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Failure to implement policy may prove costly, even in absence of specific complaint

July 22nd, 2014  |  Kathy Kapusta

A recent decision by a federal district court in Indiana should serve as a reminder to employers that just having an anti-discrimination policy isn’t enough. As a dry cleaning company in that state discovered, the failure to properly implement the policy and train all employees in federal anti-discrimination laws, or in its anti-discrimination policy, can subject the employer to the possibility of punitive damages.

In this case, an African-American presser for a dry cleaning company agreed to perform assistant manager duties without an official promotion or pay raise; he was even allowed to run the store by himself while the store manager was away for two weeks. Though he was purportedly told that he had to wait for a raise until the company was out of bankruptcy, it hired two new employees to cover his pressing duties.

Not “the face for this store.” After another worker was transferred to the store several months later to fill the assistant manager position, the employee went back to pressing full time; he never received a raise for his work as assistant manager; nor did he complain. When he asked the store manager about his demotion, she told him that the regional manager did not believe that he was “the face for this store.” Asked to explain what that meant, she responded, “What do you think I mean by face for this store? Your skin color is not right for this store, for this community.”

The employee then filed a charge with the EEOC. Shortly thereafter, he was offered the position and told that he would be paid for the time he performed assistant manager duties in the prior months. The EEOC then brought suit on his behalf, contending that he was denied a promotion because of his race in violation of Title VII. The employer moved for summary judgment on the punitive damages claim. Observing that Title VII allows an award of punitive damages when a plaintiff “demonstrates that the defendant engaged in intentional discrimination with malice or with reckless indifference to the federally protected rights of an aggrieved individual,” the court denied the employer’s motion.

Knowledge that action may have violated law. Of particular importance to employers, the court first found that there was evidence that the employer acted with knowledge that its actions may have violated Title VII. It was undisputed that the regional manager was a managerial agent acting within the scope of his employment. In addition, there was evidence that he was familiar with Title VII as well as his employer’s policies. Specifically, he attended employment discrimination training and claimed to be “well grounded” in such laws, as well as his employer’s discrimination policy. He also attended “almost all” of the orientation programs for new employees. In this situation, the court noted, the employee was not required to make a formal complaint against the regional manager because only the manager’s awareness that he was acting in violation of federal law, not his awareness that he was engaging in discrimination, was relevant.

No good-faith effort to implement policy. There was also evidence that the employer did not engage in good-faith efforts to implement its anti-discrimination policy. It was undisputed that it had a policy, which was contained in its handbook. Moreover, the employee signed an acknowledgement of receipt of that handbook. What was lacking was evidence that the employer actually enforced its policy. Although the regional manager indicated that there was a “comprehensive orientation program” that covered “all types of discrimination,” the district manager, store manager, and employee all denied having received any race discrimination training. The district manager indicated he had “probably received” some materials, but he could not recall them specifically. He was also unfamiliar with Title VII.  

Without evidence of employee training in federal anti-discrimination laws or in the employer’s anti-discrimination policy, the court here observed, courts are reluctant to grant summary judgment precluding the issue of punitive damages from reaching the jury. In this case, three employees (two managers) testified that they did not receive such training. Moreover, the fact that the store manager did not take appropriate measures to address the regional manager’s “face” comment indicated that she did not understand race discrimination laws or her role in ensuring that the employer was in compliance with anti-discrimination laws.

No complaint mechanism. Nor was there evidence that the employer had a complaint mechanism in place. Although the regional manager stated that he had an “open door policy,” the employee was not aware of the policy or the fact that the regional manager was involved in the promotion process. Nor did anyone tell the employee he could talk directly to the regional manager. Further, the EEO clause in the handbook did not contain a complaint mechanism for employees complaining of race discrimination; instead, it referred to anyone who felt they had been “harassed.” And although the employee testified that Title VII notices were posted in the bathroom, there was no indication that those notices outlined a complaint mechanism.

Finally, the court acknowledged the employee did not “specifically complain” that “he felt discriminated against on the basis of his race” when he was not promoted and thus, the employer did not have an opportunity to remedy the situation prior to the EEOC charge. However, the court noted, although the employer took action after the EEOC charge, the court could only consider the employer’s efforts before the charge was filed. The “only undisputed fact in the record” was that a policy existed, which the court noted “had been repeatedly held to be insufficient to establish a good faith effort to comply with Title VII.”

Take away for employers. While it is important to have an anti-discrimination policy, the implementation of a written or formal policy is not sufficient in and of itself to insulate an employer from a punitive damages award. As the court here pointed out, employers otherwise would have an incentive to adopt formal policies in order to escape liability for punitive damages but they would have no incentive to enforce those policies. Here, the employer failed to show that it provided sufficient training to its employees regarding its policies or anti-discrimination law or a mechanism to enable employees to make complaints.

While sexual harassment and/or anti-discrimination training, either for employees or for supervisors, is not mandated by federal law, it may be mandated by state law. As this case emphasizes, training about workplace discrimination and harassment and other inappropriate behavior is beneficial in several ways. It can help to:

  • Prevent liability for supervisor discrimination or harassment. Training can assist an employer’s ability to prove both that it acted reasonably by teaching supervisors and employees workplace harassment and discrimination prevention and by showing that the employee acted unreasonably because he or she was educated on discrimination and harassment and the organization’s complaint procedure, but failed to utilize it. 
  • Prevent liability for coworker and non-employee conduct. Employees must learn that they have a duty to report harassment or discrimination themselves, so that the employer is given the opportunity to promptly correct the situation and, therefore, avoid liability. Additionally, supervisors must be taught to recognize and address workplace such conduct so that “known” discrimination or harassment does not go uncorrected.
  • Prevent liability for punitive damages. Documented training efforts can demonstrate an employer’s strong commitment to a non-discriminatory work environment.