Workplace training has long been recognized as effective in helping to reduce legal costs, raise awareness of employment law requirements, and facilitate improved employee performance and morale. As courts continue to emphasize, workplace training may pay even greater additional dividends - in the form of reducing or eliminating punitive damage awards against employers in discrimination claims.
Nowhere is workplace training more obviously necessary than in matters of harassment and discrimination. In fact, a review of federal court decisions demonstrates that, when properly prepared and presented, such training can significantly reduce an employer's punitive damages exposure.
Five years ago, the U.S. Supreme Court woke employers up to the potential cash value of a strong supervisory training program. In Kolstad v. American Dental Association, 119 S. Ct. 218 (1999), the plaintiff claimed that the American Dental Association's failure to promote her was the result of sex discrimination and that she was entitled to punitive damages. The Court held that while an employer's conduct need not be "egregious independent of the required state of mind" in order for punitive damages to be awarded in a discrimination case, evidence of such conduct can be used to meet the plaintiff's burden of proof as to the malice or reckless indifference which must be demonstrated in order for punitive damages to be awarded. The Court also found that "in the punitive damages context, an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where these decisions are contrary to the employer's good faith efforts to comply with Title VII."
What would such "good faith efforts" typically entail? Although the Court did not examine whether the American Dental Association "had been making good faith efforts to enforce an anti-discrimination policy," the Court stated that the purposes underlying Title VII are "advanced where employers are encouraged to adopt antidiscrimination policies and to educate their personnel on Title VII's prohibitions."Id. The Court did not elaborate on what specific "education" might be required. Given its discussion of the "prophylactic" purposes of Title VII, however, the Court appeared to be supporting its earlier decision in Farragher v. City of Boca Raton, 524 U.S. 775 (1998), which held that an employer has an affirmative defense to a sexual harassment claim when it has provided, and the complaining employee has unreasonably refused to take advantage of, mechanisms to bring harassment complaints to the attention of management. Once again, the Court seemed determined to give employers an incentive to educate employees in general (and supervisors in particular), and to give would-be plaintiffs an incentive to take advantage of those educational efforts by addressing such matters through internal complaint procedures.
Kolstad does not provide specific guidance regarding the precise value of preventive measures in the context of punitive damages, or about the specific type of training that could bar a punitive award. Cases decided since Kolstad also do not provide a precise formula for the amount or type of training which would be sufficient to hold the employer harmless for punitive damages. Nevertheless, those cases do suggest that simple dissemination of an anti-harassment policy may not be enough to provide a "good faith defense" to punitive damages.
Cases applying Kolstad have been, and will continue to be, very fact-specific. At a minimum, however, it appears that courts will be willing to examine both the employer's underlying conduct (including training efforts) and its response to an internalcomplaint in determining whether the company may be liable for punitive damages. For example, in EEOC v. Wal-Mart Stores, Inc., 1999 U.S. App. LEXIS 20015 (10th Cir. Aug. 23, 1999) (an ADA case), the appellate court affirmed the imposition of punitive damages in light of the Kolstad standard. The court held that Wal-Mart's failure to properly train and educate its employees in its anti-discrimination policies warranted punitive damages.Importantly, the court criticized the lack of ADA training for Wal-Mart's supervisors and noted that, while Wal-Mart had a written anti-discrimination policy, "that alone is not enough." Specifically, the court observed:
"[T]he extent to which an employer has adopted antidiscrimination policies and educated its employees about the requirements of the ADA is important in deciding whether it is insulated from vicarious punitive liability.Wal-Mart certainly has a written policy against discrimination, but that alone is not enough . . .The evidence demonstrates a broad failure on the part of Wal-Mart to educate its employees, especially its supervisors, on the requirements of the ADA, and to prevent discrimination in the workplace."
Similarly, in Deffenbaugh-Williams v. Wal-Mart Stores, 188 F.3d 278 (5th Cir. 1999), the appellate court rejected Wal-Mart's "good faith" defense because it was based primarily on testimony to the effect that Wal-Mart "encourages employees to contact higher management with grievances.""Plainly such evidence does not suffice to establish, as a matter of law, Wal-Mart's good faith in requiring its management to obey Title VII." Id. at 286.In short, the evidence "left the jury wide latitude to infer that any Wal-Mart policy against discrimination was too poorly enforced to distinguish Wal-Mart's actions from" those of the perpetrator himself.Id. The implication of the Deffenbaugh-Williams case is that punitive damages will be avoided when the employer has done more "training" than merely having an open-door policy. See also Lowery v. Circuit City Stores, 206 F.3d 431, 446 (4th Cir. 2000) ("employer's institution of a written policy against race discrimination . . . is not automatically a bar to the imposition of punitive damages").
