations to disabled people who are otherwise qualified to perform a job. It also bans discrimination in the provision of government programs and services.
The law was signed by former President Bush, who filed a court brief supporting two Alabama state employees who sued the state. Mr. Bush said the ADA let disabled people "pass through once-closed doors into a bright new era of equality, independence, and freedom."
Wednesday's ruling reversed a federal appeals court decision that let Patricia Garrett and Milton Ash sue over alleged bias in their state jobs.
Garrett had been a University of Alabama nurse for 17 years when she took a four-month leave to undergo surgery, radiation, and chemotherapy for breast cancer. When she returned, she said she was ordered to take a lower-paying job or quit.
Her lawsuit said her supervisor made negative comments about her illness. She took the lower-paying job and ater retired.
Ash, a security guard for the Alabama Department of Youth Services, said his severe asthma was aggravated by the agency's refusal to enforce its no-smoking policy or repair exhaust problems on a vehicle he had to drive.
The 11th U.S. Circuit Court of Appeals ruled the two could sue under the ADA, saying the law canceled the states' constitutional immunity from being sued in federal court against their will.
The Supreme Court said Wednesday the appeals court was wrong.
Rehnquist said examples offered in the case of discrimination by states "fall far short of even suggesting the pattern of unconstitutional discrimination" to justify legislation based on the Constitution's 14th Amendment equal-protection guarantee.
"In order to authorize private individuals to recover money damages against the states, there must be a pattern of discrimination by the states ... and the remedy imposed by Congress must be congruent and proportional to the targeted violation. Those requirements are not met here," the chief justice said.
In contrast, Rehnquist wrote that Congress had found a "marked pattern" of racial discrimination by states when it enacted the Voting Rights Act back in 1965.
Breyer's dissent said Congress had found about 300 examples of discrimination by state governments. "Congress expressly found substantial unjustified discrimination against persons with disabilities," he said.
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