• Prevent Punitive Damages -- Provide Management Training
  • September 11, 2009 | Author: Robert E. Gregg
  • Law Firm: Boardman Law Firm LLP - Madison Office
  • A company was found liable for an extra $50,000 in punitive damages for failing to train its managers about discrimination. In Mathis v. Phillips Chevrolet, Inc. (7th Cir., 2001), the court stated, "Leaving managers with hiring authority in ignorance of the basic features of the discrimination laws is an extraordinary mistake for a company to make, and a jury can find that such an extraordinary mistake amounts to reckless indifference." That "reckless indifference" warrants awards of extra money as punitive damages.

    The $50,000 was not the whole award. In a discrimination case, the losing employer first pays the "compensatory damages": back pay, front pay, lost benefits, etc. Then the employer pays the legal fees of the winning plaintiff. These two payments often amount to hundreds of thousands of dollars. The "punitive damages" are just extra icing on the cake. So, the overall impact of management unawareness and neglect of the basic employment laws can be huge.

    The City of Opa-Locka, Florida suffered an even greater hit. A jury awarded $1.5 million plus $500,000 of additional damages to a former employee for the municipality's complete indifference. The city had no policy and no training on discrimination. Griffin v. City of Opa- Locka, et al. (11th Cir., 2001).

    In EEOC v. Board of Regents of the University of Wisconsin (7th Cir., 2002), a jury found age discrimination in a layoff. One important factor was that the directors and two deans involved had "heard about" the discrimination laws but had received no training in employment law, and had little knowledge of the laws. In Hill v. The Children's Village, (S.D. NY, 2002), the employer had a harassment policy, but gave no training to its managers. The court held that management had been given insufficient knowledge "to even recognize sexual harassment when they saw it."

    Negligence Has Become Intent

    Punitive damages generally require intentional discrimination. The law does not require an organization to have a harassment and discrimination policy and give training. Hall v. Bodine Electric Co., 276 F.3d 345 (7th Cir., 2002). Lack of a policy simply deprives the employer of the Faragher defense (requiring the employee to first use an internal process to address concerns). Faragher v. City of Boca Raton, 524 U.S. 775 (1998). So when a busy business neglects the policy or information process, the act of omission eliminates a defense but there was no indication it was to trigger an extra level of liability. Now the courts are expanding these acts of neglect into a finding of seemingly intentional omission.

    In the sexual harassment case of Anderson v. G.D.C., Inc., 281 F.3d 452 (4th Cir., 2002), the court reversed a summary judgment and allowed the plaintiff to pursue punitive damages, stating that the company "never adopted any anti-discrimination policy, nor did it provide any training whatsoever on the subject of discrimination. . . . A rational jury could conclude that G.D.C. did not engage in good faith efforts to comply with Title VII." Another employer lost $25,000 for "malice and reckless indifference" when it had both ineffective employment policies and failure to properly instruct supervisors on employment practices. Miller v. Kenworth of Dothan (11th Cir., 2002).


    The action of each supervisor can have a major impact on the bottom line. An ignorant supervisor can cost hundreds of thousands of dollars. That's a lot of sales down the drain. A knowledgeable, aware supervisor can save those dollars, resulting in profits.

    An organization which neglects supervisory training is asking for trouble. The first step for the employer is to have effective policies, including anti-harassment and "respectful workplace" policies. However, that is not enough. Phillips Chevrolet had a written EEO policy, but it seemed to be just a piece of paper to which managers were not trained to pay attention. The key to avoiding liability is the training.

    What is the Minimum Training?

    Mathis v. Phillips Chevrolet was an age discrimination in hiring case. Griffin v. City of Opa- Locka was a harassing environment case. EEOC v. Board of Regents of the University of Wisconsin was a termination case. The major liability issues for most employers occur in (1) the hiring process, (2) workplace environment and (3) discipline and discharge. The laws and employment damages of each of these areas are different. Therefore, supervisors should receive separate Basic Training on each of these three critical facets of employment.

    Hiring. Anyone who has any role in reviewing applications, interviewing candidates, or making hiring decisions should receive at least basic information on the "do's and don't's" of what can and cannot be asked or considered, and on the concept of "validity," which is required by the Americans With Disabilities Act and often plays a role in other hiring cases as well. A one-half day Basic Training course could cover the fundamentals for most managers. Those with greater responsibility for the overall hiring process should receive additional training.

    Environment. Hostile work environments generate cases for harassment and "unsafe place." Everyone "in charge," including lead workers or team leaders, should understand how to recognize and correct discriminatory, hostile, intimidating behaviors, and what to do if an employee, customer or any other person reports concerns. These are areas in which employees can be personally liable to pay damages, as well as the organization. So, all employees, not just supervisors, may benefit from this training.

    Again, a one-half day Basic Training course should provide the necessary information. More extensive information should be provided to those who are responsible for the investigation of complaints.

    Discipline and Discharge. Lack of documentation, subjective and unfair standards, and "nonvalidity" are the chief causes of liability in discharge cases. A major goal of training is to show managers how to recognize and properly approach performance and behavior issues early, before they escalate to discharge and while they can still be solved. The improper approach and "stupid" statements made by frustrated managers are key factors in jury decisions. A half-day Basic Training can provide the minimal fundamental foundation to avoid the pitfalls. Again, top managers who make the final discharge decisions need more training in order to provide the overall guidance and be the "final check" for supervisors' actions.

    The Prescription

    The prescription is for at least a day-and-a-half of Basic Training for all supervisors. This can be in three separate half-day increments. Those in charge of the overall process need additional training, especially in the areas of monitoring the hiring process, investigating complaints and the complexities of legal compliance. Management training usually shows quick results in problems solved, litigation avoided and enhanced performance.

    Unfortunately, many organizations are not willing to invest this small amount of time and money because it cuts into the budget's "bottom line" and takes staff away from their "more important" duties.

    This is a shortsighted view of the "bottom line." For years, the auto service industry has advertised the concept of "pay us now or pay us later," selling the message that preventive maintenance is cheaper than major repairs. An organization which believes it is "saving" money by short changing on a day-and-a-half of Basic Training will later reap months and months of lost management time, and hundreds of thousands of dollars in the resulting litigation. It will discover the true "bottom line."

    Knowledgeable managers enhance the bottom line through efficiency. Just as one would not entrust car repairs to an untrained technician, or bridge design to an engineer who never studied bridges, an organization should not entrust its most important asset, people, to uninformed managers.