Judging Cases On Individual Basis
In light of its size and visibility, Wal-Mart may have been treated particularly harshly in both cases. Nevertheless, the fact remains that two different Circuit Courts found that the company was liable for punitive damages at least in part because of its apparent failure to present evidence of adequate training of its managerial employees.By contrast, other employers have presented evidence of training sufficient to avoid any punitive damages. For example, in Woodwardv. Ameritech Mobile Communications, Inc., 2000 WL 680415 (S.D. Ind. March 20, 2000), a District Court dismissed the plaintiff's prayer for punitive damages in a sexual harassment case using a Kolstad analysis. In Woodward, the evidence of the employer's good faith regarding non-discrimination, included the following:
The employer's "ethics" policy included a specific policy on sexual harassment with several avenues for reporting policy violations; and
The plaintiff (a customer sales representative) had signed two separate statements acknowledging that she read and understood the policy and attended the company's two-day training program on sexual harassment.
Analyzing the punitive damages issue, the court cited EEOC v. Wal-Mart, supra, stating that "the extent to which an employer has adopted anti-discrimination policies and educated its employees about the requirements of the [anti-discrimination laws] is important in deciding whether it is insulated from vicarious punitive liability." Unlike the Tenth Circuit in the Wal-Mart case, however, the court in Woodward found that Ameritech met the "good faith" standard because of its policy (with two avenues for complaints) and its in-house educational efforts, and also cited the plaintiff's failure to address the issue with the human resources department (as indicated in the policy). Similar results have been reached in other cases as well.See, e.g., Hull v. Apcoa/Standard Parking, 2000 WL 198881 (N.D. Ill. 2000) (fact that plaintiff attended a training program yet failed to take advantage of available complaint procedures weighed against any award of punitive damages).
Other courts also have emphasized the importance of non-discrimination training in shielding employers from punitive damages.For example, in Hatley v. Hilton Hotels Corp., 308 F.3d 473 (5th Cir. 2002), the appellate court readily concluded that the employer had a good faith defense to punitive damages, despite the allegations that the sexual harassment was perpetrated by supervisory personnel. The "good faith" finding was premised on evidence that the employer "had a well-publicized policy forbidding sexual harassment, gave training on sexual harassment to new employees, established a grievance procedure for sexual harassment complaints, and initiated an investigation of the plaintiffs' complaints."Id. at 477.
Training will, of course, not cure all ills. At least one court has been so outraged by a senior officer's own discriminatory behavior that evidence of the training of that individual had no effect on reducing punitive damages.See Kuper v. Empire Blue Cross and Blue Shield, 2003 WL 359462 (S.D.N.Y. 2003), citing Luciano v. Olsten, 912 F.Supp. 663, 670 (E.D.N.Y.1996), aff'd, 110 F.3d 210 (2d Cir.1997) (senior manager who had received ADA training and nevertheless discriminated against disabled employee created potential for punitive damages.) The court in Kuper found it "particularly egregious for a person responsible for assuring a company's compliance with discrimination laws to fail to" investigate alleged discrimination. Moreover, training which is provided only after harassment or discrimination has occurred often can do little to establish the "good faith" required under Kolstad. See, e.g., Johnson v. Spencer Press of Maine, Inc., 2003 WL 1697 (D. Me. 2003).
Training Programs: Good Business Decisions
Employers have considered harassment and discrimination training to be beneficial to fostering a positive workplace environment for many years, but it has not always been viewed as a critical requirement. Yet in the aftermath of Kolstad, courts faced with demonstrated discrimination or harassment have been focusing on training as an important factor in overall liability. While no court has provided a definitive roadmap, it appears clear that courts will require "something more than just a policy" as a defense to punitive damages in discrimination cases.Each case - and each employer - will be judged on its own facts. At the end of the day, any employer facing punitive damages in such a case will need to show that it both educated its workforce regarding anti-discrimination principles and that it required adherence to those standards.
All employers should consider a business-wide training program that includes distribution of the relevant policies to all employees and specific training to be provided to management team members. That training should focus not just on sexual harassment (which appears to be the most common subject of such training) but on all forms of illegal discrimination and harassment. Of course, first and foremost, the goal of prevention training is to prevent discrimination and harassment from happening in the first place. While such a training program cannot be guaranteed to prevent harassment or completely insulate an employer from liability should such harassment take place, it is a strong step in that direction and may undercut claims for punitive damages resulting from any discrimination or harassment that happens on your watch.
Jacklyn J. Ford is a Partner at Vorys, Sater, Seymour and Pease LLP in the firm's labor and employment group.She can be reached at (614) 464-8230.