Avoiding Discrimination Claims When Firing or Downsizing Employees
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Transcript of Avoiding Discrimination Claims When Firing or Downsizing Employees
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Avoiding Discrimination
Claims When Firing or
Downsizing Employees
www.thompson.com
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ii Thompson Publishing Group
Thompson Publishing Group, Inc.
Thompson Publishing Group is a trusted name in providing professionals with authori-
tative analysis of laws and regulations that help businesses develop regulatory compli-
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Avoiding Discrimination Claims When Firing or Downsizing Employees
is published by Thompson Publishing Group Inc.
805 15th St. NW, 3rd Floor, Washington, DC 20005.
Writers: Burton J. Fishman, Esq.; Susan Knbl; Judith E. Kramer, Esq.;
Barbara S. Magill, Esq.; Leslie Stout-Tabackman, Esq.
Editor: Michael Cardman
Desktop Publisher: Jason Peaco
This information is designed to be accurate and authoritative, but the publisher
is not rendering legal, accounting or other professional services. If legal or other
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Avoiding Discrimination Claims When Firing or Downsizing Employees 1
Avoiding Discrimination Claims WhenFiring or Downsizing Employees
Employees are most apt to le discrimination charges when they lose their jobs due to
an employers action. Workers often are angry and frightened about their futures. They wantsomeone to blame and they want money. Moreover, they no longer have a job or workplace
relationships to protect.
The way you handle a termination can mean the difference between a lawsuit and a
peaceful parting of the ways. This white paper will:
give you guidelines to follow in the event that termination or downsizing becomes
necessary (Section I When You Have to Cut Back);
inform you about subtle issues that often arise under various federal employment laws
(Section II Avoiding Common Pitfalls);
tell you how to shield yourself from liability with systems of performance evaluation
and discipline (Section III - Providing Proper Evaluation and Discipline);help you keep track of all your actions (Section IV Recordkeeping and
Documentation); and
discuss what steps to take in the event of charges (Section V When All Else Fails:
Responding to Charges)
Termination is never easy for either the employer or the employee, but handling it in the
right way and adhering to all of the laws that might be involved can protect your companys
future economic health.
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Avoiding Discrimination Claims When Firing or Downsizing Employees 3
I When You Have to Cut Back
While there are no sure-re ways to guarantee against a lawsuit, there are issues to
consider and steps to take that can help reduce the likelihood of a court battle.
This section offers some tips to help guide you in the event that terminating or
downsizing employees becomes necessary.
Use Neutral Principles
If you nd yourself faced with the difcult task of laying off or terminating employees,
the most important thing to do is to make the process as neutral and objective as possible.
That is, you should make sure that the decisions about whom to let go are based on
documented neutral business needs.
If you have some jobs your company can do without, eliminating those jobs regardless of
who holds them is a neutral, objective way to reduce your workforce. If you have a seniority
policy or union contract, follow the requirements to the letter. For example, last hired, rst
red is a neutral way to make decisions and is not based on the identities of the particularemployees who were more recently hired.
If there is no such obvious way to make cuts, you may decide to discharge employees
based on their performance. This is one of the values of having regular and honest
performance evaluations of your employees. If you have fully documented your employees
performance, these evaluations can form the basis for choosing among them.
You may decide to bring in an outside consultant to select the employees to be
discharged. If a consultant has no knowledge of employees race, age, gender or disabilities,
this could help insulate your company from charges of bias. However, be sure to instruct the
consultant to employ neutral principles in making the decisions about whom to cut.
Hold a Termination Conference
The employees supervisor, together with a representative of the human resources
department or a senior manager, should communicate the termination decision to the
employee. There should always be two company representatives at the termination meeting.
Tell the employee the true reason for the termination decision and, where appropriate,
provide a few specic examples of the problems (whether they be performance or economic
related, or otherwise) leading up to the companys decision. However, do not debate the
merits of the decision; make it clear to the employee that the decision is nal. Try to keep the
meeting brief and to the point.
If the termination is to be immediate, at the conclusion of the termination meeting, askthe employee to return all company property, including building passes, card keys, hard keys,
ofce equipment, credit cards, documents, etc.
Do not make any false statements to the employee(s) regarding termination or recall
rights.
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4 Thompson Publishing Group
Inform the employee of rights respecting unemployment benets and, in reduction-in-
force situations, consider having someone from the local ofce of Employment Security
present to start collecting applications.
Inform the employee of rights, if any, to continued company benets or severance pay.
Specically inform the employee of Consolidated Omnibus Budget Reconciliation Act
(COBRA) rights to continued health insurance.
In RIF situations, consider having employment counselors present to help employees nd
new jobs.
Consider having the nal paycheck ready for distribution when notice of termination or
layoff is given or, on the last day of work.
Conduct an Exit Interview
Under some circumstances, where the employee has advance notice of the termination
decision, it will be a good idea to conduct an exit interview the last day the employee is
on the job. Such an interview helps to close off loose ends. It gives the employer a chance
to collect company property, issue a nal paycheck, review COBRA information and,
importantly, to listen to any concerns that the employee may raise. This is particularly
important for three reasons:
It allows the employer to modify and improve the discipline and discharge process
based on employee concerns. This may alleviate future litigation.
It may afford the employer the opportunity to determine if this employee intends to
sue.
It may let the employer know if the employee has prospects for future employment (an
important damages issue if a lawsuit is forthcoming).
Communicate With Remaining Staff
In individual termination scenarios, active employees should be advised that the former
employee has departed in the ordinary course. No information as to the reasons for the
discharge should be provided to anyone other than those with a need to know (for example,
the employees supervisor, human resources director or senior management).
In RIF cases, once the termination decisions are made, active employees should be
advised that as a result of nancial or other applicable reasons, the company is undergoing a
RIF resulting in the layoffs of the departing employees. Where appropriate, active employees
should be advised that no further layoffs are anticipated at this time.
Make a Plan for Handling Future Reference Inquiries
Handling inquiries about former employees has become increasingly difcult. Many
defamation suits have been brought by employees who received negative references. A
U.S. Supreme Court case,Robinson v. Shell Oil, has made references even more difcult to
handle. InRobinson, the court ruled that aformeremployee can bring suit under Title VII for
retaliation. This now means that if an employee receives what is perceived to be a negative
reference letter, the employee may be able to sue the employer under Title VII (assuming
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Avoiding Discrimination Claims When Firing or Downsizing Employees 5
the employee is protected by Title VII) even though the employee no longer works for the
employer.
