David J. Middlebrooks, Albert L. Vreeland, II, Editors
Lehr Middlebrooks & Vreeland, P.C.

Vol. 18, No. 9
February 2008

RACE DISCRIMINATION

Racial slurs cost half a mil

It doesn't take a fancy law degree to know that you're in deep when a judge opens his review of your case with a comment like: "Despite considerable racial progress, racism persists as an evil to be remedied in our [n]ation." For Birmingham's Bagby Elevator Company, it all went south from there. The case recounts multiple uses of the "n" word by employees, supervisors, and even the company president, as well as references to black employees as "slaves" and "monkeys." By the end of the story, Bagby was more than half a million bucks lighter in the wallet.

A career of ups and downs

Greg Goldsmith worked for Bagby Elevator in its shop. By all accounts, he was very good at what he did and was given assignments of increasing responsibility, including special projects for the company's president. His future with Bagby seemed promising, but he would soon find himself the target of racial slurs and unemployed.

On paper, Bagby Elevator wasn't some anachronistic vestige of the old South. The company had all the right policies in place, prohibiting discrimination and harassment and requiring that violations be reported. The harassment policy provided multiple avenues for employees to report problems and declared that all claims would be thoroughly investigated and that disciplinary action would be taken.

So what went wrong? As the court saw it, the policy may have said all the right things, but its "effectiveness was dubious." The company's president testified that he wasn't "that good on the policy" and admitted that he didn't know how he would discipline a supervisor for using racial slurs. Bagby didn't provide any training on discrimination in the workplace. And although one employee was warned that if he used a racial slur again he would be terminated, when he did, he was reprimanded but not fired.

Goldsmith's supervisor, Ron Farley, used racial slurs at work, including the euphemistically dubbed "n" word. When Goldsmith complained to the company's vice president, he was told, "That's just the way Ron is. You are just going to have to accept it."

The slurs continued after his complaint, including a comment by Farley ― an amateur grammarian ― that "Them niggers are crazy. Them some of the dumbest niggers I ever seen in my life." Goldsmith didn't bother reporting that comment because the vice president had already told him he would have to accept it. Other employees behaved with a commensurate level of racial sensitivity, referring to black workers as "monkeys," introducing a black coworker as a "slave," vowing to have sex with a "black lady before they die," and waxing nostalgic: "I really never liked black folks no how."

When Goldsmith applied for a promotion to a higher-paying field position, he was told, "They don't mix the front and the back." The majority of the shop employees were black, and all of the employees in the field were white. After he was denied the promotion, he filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC).

Mandatory arbitration makes things worse, not better

To thicken the plot, while Goldsmith's EEOC charge was pending, Bagby implemented a mandatory dispute resolution procedure that required employees to arbitrate any claims against the company. The decision to implement the new procedure came just 16 days after the court of appeals decided a case that allowed an employer to require its employees to sign a similar dispute resolution procedure and to fire those who would not (see "Nothing illegal about mandatory arbitration" in our June 2002 issue).

The catch, however, was that Bagby's procedure applied to all "past, present and future" claims, including Goldsmith's pending EEOC charge. Goldsmith offered to sign the agreement if it excluded his pending charge, but Bagby refused and insisted that he sign it as written or be terminated. A white coworker initially refused to sign as well, but his supervisor encouraged him, and he later signed it. Goldsmith received no encouragement, only an ultimatum. In the end, he refused to sign the agreement and was fired. He then filed a second discrimination charge, this time claiming race discrimination and retaliation.

After a Birmingham jury whacked Bagby with a verdict in excess of half a million dollars, the Eleventh U.S. Circuit Court of Appeals (which covers Alabama) took a look at the case. Although Bagby had the right to implement a mandatory arbitration procedure, the court said it couldn't require Goldsmith to give up his rights in his pending discrimination charge. It also noted that a white employee who initially refused to sign the agreement had been encouraged to reconsider, while Goldsmith had not.

The court concluded that it was appropriate for the jury to hear "me too" evidence ― testimony from other employees about racial slurs they had heard ― even though Goldsmith wasn't present when the comments were made. (This is an important issue that will be decided by the U.S. Supreme Court this year.)

It also agreed that it was appropriate for the jury to hear that the company president had used the "n" word at his country club. Finally, the court held that half a million dollars in punitive damages wasn't too much for the conduct exhibited. (We think it could've been a lot worse in light of the number and nature of the comments made.) Goldsmith v. Bagby Elevator Co., Inc. (11th Cir., 2008).

Learning from the mistakes of others

The obvious point of this case is that an antidiscrimination policy is only as good as its enforcement. Here are a few other points worth noting:

• Neither federal nor Alabama law requires that you conduct sexual harassment training, but courts and juries expect it as a sign of commitment to your antidiscrimination and antiharassment policies. As we saw in this case, mere words on paper won't cut it.
• Commitment to equal employment opportunity and antiharassment policies is measured from the top down. If a jury doesn't see buy-in from corporate leaders, they will view the entire organization as suspect.
• As we've discussed at length before, arbitration provisions aren't a cure-all for your employment woes. They carry serious implications for workforce morale as well as how you manage employment problems. Consider any potential arbitration policies carefully before adopting them.

Copyright 2008 M. Lee Smith Publishers LLC

The Alabama State Bar requires the following disclosure: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers."