United States: U.S. Supreme Court Expands Employer Liability for Retaliation

The United States Supreme Court's June 22, 2006 decision in Burlington Northern & Santa Fe Railway Company v. White is important for both employers and employees, as attested by the extensive media coverage. However, the media largely overlooked the most significant implications of the ruling. It is not surprising that the Court would permit a retaliation claim where the employer transferred the employee to a physically harder, less desirable job, shortly after her first complaint of harassment, and suspended her without pay for 37 days, during the holidays, shortly after she filed a complaint with the Equal Employment Opportunity Commission ("EEOC"). What is surprising is the Court’s expansive, sweeping approach.

The U.S. Supreme Court’s Burlington Northern standard for retaliation claims is inherently ambiguous. It will be more risky for employers to impose discipline on poor performers who have asserted, or helped someone else assert, a discrimination or harassment claim.

After the Burlington Northern decision, the situation is even more complicated for California employers. The California Supreme Court’s August 2005 decision in Yanowitz v. L’Oreal USA, Inc., 36 Cal.4th 1028 (2005), addressed an issue almost identical to that in the Burlington Northern case – and it established a different, and arguably more pro-employer, standard for retaliation claims under California’s Fair Employment and Housing Act ("DFEH"). Consequently, in California, the employer will have to manage two different and somewhat inconsistent standards. The prudent employer would, of course, follow the more pro-employee standard, in an effort to avoid a lawsuit for retaliation.

The result is that even more retaliation claims are likely to be filed than at present. Ordinary work place discipline will in many cases be imposed at the risk of a retaliation claim. These two decisions place a premium on early identification, counseling and documentation of poor performers, lest the poor performer file a preemptive discrimination or harassment claim and then invoke the anti-retaliation protections of the statutes.

From the employer's perspective, the most significant aspects of the Burlington Northern ruling are: (1) the Supreme Court has adopted a broad rule ("actions that would have been materially adverse to a reasonable employee or job applicant") rather than a "bright line" test for unlawful retaliation, and the Court's standard requires the employer to take into account the individual's circumstances; (2) the Court extended the protection to retaliatory conduct outside the workplace ("the anti-retaliation provision…does not confine the actions and harms it forbids to those that are related to employment or occur at the workplace"); (3) the Court found that the employer's remedial action -- reinstatement of the employee with full back pay and benefits -- did not preclude liability for retaliation; and (4) the decision has broad implications for protected activity under Title VII and other statutes.

"We Phrased the Standard in General Terms…" Justice Breyer bluntly acknowledged the generality of the standard adopted by the Court and went on to say that the Court did so "…because the significance of any given act of retaliation will often depend upon the particular circumstances…" and "context is important." The Supreme Court also emphasized that the protection afforded by the anti-retaliation clause of Title VII of the Civil Rights Act is not limited to the "terms, conditions and benefits of employment" or even to the work place. These two aspects of the Court's decision will pose major dilemmas for employers trying to deal with performance or conduct issues involving employees who have engaged in protected activity.

• What is the standard by which employers must guide their actions? The Court concluded that the anti-retaliation clause "..covers those (and only those) employer actions that would have been materially adverse to a reasonable employee or job applicant. In the present context that means that the employer's actions must be harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination."
  
  The Court rejected the narrower test which had been adopted by some of the lower federal courts requiring that retaliatory action must involve an "ultimate employment decision" in order to be actionable. The Court also specifically rejected an arguably broader standard that would have prohibited any "adverse treatment that is based on a retaliatory motive and is reasonably likely to deter the charging party or others from engaging in protected activity." However, the general boundaries articulated by the Court are far from clear.

• Did the Court recognize any limits? Yes and no. The Court emphasized that the term "material adversity" is intended to "…separate significant from trivial harms" and to "filter out complaints attacking the ordinary tribulations of the workplace…." In language which evokes its decisions in Farragher, Oncale and other harassment cases over the past decade, the Court signaled that "petty slights" and "minor annoyances" do not "normally" have sufficient deterrent effect to fall within the scope of the prohibition.

The Court also described its own standard in Burlington Northern as objective (based upon the perspective of a "reasonable employee", rather than upon the "plaintiff’s unusual subjective feelings"), but at the same time made it clear that the individual’s situation must be considered, stating "context matters." The court discussed two examples: in the first, reasoning that a schedule change might not be significant for most employees, but could be significant for a young mother with children in school; and in the second, reasoning that a supervisor's failure to invite an employee to lunch would be trivial in most circumstances, but could be significant if it were a training lunch. Similarly, while acknowledging that "reassignment of job duties is not always actionable", the Court found that White’s transfer was actionable in light of the particular circumstances. In his concurring opinion, Justice Alito criticized the hybrid objective standard, pointing out that "[t]he majority's illustration introduces three individual characteristics: age, gender, and family responsibilities. How many more characteristics a court or jury may or must consider is unclear."

For the time being, employers who wish to transfer, discipline, demote or make other adverse changes affecting an employee who has engaged in protected activity, are left with the imponderable task of divining whether their actions are "...harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination", taking the employee's circumstances into account. Of course, the employee must show a causal link between the protected activity and the retaliation. However, these situations often involve a need to address performance, conduct or business issues that arise shortly before or after the protected activity occurs, thus making an inference of causation possible. For example, in Burlington Northern, the jury found White’s suspension to be in retaliation for her protected activity, even though the suspension followed a job assignment dispute between White and her supervisor. This is why the pundits have predicted that employers will feel that their hands are tied: even a relatively minor change may lead to liability, depending upon timing and the individual employee's circumstances.