As a result, employers should choose from one of the following options when it comes to
references:
1. Do not give employment references for any employee.
2. Only give out an employees name, dates employed, and jobs held (the so-called
name, rank and serial number).
3. Prepare a reference letter at the exit interview that the employee approves, and use
that letter in response to all subsequent inquiries.
4. Obtain a release from the employee respecting any references provided to prospective
employers.
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Avoiding Discrimination Claims When Firing or Downsizing Employees 7
II - Avoiding Common Pitfalls
Under many state laws, employees are considered employees-at-will, which means that
the employment relationship may be terminated by either the employer or employee at any
time for any reason, even if the employee has done nothing wrong. However, even in states
that recognize the concept of employment-at-will, employers are prohibited from terminatingemployees in a discriminatory fashion.
Federal laws prohibit employers from terminating employees because of their race, color,
religion, sex or national origin (Title VII of the Civil Rights Act of 1964), because of their
disability (the Americans With Disabilities Act) or age if they are over 40 years old (the Age
Discrimination in Employment Act), or because employees exercised their rights under these
laws.
It is obvious, of course, that you may not terminate an employee because of his or her
race, color, religion, sex, national origin, disability or age (if over 40).
But there are more subtle issues as well. The following material addresses issues that
may arise under the ADEA, the Family and Medical Leave Act, the Uniformed ServicesEmployment and Reemployment Rights Act and the Worker Adjustment and Retraining
Notication Act.
The Age Discrimination in Employment Act
When terminating or downsizing employees, you must be cautious about running afoul of
the Age Discrimination in Employment Act. If you decide to make personnel cuts to reduce
your payroll costs, you may decide to let some of your most highly paid workers go. If all of
those employees are over the age of 40, they are protected by the ADEA.
Under the ADEA, it is unlawful to discriminate against an employee because of age with
respect to any term, condition, or privilege of employment including job termination. Jobterminations under the ADEA can include separation of employment for almost any reason
including terminations for cause, the discharge of an at will employee, layoffs, reductions
in force, and mandatory or incentive-based retirements.
Whenever you are contemplating the job termination for any reason of an employee
aged 40 or older, you must take steps to ensure that the termination decision is not age-based
and that you can justify and document the non-age-based reasons for the termination.
The ADEA does permit you to make decisions based on factors other than age, but
Equal Employment Opportunity Commission regulations make it clear that a decision that is
based on the average cost of employing older employees as a group is unlawful, except with
respect to employee benet plans that qualify for special treatment under the law (29 C.F.R.1625.7(f)).
You are permitted to make individualized termination decisions based on the wages or
salaries of individual workers not on the average cost of older workers as a group. If you
do so, your decisions should be based on factors other than age.
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8 Thompson Publishing Group
Documentation and Recordkeeping
Before you decide to terminate an ADEA-covered employee, it is best to have someone
in your human resources department review the termination decision to make sure that it
is based on legitimate, non-age related factors and that all documentation in support of the
decision is in good order (see Section IV Documentation and Recordkeeping for more
information on this). You may be required, if an age claim is made, to explain the legitimate,non-discriminatory reason for your decision to terminate an employee.
If you do not have or provide a legitimate reason for a termination, or the reason you
give is shown to be untrue, a court or the EEOC may infer that the reason was discriminatory.
Going through the process of review and documentation before job termination is key to
defending an age claim that your company may face after the employee has been terminated.
Reductions in Force
Reductions in Force (RIFs) usually include large numbers of age-protected workers.
Because RIFs are driven by the need to cut costs, highly compensated employees, which as a
group tend to include a high number of older workers, often are targeted for layoff.
If you are faced with having to engage in a RIF or group layoff, you need to compare the
ages and personnel le information of all those selected for termination with the ages of and
personnel le information for employees who have not been selected. You should perform
this adverse impact analysis early in the layoff decisionmaking process so that changes can
be made if the analysis shows that a disproportionate number of older workers will be part of
the layoff. If your analysis does show a disparate impact that older workers as a group are
impacted adversely you should reconsider the group selected for termination.
Early Retirement
Employers sometimes offer early retirement incentives to coax older, higher-paid
employees to retire earlier than they might otherwise have. These plans are permitted by theADEA, but they must be voluntary. Making workers choose between early retirement and
being red is not voluntary (Herbert v. Mohawk Rubber Co., 872 F.2d 1104 (1st Cir. 1989)).
The Older Workers Benet Protection Act (OWBPA) amended the ADEA to make sure
workers who were eligible for or near retirement were not treated unfairly by employers
anxious to hire younger workers at lower salaries. The OWBPA has specic provisions for
pension plans, early retirements and deductions from severance pay.
Under the law, the end of the accrual period or a reduction in the rate of accrual of
dened benet plans those in which benets are predetermined at the beginning of plan
participation and the amount required to fund the benets is contributed cannot be based
on age.
For dened contribution plans those in which a predetermined amount is contributed
annually and the end benets are the result of those contributions and whatever earnings are
made on their investment neither the rate of allocations nor the end of those allocations
can be based on age.
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Avoiding Discrimination Claims When Firing or Downsizing Employees 9
Employers generally require employees to sign waivers when they take early retirement
or other buyout benets the employee receives some benet in exchange for giving up the
right or potential right to sue for discrimination.
The Family and Medical Leave Act
Under the Family and Medical Leave Act, you are permitted to refuse to return someoneto work who would otherwise have been laid off, or whose position was eliminated while on
leave (29 U.S.C. 2614(a)(3)(B); 29 C.F.R. 825.216(a)). However, you may not terminate an
employee because he or she took FMLA leave. That is the crux of the statute: job-protected
leave for the birth, adoption or placement in foster care of a child, or for a serious health
condition of a covered family member or the employees own serious health condition. If the
employee takes leave but has no job to return to at leaves end, the law is meaningless.
The Uniformed Services Employment and Reemployment Rights Act
Similarly, you may terminate an employee who is on Uniformed Services Employment
and Reemployment Rights Act leave, as long as you can show that the employee would
have been terminated even if he had not been on leave. You may not terminate an employeebecause he or she is on military leave.
