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Punitive Damages in Civil Rights Actions

State of mind, not egregious conduct, is determinative. In Kolstad v. American Dental Ass'n, 119 S. Ct. 2118 (1999), the Supreme Court defined the standards for punitive damages under the Civil Rights Act of 1991, which amended the law to allow for punitive damage awards in intentional discrimination cases under Title VII and the ADA. A complaining party may recover punitive damages if the defendant "engaged in a discriminatory practice or discriminatory practices with malice or with reckless indifference to the federally protected rights of an aggrieved individual." 42 U.S.C. § 1981a.

The Court unanimously rejected the notion that punitive damages are only available for "egregious" discrimination, as compared to "garden variety" discrimination. The terms "malice" and "reckless" refer to the actor's state of mind and its knowledge that it may be acting in violation of federal law. Egregious acts may, of course, be evidence supporting an inference of the requisite "evil motive;" they are not, in themselves, necessary to support an award of punitive damages. The Court mentioned a few safe harbors when the standard will not be met, however, where the employer is:

  • unaware of the relevant federal prohibition;
  • acts with the distinct belief that its discrimination is lawful, e.g., plaintiff's theory is novel or poorly recognized;
  • reasonably believes that its discrimination satisfies a bona fide occupational qualification defense; or
  • reasonably believes there is a statutory exception to liability.

Vicarious liability. Although the first part of the Kolstad opinion makes awards of punitive damages more likely than before, the Court went on, in a five-to-four decision, to hold that an employer may avoid liability for punitive damages for the discriminatory behavior of an agent under certain circumstances. The Court created unresolved issues about whether the acts of lower-level supervisors, as compared to those of "important" managers, will lead to punitive damages against the employer. Moreover, the Court explicitly modified common law rules to hold that "an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where these decisions were contrary to the employer's 'good-faith efforts to comply with Title VII.'"

As in Faragher, the Court remarked that the goal of the statute is prophylactic - employers should be encouraged to prevent discrimination. It would not serve the goal if, when an employer trains its supervisors to avoid discrimination, the employer is nonetheless liable for their acts that disregard that training. Therefore, to avoid punitive damages for the acts of a manager, employers will need to train and implement policies against discrimination very much in the same way they are doing with respect to harassment as a result of the Faragher opinion last year. Employers should

  • adopt policies that discrimination will not be tolerated
  • provide a complaint procedure
  • train supervisors to avoid discrimination (anyone who has responsibilities for tangible employment actions or directing work activities should be trained)
  • keep an acknowledgment in supervisors' files that they have received training, and
  • monitor and evaluate supervisors' performance regarding their compliance with EEO laws.
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