On June 22, 1999, the U.S. Supreme Court handed down four important employment discrimination decisions. In three of the cases, the Court concluded that the Americans with Disabilities Act (ADA) generally does not protect people with impairments which can be easily corrected. We analyzed the three ADA cases in our July 1999 newsletter.
In the fourth case, Kolstad v. American Dental Association (the Association), the Court held that punitive damages can be awarded under Title VII of the Civil Rights Act of 1964 if the employer acted "with malice or with reckless indifference" to an employee's federally protected rights, even if the employee cannot show "egregious" or outrageous misconduct by the employer. In another part of its ruling, which has more practical implications for employers, the Court ruled that when an employer has made "good faith efforts" to comply with Title VII, it cannot be required to pay punitive damages for the discriminatory actions of managers who violate its policies
Facts and Procedural Background.
Kolstad sued her employer, the Association, for sex discrimination after a male candidate was promoted over her to a vacant position. Kolstad asserted that the selection process was a "sham," and that the male candidate was chosen before the formal selection process even started. She also testified that the manager making the promotion decision told sexually offensive jokes and referred to prominent professional women in derogatory terms.
Kolstad won at trial and the jury awarded her $53,000 in back pay. However, because she had not offered evidence that the Association had engaged in egregious misconduct, the trial judge refused to instruct the jury on awarding punitive damages. On appeal, the Court of Appeals for the District of Columbia affirmed.
While some federal courts had adopted the same egregious and outrageous standard, others adopted a more favorable standard for employees, requiring only a finding of intentional discrimination to support a punitive damages award. The Supreme Court agreed to hear Kolstad's appeal to resolve the conflict.
Defining Malice or Reckless Indifference.
In its ruling, the Supreme Court examined the Civil Rights Act of 1991, which provides that an individual may recover punitive damages if he or she demonstrates that the employer engaged in discriminatory conduct "with malice or reckless indifference to the federally protected rights" of the employee.
The Supreme Court concluded that, to recover punitive damages, an employee must show more than intentional discrimination, but not necessarily egregious conduct. The Court decided that a showing that the employer knew that it might be acting in violation of federal law would be enough to establish the "malice or reckless indifference" the Act requires. The Court sent the case back to the trial court to determine if Kolstad could show that the Association knew that it might be violating Title VII when it denied her the promotion.
The Good Faith Defense.
More importantly for employers, the Supreme Court also held that employers cannot be held automatically liable for the actions of managers that are "contrary to the employer's good faith efforts to comply with Title VII." If an employer can demonstrate good faith compliance efforts, such as implementing polices prohibiting discrimination and training personnel on the requirements of discrimination laws, the employer cannot be acting in reckless disregard of federally protected rights of employees, regardless of an individual manager's conduct.
Just as the Supreme Court's 1998 sexual harassment decisions suggested that employers may avoid liability in some cases by adopting policies and programs to prevent and correct sexual harassment, Kolstad encourages employers to expand their prior efforts to cover all forms of unlawful discrimination.
Recommendations for Employers.
In light of Kolstad, we continue to recommend that employers implement measures to establish good faith compliance with discrimination laws and protect against punitive damages awards. We suggest that employers:
- Adopt and enforce policies prohibiting all forms of employment discrimination;
- Use distribution methods calculated to make sure all employees receive copies or are made aware of the policies;
- Train and retrain managers and supervisors to ensure that they understand the importance of the policies;
- Include complaint procedures in the policies that allow employees to report violations to someone outside their direct chains of command; and
- Impose prompt discipline on supervisors or employees who disregard policies.