As a general rule, under USERRA an employee is entitled to reemployment in the job he
or she would have attained with reasonable certainty had it not been for the period of military
service. This is known as the escalator principle, because the employment escalator
may have gone up or down while the employee was away, and he or she steps back on
the escalator at the place he or she would, with reasonable certainty, have been but for the
military service.
If the employee would have been laid off or terminated during the period of service, he
or she may suffer the same fate on return from military duty (20 C.F.R. 1002.191 and 194).
If, on the other hand, the employee would have been promoted, you must place the returningworker in the promotion position.
The Worker Adjustment and Retraining Notifcation Act
One of the least-known federal employment laws is one that requires certain employers
to give notice or a warning to its employees when it is planning a large layoff or
plant closing. The law is the Worker Adjustment and Retraining Notication Act (29 U.S.C.
2101 et. seq.). Many people have argued that the WARN Act does little more than harm
a struggling business by giving the best workers a reason to leave as soon as possible.
Nevertheless, it is the law.
Only certain businesses are covered by WARN, and those are covered only in certaincircumstances. First, you have to be of a certain size. If your company has 100 or more
full-time workers (not counting employees who have less than six months on the job and
employees who work fewer than 20 hours per week), or if your company employs 100 or
more workers who work at least a combined 4,000 hours per week, WARN requires you to
provide written notice to affected employees at least 60 calendar days in advance of a plant
closing or mass layoff (29 U.S.C. 2101, 2102).
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10 Thompson Publishing Group
Second, not all shutdowns are the same. A plant closing that will trigger WARN Act
requirements occurs if you are permanently or temporarily shutting down a single site of
employment and the shutdown results in an employment loss for 50 or more employees
during any 30-day period (29 U.S.C. 2101(a)(2)). For WARN Act purposes, the effective
date of a sale of a business is the date the sale closes (Phason v. Meridian Rail Corp., 479
F.3d 527 (7th Cir. 2007)).
Third, not all layoffs are covered. Only if a mass layoff will last more than six months
will the layoff trigger WARN Act coverage and then only if at least one-third of the
employees at a single site have an employment loss during any 30-day period and at least50
employees are affected; or at least 500 employees at a single site during any 30-day period
have an employment loss regardless of the percentage of the workforce they represent (29
U.S.C. 2101(a)(2)).
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Avoiding Discrimination Claims When Firing or Downsizing Employees 11
III - Providing Proper Evaluations andDiscipline
If you wish to avoid discrimination claims, it is vitally important that you establish
systems for evaluating employees performance and for disciplining them when they fall short
of expectations or violate company policy.
Performance Evaluations
Performance evaluations are the basis for important business and legal decisions. They
are used in determining compensation, promotions, transfers and terminations. For these
reasons organizations must hold supervisors and managers accountable for the performance
evaluation process. Most importantly, managers need to be trained how to properly evaluate,
counsel, document and discipline their subordinates so that poorly prepared evaluations do
not open the door to legal jeopardy should an employee le a discrimination complaint.
Before managers can begin to write performance reviews, it is important to ensure
that performance ratings are based on fair, clear and objective performance criteria. The
criteria should support your companys culture, values and business strategies and should
include clearly dened goals and job-specic competencies. The more clearly articulated
and behaviorally anchored the criteria are, the greater likelihood there will be reliability and
consensus among different raters.
Training for Managers and Supervisors
Training must take place before managers or supervisors deliver performance evaluations
to their subordinates. The damage that can be done by an untrained supervisor could have
a signicant impact on your organization. Since the passage of Title VII, the courts have
addressed various issues in which performance appraisals played a signicant role. In their
decisions, courts often cited the inadequacies of the employers appraisal system as the root
cause of some discriminatory action concerning promotion, layoff or compensation.
As a result, todays performance appraisals are required to comply with federal guidelines
(the Uniform Selection Guidelines), especially with respect to validity. Being less than
truthful can subject your organization to the possibility of large jury awards. By making
managers aware of the potential consequences to the company if their appraisals are inated
or untruthful, and by holding them accountable for how well they do them in reviews of their
own performance, organizations can ensure that evaluations will more accurately reect
employees performance.
The performance appraisal process should be kept simple. A good training program can
help managers decide what aspects of performance they wish to measure. Without careful
planning, it is easy to develop forms that are too long, too complex or totally irrelevant. By
having managers and supervisors articulate what is important to their subordinates success,
they will be able to craft performance evaluations that are specic and objective. Finding
a tracking system to note all the things their subordinates have done during the evaluation
period will make writing reviews much easier.
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12 Thompson Publishing Group
Trainers should lay out the big picture why the organization values performance
appraisals, how individual performance benets each department and how managers can
measure performance objectively. By underscoring the nancial impact the lack of feedback
can have on the company (e.g., turnover costs, absenteeism), managers should have a better
appreciation of how a good performance appraisal system can add value to their margins.
It is important to provide managers and supervisors with clearly written instructions onhow to administer the performance evaluation program. Train them how to rate employee
performance and how to provide feedback in a positive fashion. This not only helps managers
address performance problems in a constructive manner, but it also shows them how to
recognize and reinforce good performance. If performance appraisals are well crafted,
employees will more likely accept them as a credible representation of their work.
There are three steps in a performance appraisal process. Proper training prepares
managers and supervisors to:
Dene the job
1. Managers must make sure their subordinates understand the specic job criteria
against which performance will be measured. This begins with a thorough jobanalysis resulting in the creation of a job description. As part of a companys
continuous improvement effort, the job description should be a work in progress,
rather than a one-time event. Employees should play an active role in helping to
write, revise or update their job descriptions.
2. Managers and supervisors must communicate job standards and other expectations
to their subordinates before the evaluation period begins. Whatever standards you
establish, be sure that you quantify them as much as possible, communicate them
clearly and enforce them as consistently and fairly as possible.
Appraise performance
1. Managers compare their subordinates actual performance to the standards set
in step one. They should be able to accurately measure past job performance
and justify any rewards they give their subordinates. All employment decisions,
including promotion and discipline, must be based on legitimate, non-
discriminatory business-related reasons without regard to age, national origin, race,
religion, sex or any other protected category.
2. In addition to learning how to evaluate performance, managers should learn how
to use the performance appraisal form and evaluation procedures. The form should
clearly dene individual measures of job performance, like quantity or quality,
rather than global measures of job performance, such as overall performance. In
addition, performance evaluations should be behaviorally based so that all ratingscan be supported by objective, observable evidence.
