EMPLOYER RETALIATION

Bad news for employers: It's now easier to prove retaliatory discharge

The Eighth U.S. Circuit Court of Appeals (which includes Missouri) recently ruled that an employee who sues for retaliatory discharge under Missouri law need only show that unlawful retaliation was a "contributing" factor in the employment decision, not the "determining" factor. This standard is easier for employees to meet than the "determining factor" or "substantial factor" standard applied under federal employment discrimination laws such as Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act. Read on to learn how an employee can prevail even when there are several reasons for her discharge and discrimination is only a minor one.

Facts

In May 2001, Terri Wallace began working for DTG Operations, Inc., as a station manager at its Kansas City International Airport Dollar Rent a Car station. On April 9, 2002, she e-mailed her supervisor's boss about alleged inappropriate sexual comments and conduct by her direct supervisor. Her complaints cited four alleged incidents.

In the first incident, Wallace's supervisor called her and other employees into his office and used a speaker phone to dial a number that played a recorded sexual message. In the second incident, the supervisor called Wallace and others into his office to view pornographic computer images of the cartoon character "Popeye." In the last two incidents, he allegedly made statements to Wallace about "the size of her butt."

The company's sexual harassment policy stated that an employee could complain to the supervisor of the alleged harasser if she wasn't comfortable complaining directly to the alleged harasser or her own supervisor. Wallace complained to her supervisor's boss, who was unhappy that she didn't complain directly to her supervisor. He later testified that he liked to joke around with employees to "liven up the workplace" and that her complaint about her supervisor would "muzzle" interaction that should happen freely and openly.

Fifteen days after Wallace lodged her complaint, the manager to whom she complained discharged her. In the termination meeting, Wallace was told that she was being terminated because there were too many station managers at her location, there had been a downturn in business following the events of 9/11, and she was the least senior manager. She asked to be transferred to another location, but management refused, citing a company policy prohibiting transfers if the employee had received discipline in the preceding year.

Wallace filed a lawsuit against DTG claiming retaliatory discharge for complaining about sexual harassment under the Missouri Human Rights Act (MHRA). The case was tried before a jury in the U.S. District Court for the Western District of Missouri. The trial judge instructed the jury that Wallace could prevail if she proved that her sexual harassment complaint was a "contributing factor" in her discharge. After trial, the jury returned a verdict in Wallace's favor and awarded her $10,000 in lost wages, $20,000 in compensatory damages, and $500,000 in punitive damages.

DTG appealed, arguing that the trial court applied the wrong standard for determining whether Wallace's discharge qualified as unlawful retaliation. The company contended that the trial court should have applied the stricter federal standard, which requires that unlawful retaliation be the "determining factor" in the employment decision. Wallace argued that the trial court correctly applied the more lenient "contributing factor" standard used by Missouri courts in other types of discrimination cases.

Eighth Circuit's decision on causation

The Eighth Circuit began its opinion by reviewing the evidence supporting Wallace's retaliatory discharge claim, noting that DTG had provided "shifting explanations" for her termination. At trial, the company stated that poor performance was an issue. However, it initially stated that Wallace was being discharged because the location where she worked was overstaffed and the company had suffered a downturn in business and reduction in revenue following the events of 9/11.

The court noted that the manager involved in the decision to terminate Wallace had expressed anger about her mode of reporting the alleged sexual harassment, even though she followed the recommended reporting method under company policy. The court also noted that the company did not apply its policy regarding transfers consistently when it denied Wallace's request for a transfer in the termination meeting. Finally, the court stated that the timing of the termination decision ― 15 days after her sexual harassment complaint ― served as evidence of retaliation in light of the other evidence supporting retaliatory motive.

At the time of the trial, no Missouri court had conclusively answered the question of whether the "determining factor" or the lesser "contributing factor" standard governs a retaliation claim under the MHRA. However, after the trial, the Missouri Supreme Court ruled in Hill v. Ford Motor Co. that the employee need only show that unlawful retaliation was a contributing factor (as opposed to a determining or substantial factor) in the employment decision to prevail. Accordingly, the Eighth Circuit held that the trial court had correctly applied the "contributing factor" standard to Wallace's retaliation claim and found that there was sufficient evidence to support the jury's verdict in her favor.

Applying this lower standard of causation is important because Wallace admitted during the lawsuit that there was overstaffing at her location and that the company had suffered a downturn in business. If the stricter federal standard had been applied and she had been required to show that unlawful retaliation was the determining factor in her discharge, she may not have prevailed.

At least punitive damages were reduced

The only good news is that the Eighth Circuit did reduce the punitive damages award from $500,000 to $120,000, finding that the amount was excessive in light of the amount of compensatory damages awarded. Given the nature of Wallace's claims, the court stated that the most important factors to consider in determining whether punitive damages are excessive are the degree of reprehensibility of the employer's conduct and the ratio of punitive damages to the actual harm inflicted on the employee. The court found that a four-to-one ratio of punitive damages to actual damages was appropriate and, accordingly, made a major reduction in the amount of the punitive damages. Wallace v. DTG Operations, Inc. (8th Cir., April 17, 2009) (Case No. 08-1474).

Lessons learned

There are several lessons to take away from this decision, each of which can help in preventing a sexual harassment or retaliation claim:

• Having a sexual harassment policy does you no good if you don't properly train supervisors and managers and then enforce your policy.
• Promptly investigate and correct complaints of sexual harassment.
• Never express unhappiness because the employee didn't complain directly to the person alleged to have engaged in discrimination or harassment.
• If possible, avoid terminating an employee shortly after she complains of discrimination or harassment.
• Make sure you investigate claims of discrimination and harassment carefully, and always give the true reason for the discharge. Providing shifting reasons for the termination is a formula for disaster.