New Decisions Affecting Employer Liability

 

By Matthew C. Scarfone

 

The U.S. Supreme Court recently issued two important opinions affecting employers’ potential liability in lawsuits alleging discrimination and retaliation. In Vance v. Ball State University, the Supreme Court rejected a broad definition of “supervisor,” limiting employers’ potential for vicarious liability.  In University of Texas Southwestern Medical Center v. Nassar, the Supreme Court held that the “mixed motive” standard for determining whether an employer has engaged in discrimination does not apply to actions for retaliation under Title VII, meaning that employees must show that adverse employment action was motivated solely by retaliation.

Vance v. Ball State University

In Vance, an African-American employee, asserted a Title VII claim against her employer, Ball State University, alleging that racial harassment by a co-worker created a hostile work environment.  The trial court granted summary judgment for the university, and the Seventh Circuit Court of Appeals affirmed.  The employee appealed and the U.S. Supreme Court granted certiorari.

An employer’s liability for discrimination by an employee depends on the status of the harasser to the victim.  When one co-worker discriminates against another, an employer can only be held liable if the employer was negligent in controlling the working conditions.  However, when the harasser is a supervisor of the victim, an employer may be vicariously liable.  If the supervisor takes some tangible employment action against the victim, the employer is strictly liable.  If no tangible employment action is taken, the employer must prove that it exercised reasonable care to prevent and correct harassing behavior, and that the plaintiff unreasonably failed to take advantage of the preventative or corrective opportunities provided. 

Thus, the framework used to determine whether an employer is liable for the discriminatory acts of an employee depends largely upon whether the employee is a “supervisor.”  This term was interpreted differently by different courts.  Some courts held that a supervisor must have the power to hire, fire, demote, promote, transfer or discipline.  Other courts used an “open-ended” approach suggested by the Equal Employment Opportunity Commission (“EEOC”), which takes into account the employee’s ability to exercise significant discretion over another’s daily work. 

In a recent 5-4 decision, the Supreme Court held that “An employer may be vicariously liable for an employee’s unlawful harassment only when the employer has empowered that employee to take tangible employment actions against the victim . . .”  Rejecting the more nebulous EEOC interpretation, the Court noted that the framework for determining employer liability presupposes a clear distinction between co-workers and supervisors.  The first scenario in the framework for supervisor liability applies where the supervisor has taken tangible employment action, strongly implying that supervisors are empowered to take such action.  The Court preferred this more finite rule, explaining that parties will often know before litigating a case whether the alleged harasser is a supervisor, and will be in a better position to assess cases and consider potential resolutions.

While this ruling is certainly a win for employers, it remains to be seen whether it may be as “readily applied” as the Court intended.  For instance, the petitioner in Vance urged the Court that this rule would cause employers to attempt to insulate themselves from liability by designating only a few individuals with authority to take tangible employment actions.  The Court suggested that under these circumstances, decision-makers would likely rely on the input of others in making employment decisions, and an employer may be held to have effectively delegated decision-making power to the employees on whose recommendations they rely.  This suggestion blurs the distinction between supervisors and co-workers, and highlights the potential problems with this seemingly “bright-line” rule.

University of Texas Southwestern Medical Center v. Nassar

Dr. Nassar was an assistant professor at the University of Texas Southwestern School of medicine, and a physician at the affiliated Parkland Memorial Hospital, which was required to offer its open staff position to faculty members.  Nassar complained of repeated ethnic and religious harassment from his superior, Dr. Levine.  In order to avoid this discrimination, he negotiated with the hospital to arrange to become an employee of the hospital, without remaining on the university’s faculty.  Nassar resigned from the university and the hospital extended him an offer.  Upon resigning, Nassar wrote a letter to Dr. Levine’s supervisor, Dr. Fitz, explaining that the reason for his departure was Levine’s discrimination.  In an apparent effort to exonerate Levine, Fitz protested the hospital’s hiring of Nassar, and the offer was revoked. 

Dr. Nassar filed suit, alleging that Dr. Levine created a hostile work environment, and that Fitz’s efforts to prevent the hospital from hiring him constituted unlawful retaliation.  The jury found for Nassar on both claims and, on appeal, the Fifth Circuit Court of Appeal vacated the verdict as to the discrimination claim, but affirmed it as to the retaliation claim, finding that Dr. Nassar was only required to demonstrate that retaliation was a “motivating factor” for the adverse employment action, but not its “but-for” cause.  The U.S. Supreme Court granted certiorari.

Title VII of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, religion, sex, national origin, opposition to employment discrimination, and submitting or supporting a complaint about employment discrimination. Discrimination based on the first five factors is known as “status-based” discrimination, while discrimination based on the latter two is known as “retaliation.”

In 1989, in Price Waterhouse v. Hopkins, the Supreme Court held that a plaintiff could prevail on a claim of “status-based” discrimination if the discrimination was a “motivating” or “substantial” factor in the adverse employment action.  In 1991, Congress enacted section 2000e-2(m), stating that “an unlawful employment practice is established when the complaining party demonstrates that race, color, religion, sex or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice.”  This statute partially codified Price Waterhouse, but abrogated its holding to the extent that it allowed the employer to rebut a showing that discriminatory intent was a motivating factor.

Since Price Waterhouse and the 1991 amendments, the EEOC noted a division of authority regarding whether the “motivating factor” analysis applied to claims for retaliation.  In Nassar, the Supreme Court held that the traditional “but-for” causation analysis, and not the “motivating factor” analysis, applies to Title VII retaliation claims.  The Court noted that Title VII is a comprehensive statutory scheme, and that if Congress intended the “motivating factor” analysis to apply to retaliation claims, it could have stated so.  In support of its holding, the Court explained that in Gross v. FLB Financial Services, Inc., it previously refused to apply a “motivating factor” analysis to claims under the similar Age Discrimination in Employment Act (ADEA).

This holding substantially limits an employer’s potential liability for retaliation.  The Court recognized that this ruling should protect employers against litigating claims of retaliation based on unfounded allegations of discrimination by underperforming employees attempting to avoid termination. 

 

Should you have any questions or comments, please contact Colodny Fass& Webb.

 

 

Click here to follow Colodny Fass& Webb on Twitter (@CFTLAWcom)

 

 

To unsubscribe from this newsletter, please send an email to Brooke Ellis at bellis@cftlaw.com.