3. From a legal standpoint, the manager or supervisor who appraises the employee
should be sure they have substantial daily contact with the subordinate they are
evaluating.
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Avoiding Discrimination Claims When Firing or Downsizing Employees 13
Provide feedback
1. The appraisal of an employees job performance should be part of the normal day-
to-day responsibility of every manager and supervisor as it relates directly to the
managers responsibility for planning and assigning work. Managers need to set
aside time to meet with subordinates on a daily, weekly or monthly basis to discuss
performance and progress and lay out plans for development.2. Since the goal of performance evaluations is to improve future performance, it
is highly recommended that a manager and a subordinate set performance goals
together and then evaluate progress toward those goals. The employee should be
an equal and active partner with the manager throughout the evaluation process.
3. Employees are more inclined to accept suggestions for improvement when they
are provided feedback on a continuing basis. Frequent participatory mini-session
reviews have been shown to help employees maintain focus, lead to greater
employee satisfaction and higher on-the-job performance. It also minimizes the
possibility that an employee will be surprised during the annual appraisal review.
4. Career pathing and counseling should be a part of the performance process andcompensation systems must link performance accomplishments to salary increase
considerations.
5. Be sure your organization provides a mechanism whereby an employee can appeal
their evaluation should they disagree with a supervisor or managers appraisal.
Allowing employees a written response not only identies potential problems, but
serves as a record for any discriminatory actions.
6. Before the evaluation is provided to the employee, have a managers or
supervisors evaluations reviewed by a superior or someone in human resources.
This reduces the chance of supercial or biased reviews and ensures the standards
being used are equivalent with other appraisers.
Managers and supervisors should be aware of the most common performance evaluation
errors so they avoid falling victim to them:
Lack of differentiation when managers rate everyone the same. This may take the
form of leniency with everyone getting high ratings, or severity with everyone getting
low ratings or with everyone geting rated in the middle (central tendency). This lack
of uniform rating standards makes it difcult to decide which employees should be
rewarded, promoted or counseled. Ranking or forced distribution helps to eliminate
this problem.
Recency effect when managers cannot remember the earlier part of the performance
period and, as a result, they weigh the most recent events too heavily. The useof diary entries in electronic databases or entries on 3x5 cards throughout the
performance period helps managers decide what needs to be done to increase employee
effectiveness or build on successes. It also makes the evaluation a review of events the
manager and employee have already discussed, thereby eliminating the possibility of
any surprises at annual review time.
Rater bias when managers allow their personal biases and prejudices to distort
ratings rather than looking at job-related results and behaviors. This can lead to adverse
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14 Thompson Publishing Group
impact on a protected class and expose the company to legal liability. Requiring
documentation or explanations for rating reports helps deal with this problem.
Unclear or shifting performance standards when managers rate each subordinate
by different standards and expectations. A low-performing, but motivated employee
might be rated higher than a top-performing but seemingly indifferent employee.
Including descriptive phrases that dene each trait and what is meant by exceptionalor unsatisfactory helps evaluate subordinates consistently.
Halo effect when a manager rates a subordinate high or low on allperformance
measures based on one of their characteristics. For example, an especially friendly
employee may be rated excellent for all traits rather than for the trait gets along well
with others. Being aware of this problem is a major step toward avoiding it.
Guidelines for Performance Evaluation Meetings
Formal performance reviews provide many opportunities for managers and supervisors
to praise, motivate/coach, correct job performance, provide direction, enhance the likelihood
of achieving the departments/companys goals, and set programs/tasks for the coming
year, such as career development, training and promotion. They are most useful as formaldocumentation to ongoing feedback activities. They must be honest, accurate, fair and
delivered in a timely manner.
To ensure a productive meeting:
Be prepared. Both the manager and the subordinate should carefully analyze the actual
performance against the established objectives. Objectives should have been developed
consistent with the SMART test specic, measurable, achievable, realistic and time-
bound. Determine whether goals have been met. Have the facts and identify observable
behaviors to support both views. Have a copy of the job description available so that it
is possible to modify it during the performance period if/when things change.
Allow adequate time without interruptions and ensure privacy. Doing so reinforces themessage that the process is important.
Establish an atmosphere for cooperative discussion . Stress the importance of two-way
dialog, even if it means disagreement. Both manager and subordinate need to listen to
the others perspective to arrive at a shared understanding of the facts.
Begin by discussing the employees positive accomplishments or successes. It is
helpful to always include some constructive criticism to lay the groundwork should an
employees performance deteriorate in the future.
Focus on results, contribution and observable behaviors. Focus on these when
discussing reasons for shortfalls and avoid speculation on attitude or motivation. Keep
the emphasis positive by identifying what could have been done differently or canbe done differently in the future to improve performance. Performance problems are
easiest to solve when they are expressed in terms of desired behaviors versus actual
behaviors. Employees who get a rating below satisfactory should be placed on a
performance improvement plan (PIP). (See Fig. 823 for discussion pointers.)
Analyze strengths and development needs. Identify the elements that had an impact
on performance. Begin to identify future development needs. Provide supporting
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Avoiding Discrimination Claims When Firing or Downsizing Employees 15
commentary that allows the employee to understand why overall performance was
rated as it was.
Discuss conditions beyond the employees control. Discuss both personal and business-
related issues. Such factors may have had a signicant impact on performance and
should be taken into account. Because a manager may not know all the facts, it is
especially important to have the employees full participation.Discuss the impact of the evaluation . It is important to let employees know how their
evaluations will affect pay increases, promotions, reassignments or other personnel
actions.
Keep in mind the following when preparing your written performance reviews:
Evaluate results, not the person. Beware of confusing personal feelings about an
individual with his or her actual performance. A fair decision is based directly on
actual outcomes. Evaluate both strengths and weaknesses.
Evaluate for the current period only. While past performance is not totally irrelevant
to the discussion, only results for the current performance period should enter into
the rating of each goal. Do not be inuenced by prior ratings or a previous managersdecisions.
Evaluate present performance, not potential. An individual with high potential for
future contribution might be performing modestly at this time. A fair assessment looks
at current results only.
Rate performance, not salary level. A common problem is automatically assigning
higher ratings to those individuals already at the top of their salary ranges. High
salaries based on past performance do not necessarily indicate high performance in the
current performance period.
Look at the big picture. Look at the work as a whole when assigning an overall
rating for the individuals performance. A low rating on one objective should notpreclude a strong overall appraisal if results in other areas warrant it. Also, be sure to
consider the entire performance period, not just the most recent weeks.
Be aware of managerial guilt. If there have been clearly agreed-on expectations and
observable measures of success, there is no need for guilt in assigning an appropriate
rating. If there has been ongoing communication and feedback during the year, ratings
should not surprise the employee.
Always end on a positive note. Even if the employee is experiencing performance
problems, express your interest in working cooperatively together to correct any
deciencies. Be sure future performance standards have been communicated and are
understood by the employee. Investing the time to complete a thorough and honest
evaluation is an important part of the mentoring, coaching and supervision of yoursubordinates.
At the conclusion of your meeting, allow employees to make written comments on the
evaluation form in the employee comment section. If they need additional time to formulate
a response or rebuttal, give them a specic date when the form must be returned (usually
within a week). Make sure the employee understands that by signing the evaluation they are
indicating they have reviewed the form; it does not indicate they are in full agreement with
the review. Make sure the managers signature is on the performance evaluation as well.
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Because a properly conducted performance evaluation contains specic (and sometimes
sensitive) information about the employee, it should only be available to management and
those with a need to know. Remember, evaluations can become documentary evidence in
a lawsuit, so copies should only be kept in the employees ofcial personnel le to which
access is restricted.
Providing Proper Discipline
Discipline is generally administered when an employee falls short of work expectations
or violates company policy and management must act quickly to rectify the situation.
Your employee handbook or policy and procedures manual should outline your companys
discipline policy. It should dene the standards by which employees will be held accountable
and summarize the types of misconduct that will result in discipline, up to and including
termination.
Generally, discipline should be progressive, although there are certain types of
misconduct that are so intolerable they warrant immediate discharge without prior notice
(e.g., embezzlement, battery or harassment of another employee, willful insubordination,
possession or use of illegal substances, or dereliction of duty). Usual progressive disciplinary
actions include oral warnings, written warnings, suspension and termination of employment.
Oral Warning
The major purpose of any disciplinary policy is to correct the problem and prevent
recurrence. Therefore, when a problem or problems arise, managers should not wait, but
should immediately speak with the employee in private and suggest a course of action
to improve the situation. Discussions should be carefully documented and placed in the
employees le.
It is equally important to follow up with the employee to make sure the course of
action has been implemented and progress is being made. Managers should specify theconsequences if the improvements are not made.
Written Warning
If an oral warning fails to rectify the employees performance issues, the manager should
implement and monitor a performance improvement plan. The PIP should dene the problem,
outline the solution (performance goals that must be met for the employee to keep his job),
determine how often the manager and employee will meet to discuss progress, indicate a
timeframe for progress to be made and specify the consequences if the goals and objectives
have not been met. The manager should sign the form before giving it to the employee.
After discussing the PIP with the employee and making sure the employee understandsthe reasons for the disciplinary notice, the employee should be asked to sign and date the PIP,
acknowledging its receipt. Then the notice should be placed in the employees personnel le
and a copy given to the employee.
These meetings should be positive, constructive and supportive. The best approach to
handling conict is collaboration. If an employee cannot do something, the manager should
revisit the goals. The manager should express condence the employee can accomplish the
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plan and let the employee know that he or she is available for support and assistance. (See
Fig. 824-2 for suggested wording for the PIP. See Fig. 823 for tips on discussing the PIP.)
Suspension
Suspension is the most severe form of disciplinary action short of termination. It is
usually given after an employee has already received a written warning and has failed tomake sufcient improvement. Suspension should only be considered after the manager or
supervisor has had time to conduct a thorough investigation.
Before implementing a suspension, the manager should outline the facts leading up to
the suspension, the reasons for the disciplinary action and the duration of the suspension. The
manager must give the employee a chance to respond. The original copy of the notice should
go into the employees personnel le and a copy be given to the employee.
When an employee returns to work after being suspended, the manager should ensure the
employee can get back to his or her job with as little damage to reputation as possible.
If the poor performance continues, the manager should discuss the problem with human
resources and arrange for a follow-up meeting between the employee and the humanresources representative. At this meeting, the employee should receive a written notice of
the action or performance that must be corrected. There should be language in the notice
that states that failure to comply could result in termination. Managers should exercise
care in their written notices so that nothing might be seen as a reference to the employees
psychological or medical condition or as an attack on his or her character.
In dealing with difcult employees, it is always a good idea to have a witness present
(someone from the human resources department or another manager).
Termination
In todays litigious society it is extremely important for companies to establish and followto the lettertheir policies on termination. For many years, managers could re at their own
discretion; however, with the increased number of wrongful termination cases and high jury
awards that can result, companies must exercise caution before deciding to terminate an
employee.
The decision to terminate an employee should not be made solely by the employees rst
line supervisor. At least two levels of management should be involved and in difcult cases,
an employment law attorney should be consulted before the decision is nalized.
Before terminating an employee, you should ask a number of questions:
Have alternatives to discharge been considered ( i.e., last chance agreement, demotion,
option to resign or settlement agreement)?
Is the employee a member of a protected group?
Does the employee have a recognized disability?
Does the employee have a written contract?
Has the company been consistent in employing its rules and standards?
Is there a basis for a retaliation claim?
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IV - Documentation and Recordkeeping
The management of employee records and the protection of condential employee
information is one of the most important jobs the human resources department has. Ensuring
consistent retention and disposal of records is essential to support corporate accountability,
compliance and openness.
There are a number of federal and state laws that require the retention of various types
of employment records. It is up to HR to determine how the records will be created and
organized, where the various types of records should be located and who should have access
to each type of record.
Some of the records will be generated by the human resources ofce. Others should
be generated by supervisors and managers. Employment lawyers are always advising their
clients to document. Every time an employer takes an employment action good, bad or
routine it should be documented.
If you are sued for terminating an employee on the basis of his or her race, or for failing
to promote a worker because of his or her gender or of disciplining an employee because of
his or her national origin, how can you show that your conduct was based on performance,
merit or some other neutral business-related reason? It is the contemporary records, made and
kept in the usual order of business, that will be the best defense for your actions.
Regardless of the particular reasons for any adverse employment action, with the
exception of an employers response to a singular event (breach of security, theft, violence
or other criminal conduct), there should be a record of the employees conduct leading up to
the employers action, whether it is absenteeism, tardiness or poor performance.
There should be records of counseling, warnings, performance evaluations, performance
improvement plans, investigations and suspensions. The records will speak for themselves in
your defense.
Sometimes the consistency of your records with respect to others provides a defense. In
a case involving a claim of discriminatory discipline, for example, the fact that you can show
that others of different races, genders and backgrounds were given the same discipline for the
same misconduct will resolve the claim in your favor.
What to Keep Where
Different documents need to be kept in different les. In general, you should have
personnel les, medical les and strictly condential les.
Personnel les These are the main employment les for each employee. Records in
these should include the following:
basic employment data, such as name, address, employment history and emergency
information;
employee status changes, including job changes, salary changes and personnel action
notices;
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employee selection, including requisition, application, resume, college transcripts,
pre-employment tests, authorization to release information, offer/acceptance letters,
condentiality agreements and new hire checklist;
employee development, such as training courses completed, signicant achievements,
career planning and counseling documents and tuition reimbursement forms;
performance appraisals, commendations, warnings and disciplinary actions; andmiscellaneous data and separation data after the employment relationship ends,
including any requests to inspect les, resignation letters, exit interview records,
termination checklist, unemployment claim records, and reference and other waivers.
Medical les Medical information should be kept in les separate from general
personnel les to guard their condentiality and to help protect you against claims of
disability discrimination. Medical les could include the following documents:
benet plan enrollment forms;
COBRA-related paperwork;
dependent and beneciary information;
family and medical leave-of-absence forms;
doctors notes and certications;
any information that would be considered private health information under the Health
Insurance Portability and Accountability Act (HIPAA) privacy regulations;
HIPAA certication;
self-identication of disability;
medical insurance claim forms; and
benet claims forms.
Condential les Some information about employees, especially bank account and
Social Security numbers that could be used to steal the individuals identity, is so private theaccess to it needs to be strictly controlled. These records include the following:
interview evaluation forms;
pre-employment reference checks;
equal employment opportunity afrmative action data;
background check information;
any information regarding legal actions, including EEO complaints;
documentation on employee performance that is being collected but has not yet been
discussed with the employee;
payroll tax information;direct deposit information; and
requests for employment/payroll verication.
Some HR consultants advise that I-9s, the employment eligibility verication forms and
copies of supporting documents, be kept in a special le so they are available in the event
a government ofcial requests to review them. Workers compensation claims information
can be included in medical les, but these, too, may be needed for various legal reasons,
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V - When All Else Fails: Responding toCharges
If a terminated employee is a member of a protected class and is disciplined, deprived of
a promotion or otherwise suffers an adverse employment action, the employee can sue under
one of the federal discrimination laws. Of course not every plaintiffs case is a winner. Each
case must be examined on its particular facts. However, the prospect of having a jury resolve
a typical dispute between an employee and an employer is not a comfortable thought for
the employer. In any event, the whole process must start with a charge that is led with the
EEOC or a state or local equivalent.
Examining the Charge
As with any writing, the rst thing to do is try to gure out what it says. An EEOC charge
is often a very revealing document. You should determine when the document was led,
whether a continuing violation is claimed, what is being alleged and who is involved.
When Was the Claim Filed?
There are statues of limitation on when claims can be led. In most jurisdictions those
in which there is a state Human Rights Commission or similar agency a charge must be
led within 300 days of the discriminatory events. As a result, events that occurred prior to
300 days before the charge was led are, as the Supreme Court has said, as if they did not
happen at all. The individual has no proper claim for relief that a court or the EEOC can
grant.
Is There a Continuing Violation?
One way to avoid the 300-day limitation is to claim that the acts of discrimination amount
to a continuing violation. There is a box on the charge form for that purpose.
To support a continuing violation claim, the charging party must claim to have been a
victim of conduct that was not recognized as being discriminatory until some galvanizing
event took place. This is most frequently alleged in sexual harassment cases, in which a
continuing series of small slights, comments or actions were only understood as being part of
a discriminatory pattern when a more overt act of discrimination took place.
On the other hand, if something that any reasonable person should have understood
as being discriminatory or harassing took place, that is the date from which the statute of
limitations begins. The Supreme Court has recently emphasized that the mere continuing
effect of a prior discriminatory act does notconstitute a continuing violation.
What Is Alleged?
Every claim has its own requirements and its own defenses. A hiring case demands
different elements of proof than a termination case. An Equal Pay Act claim is on a totally
different track than a failure-to-promote case. A harassment claim has its own unique set of
requirements and defenses, as does a disability claim. Take the time to gure out precisely
what is at issue.
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Who Is Involved?
There are many reasons to ask this question but a few jump most quickly to mind:
Are the claims against co-workers or supervisors?
Is the president of the company involved?
Was the charge led with a state human rights agency?Are individuals liable under your states law?
Are the people named in the charge still employed by your company?
If the named individuals are no longer employed by your company, did they leave on
good terms?
Are any witnesses identied?
The answers to these questions will not only help you investigate the charge, it will help
you assess its seriousness. Obviously, incidents involving executives and supervisors are
more serious, because the conduct of those employees is imputed to the company itself, even
if top management had no knowledge of the events.
If there are known witnesses and they are still employed, an investigation can be donequickly. If some of the involved parties are no longer with the company, they need to be
located and research done about the circumstances under which they left.
Do I Call My Lawyer?
Generally, the answer to that question is yes. The company lawyer should be contacted
as soon as possible after notice of charge is received. The most important reason to call your
lawyer early is to help you analyze and assess the charge itself. Even the most experienced
HR professionals need help understanding what an employers responsibility is concerning
the interactive dialogue in a disability case or when an ailment might not be a disability.
The same is true regarding the standard of proof in an Equal Pay Act case. You may knowthat in a sex harassment case the employee is supposed to complain before ling a charge, but
do you know when that is not required? Your lawyer should.
The company should speak in a single voice from its rst response to the EEOC the
statement of position on. In jurisdictions where EEOC pleadings may be discussed and
introduced at trial, it does not assist the employers position to have more numerous defenses
in the court pleadings than before the EEOC, or worse, an entirely different theory of what
happened. Having all responses come from your lawyer right from the start will solve these
problems.
Involving your lawyer, including in-house counsel, creates the attorney-client privilege of
condentiality. The value of being able to discuss matters relating to the charge in completecondence is difcult to over-value. Theories, thoughts, even hunches should be part of what
you consider when examining allegations, but it is only prudent to reveal those under a veil of
privilege. Moreover, the ability to create drafts of documents, including settlements, that may
not be disclosed because of the attorney work-product privilege is of inestimable value.
The nal reason to notify your attorney early is so he or she can prevent you from making
a mistake that turns a losing claim into a winning one. It will pay in the long run to talk to
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your lawyer even before beginning an internal investigation so the process of discovering
what happened is done properly.
Employer Investigations
The investigation may be the most important part of a companys defense, but an
investigation is no better than the investigators. Not everyone, and not even every HRprofessional, is a good investigator. Consider training your investigators or, in appropriate
circumstances, bring in outsiders, and always under your lawyers guidance.
Elements of Investigations
An investigator must know what to look for and how to look for it. A good investigator
should know the legal elements of the claim and of its defense. Here are some other basics for
an in-house investigator to keep in mind:
1. Dont judge; listen. This is not about you.
2. Take excellent, thorough notes. These will be the employers rst-line of defense.
3. Separate rst-hand accounts from gossip. Conclusions can only be based on what can
be proven.
4. Be skeptical with everyone. Even your closest colleagues can get it wrong, if only
inadvertently.
5. Get it in writing. Any event worth investigating is worth reducing to writing and
getting signed.
6. Do not give rise to a retaliation charge because of the investigation. It is important to
require employees to cooperate with an investigation, but do not threaten or harass
anyone regarding the substance of the testimony.
7. If reaching a conclusion is part of your role, reach one. Many outside investigatorsonly collect and present information. In-house investigators will almost certainly be
asked to make a recommendation regarding discipline, even if everything must wait
for the outcome of the EEOC proceeding.
Assessing Claims
Is this a valid claim? If valid, how strong? If bogus, how credible? Would it be cost-
effective to reach an early settlement? If you defended the claim, what would it cost (1)
through the EEOC process, (2) through summary judgment, and (3) through trial? What other
factors are to be weighed?
When deciding what to do about a discrimination claim, you need to consider youremployees morale and company image. If employees believe the claim is bogus, even a
cheap settlement may cause friction. On the other hand, not many companies want publicity
about claims of race or sex discrimination, even if they are untrue.
Some companies do not wish to be seen as being an easy mark and want to defend
every action. If their policies, practices and training are top notch, that may be the best
approach. If mistakes were made, it might be better to settle early.
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Mediation
Employment discrimination claims almost always create strong responses. It is important
to remember that at this crucial juncture the HR professional must distance him- or herself
from the emotional maelstrom and consider the situation dispassionately in terms of the
companys overall goals.
In every case, a prompt settlement will be less expensive from a purely monetary point ofview, although doing so may be at cross-purposes with other valued principles. If you wish
to explore the possibility of an early settlement, the EEOCs recent emphasis on mediation
should be considered.
In the last ve years, the commission has made mediation the cornerstone of its outreach
program. It has devoted considerable time and expense to the mediation process, in large part
to reduce its unmanageable case load.
The virtues and vices of mediation need not be discussed here. They are no different
in an EEOC context than elsewhere. Further, the process is still overwhelmingly affected
by the style and capability of the mediator. However, there is a particular virtue in the
commissions current position on mediation: the EEOC will agree to just about any settlementreached by the parties and there need be no publicity. That is not usually the case later in the
process.
Responding to Charges
Every employer against which an EEOC charge is led is asked to submit a statement
of position. You should regard this as your rst best chance to win a positive determination
from the agency. In some respects, the statement of position can be considered a rst draft of
your summary judgment motion in court, should you reach that stage.
A good statement of position should do more than simply tell the employers story.
It should do so in a thorough and systematic way. A good statement routinely refers todocumentary evidence and relies on sworn declarations from appropriate witnesses.
The declarations are essential. In todays mobile society, it is more than likely that your
witnesses will have left the company (some in unhappy circumstances) if and when a court
case is led. Taking statements from the key witnesses at or near the time of the events cannot
be over-valued, because the closer to the event, the better the recollections and the more
credible the recounting will be.
For early declarations to be useful one or two years later during a court proceeding, you
must have arrived at your theory of defense early and begun speaking with a single voice.
A good statement of position sets forth the relevant factual background and it places the
facts in the appropriate legal context. This is where consultation with your lawyer may benecessary.
The statement is the appropriate place to challenge the statute of limitations, to assert that
you do not have the required number of employees to be covered by the discrimination law at
issue, to assert that the charging party is an independent contractor not covered by the law, to
dispute the existence of aprima facie case and to question whether the necessary elements of
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Avoiding Discrimination Claims When Firing or Downsizing Employees 27
a claim have been established. To do any of that, you must know what you are dealing with
under the applicable law, which is a daunting job.
The law is constantly changing. This is particularly true with respect to disability,
harassment and retaliation. The law of the circuit in which the event occurred must also be
considered.
For example, many federal appeals courts have adopted the principle that if the same
person hired and red the complainant over a relatively short period of time a year or
two the court will not impute discrimination only at the ring stage. In other words, if
you did not want that person around because of his or her membership in a protected group,
you would not have hired him or her in the rst place. Some circuits have not yet made their
positions clear on the issue.
Depending on the nature of the claim, different legal defenses are available. In a
harassment case, for example, whether or when a complaint was made can be critical. In a
disability case, there are as many defenses as there are claims, all depending on the nature of
the claim. These defenses should be raised early and often.
Request for Information
Responding to a request for information is not the same thing as responding to
interrogatories in a court proceeding. The EEOC is seeking information, not formulaic
responses. In most cases, a position statement will have responded to many of the requests.
The same will be true with respect to the documents the EEOC requests many will be
exhibits to the statement of position.
You should refuse to answer over-broad and irrelevant inquiries. Many questions are
out of a form book and may have only a limited relationship to your case. The commission
will always ask you to identify the names and phone numbers of employees, most of whom
are not similarly situated. Many attorneys advise you to refuse to answer on privacy andrelevancy grounds.
The information the EEOC wants about, for example, terminations in the charging partys
department in the last year, can easily be provided with a list with everything but the names
and personal information of the employees. The charging party should also be able to supply
that information, and the commission should pursue that route before asking it of you.
On-Site Reviews
An investigator has the option of requesting an on-site visit for the purpose of reviewing
documents, examining the premises or, more commonly, to interview employees. Although
the commission has a right to do so, you can inuence the event.
If, for example, the purpose of the on-site visit is for interviews, you can suggest that
they be held at your lawyers ofce or a more convenient company facility. That moves the
investigation out of your workplace and lets the investigator know that your counsel will be
present. If the on-site visit is at your workplace, you can determine the time when it would be
least disruptive or when the most interviewees will be present.
You should take these interviews seriously. The employees should be told of their right
to have counsel present and should be offered the chance to meet with you and/or counsel to
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review the proceeding. Please remember that for many employees, an interview by an EEOC
investigator will be considered fearsome. Do your best to calm them down and keep them
focused on the particulars of the event at hand.
Fact-Finding Conference
Although fact-nding conferences are most commonly limited to cases in which thecharge arises from a discriminatory policy or in age discrimination cases, some investigators
use them in lieu of interviews. Your counsel has a limited role, mainly trying to guide the
investigator.
Nonetheless, these can provide valuable opportunities to educate the investigator and
opposing counsel, should one attend. As a result, your witnesses should be prepared to testify
and to answer questions about the event at issue. In rare instances, the charging party will
learn that some of his or her basic understandings were wrong, and change position as a
result.
Determination Letters
At some point, and it may be after a considerable amount of time, the EEOC will issue a
determination letter. These determinations are all but worthless from a procedural point of
view, as the charging party has the right to sue you regardless of the EEOCs determination.
No Cause/Right to Sue
The commission has a number of options. The most common is to dismiss the charge
without particularized ndings. That is what used to be called no cause letters.
This means that the commission found no cause to believe a violation has occurred.
Sending a determination letter serves as a right to sue notice. The charging party has 90
days from the receipt of the letter to le suit or be barred from doing so.
For Cause
At the other extreme is a for cause determination. This means that the legal unit in the
district ofce has concluded that it is more likely than not that discrimination occurred.
This does notmean the EEOC will be suing you.
Investigation Ended/Time Expired
Another common option is that the commission has not completed its investigation and
is dismissing the charge to be pursued by the charging party. A parallel conclusion is if the
commission has not completed its investigation in the allotted minimum time 180 days
and the charging party has asked for a right to sue letter. In those instances, it is likely that asuit will be led.
Post-Determination Conciliation
In the event of a for cause determination, the EEOC will offer the opportunity for
formal conciliation. Since the emphasis on mediation, conciliation has fallen into greater
disuse. Nevertheless, conciliation offers the employer another chance to bring the matter to a
close before a complaint is led.
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There are a number of hurdles in the conciliation process. Although this is intended to be
a tripartite proceeding, the charging party is rmly in charge. The EEOC will not enter into an
agreement that is unacceptable to the charging party and, on some occasions, the commission
may seek terms harsher than those demanded by the charging party .
Another hurdle is that the EEOC will almost always require injunctive or some other
form of equitable relief, such as training, follow-up reports, a change in policy or a pressrelease. Because the commission rarely pursues garden-variety claims, if you believe that
the charging party may not le suit or would be open to a more favorable settlement were
the EEOC out of the picture, your interests are likely to be better served by waiting than by
entering into conciliation.
Remedies for Discrimination
The typical remedies under Title VII can be summarized as follows:
1. Preliminary and permanent injunctive relief. This can include an order requiring
a change in the employers policies. It also can include an order to reinstate a dis-
charged employee or to promote an employee who was passed over for promotion.2. Back pay plus prejudgment interest. Title VII provides that back pay cannot
accrue from a date more than two years before the ling of a charge (42 U.S.C.
2000e-5(g)).
3. Front pay. When reinstatement is not feasible, a court in its discretion may allow
front pay. While most courts agree that the court should itself determine whether front
pay should be allowed in a particular case, some courts allow the jury to determine
the amount of front pay.
4. Compensatory damages for emotional distress and pain and suffering. There are
statutory limits on this type of award (see 5 below).
5. Punitive damages to punish the employer and deter such conduct in the future.
Compensatory damages and punitive damages cannot exceed the following statutory
limits:
$50,000 for employers with at least 15, but fewer than 101 employees;
$100,000 for employers with at least 101 but fewer than 201 employees;
$200,000 for employers with at least 201 but fewer than 501 employees; and
$300,000 for employers with 501 employees or more.
6. Attorneys fees.
7. Costs of litigation.
Remember, the caps on damages apply only to Title VII suits, not those brought under
the ADEA, ADA or other federal law. State laws generally do not have caps on damages, so
employment discrimination plaintiffs nearly always sue under both federal and state law.
Punitive Damages
The U.S. Supreme Court addressed the circumstances under which punitive damages
may be awarded in an action under Title VII. The decision inKolstad v. American Dental
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Association (527 U.S. 526 (1999)) expanded the circumstances under which punitive
damages can be granted by removing the requirement, adopted by a number of federal circuit
courts, that an applicant or employee must prove egregious conduct by the employer to
warrant an award of punitive damages.
The Court also claried and limited the circumstances under which an employer may be
vicariously liable for punitive damages through the intentional acts of its managerial agents.
Entitlement to punitive damages was established in 1991 with the passage of 42 U.S.C.
1981a. That law provided for an award of compensatory damages in cases of intentional
discrimination (1981a(a)(1)). It also provided for an award of punitive damages if a plaintiff
proves that an employer engaged in a discriminatory practice or practices with malice
or with reckless indifference to the federally protected rights of an aggrieved individual
(1981a(b)(1)).
There is no requirement that a plaintiff demonstrate egregious conduct on the part of the
employer, the Court held. Rather, the terms malice and reckless indifference as used in
1981a(b) require a plaintiff to establish the employers knowledge that it may have been
violating federal law, not its knowledge that it actually was discriminating.
For an employer to have vicarious liability for discrimination (being liable even though it
did not know the activity was taking place) and thus be liable for punitive damages, the Court
said the following circumstances need to be shown:
1. The employer authorized the doing and the manner of the act;
2. The agent was unt and the employer was reckless in employing him or her;
3. The agent was employed in a managerial capacity and was acting within the scope of
employment; or
4. The employer ratied or approved of the act.
Sometimes an employer can do everything correctly and still be charged with
discrimination. Regardless of the validity of the claim, it is prudent to know what to expect
and to plan, just in case. Doing the right thing after notication of a claim is received can
mean the difference between winning and losing, and that will really affect your bottom line.