Federal Law Now Prohibits Retaliation Outside of the Workplace. By extending the prohibition to actions beyond the workplace, the Burlington Northern Court opened up a new and potentially vast range of claims. As the Court put it, "[a]n employer can effectively retaliate against an employee by taking actions not directly related to his employment or by causing him harm outside the workplace."

The Court cited to several cases involving examples of retaliation not directly affecting terms and conditions of employment: the FBI's refusal to follow its own policy of investigating death threats against an agent and his wife; an employer's false criminal charges against a former employee; and, in a case decided by the Court under the National Labor Relations Act, the employer's filing of a state court lawsuit against an employee. Where will the line be drawn with respect to an employer's responsibility for the actions of managers outside of the workplace? One might speculate that blacklisting or adverse references would fall within this prohibition, but what else might? Opposing the employee's membership in a social organization? What about a manager who coaches the employee's child on a sports team and does not let the child play as much as the other kids? These actions seem trivial, but as Justice Breyer opined, "context matters."

Reinstatement and Back Pay May not Suffice. Burlington Northern had an internal grievance procedure, which Ms. White used successfully: she was reinstated with back pay and lost benefits. Nonetheless, the Court found the job transfer actionable and the remedy for the 37 day suspension insufficient to bar her claims. Presumably, in the absence of a settlement, an employer may still moot an employee's claims with make whole relief, but it would appear that the relief will have to include compensatory damages. Some courts may even find punitive damages necessary to bar a claim, though a compelling argument can be made that punitive damages would be inappropriate where the employer's remedial action is prompt and voluntary. Of course, a voluntary settlement agreement should still bar a retaliation claim which is covered by the settlement.

Broader Implications. By implication, the Burlington Northern definition of prohibited conduct applies to retaliation for all forms of protected activity, ranging from internal complaints or "opposition" of practices which an employee perceives in good faith to be illegal discrimination or harassment, to participation in investigations, administrative complaints or legal proceedings. Of course, the decision is also likely to have implications for retaliation claims brought under other federal laws, such as the Age Discrimination in Employment Act and the Americans with Disabilities Act, and comparable state employment laws as well.

Ironically, the U.S. Supreme Court’s Burlington Northern holding is in many ways more pro-employee than the California Supreme Court’s Yanowitz holding from August 2005.

In almost every significant respect, California provides more protection to employees than does analogous federal law. In Yanowitz, however, the California Supreme Court rejected the "deterrence" test for retaliation claims. The "deterrence test" had long been advocated by the U.S. EEOC. In Burlington Northern, the U.S. Supreme Court adopted a version of the deterrence test, focusing on conduct that "could well dissuade a reasonable worker from making or supporting a charge of discrimination." By contrast, in Yanowitz, the California Supreme Court found that the standard was whether the retaliatory conduct constituted an "adverse employment action that materially affects the terms, conditions, or privileges of employment, rather than simply that the employee has been subject to an adverse action or treatment that reasonably would deter an employee from engaging in the protected activity."

The California Court also held that the definition of "retaliation" under FEHA should be no broader than the definition of the statutorily-prohibited discriminatory conduct. The California Supreme Court in Yanowitz analogized retaliation claims to hostile environment harassment claims: "retaliation" could be found from a course of conduct, not merely from isolated acts. In noting that "context matters", the U.S. Supreme Court in Burlington also adopted the environmentally-based theory of retaliation. But the U.S. Supreme Court specifically rejected the assertion that "retaliation" could be no broader in scope than statutorily-proscribed "discrimination." By focusing on potentially "deterrent" conduct, the U.S. Supreme Court found that "the antiretaliation provision [of Title VII], unlike the substantive [discrimination] provision, is not limited to discriminatory actions that affect the terms and conditions of employment . . ." It found that "Title VII’s substantive provision and its anti-retaliation provision are not coterminous." This is directly contrary to the California Supreme Court’s holding that "the Legislature intended to extend a comparable degree of protection both to employees who are subject to the basic forms of discrimination at which the FEHA is directed . . . and to employees who are discriminated against in retaliation for opposing such discrimination. . ."

Ironically, the U.S. Supreme Court may have created a more employee-friendly standard for assessing "retaliation" claims than did the California Supreme Court.

As a practical matter, both theories or constructions of "retaliatory" conduct are inherently subjective. The U.S. Supreme Court in Burlington Northern attempted to create an "objective" standard focusing on a "reasonable employee." But the emphasis on "context" shows that the standard is not objective in any real-world sense. By requiring consideration of the particular facts of each employee’s situation, including his or her family situation, employment history, physical or mental limitations, ethnicity, age and untold other factors, the "objective" standard disappears.

Before imposing discipline, changing job duties or making other job-related changes, a prudent employer (including those in California) will consider the potentially deterrent effect on a person who has reported, asserted or helped others to assert a discrimination or retaliation claim.

After Burlington Northern and Yanowitz, almost any employer action, even without any tangible economic effect, can give rise to a retaliation claim. These two cases will also make it more difficult, although not impossible, to obtain summary judgment once a claim is filed. But the employer is not powerless. Now, more than ever, the employer should take prompt steps to document and discipline employees who do not perform properly or who engage in misconduct. The following are our recommendations:

• Review policies, make sure they are adequate and clearly prohibit retaliation and provide a neutral channel for complaints.

• Be sure that the policies are published to all employees and that publication can be proven.

• Issue periodic reaffirmations by top management, including the policy against retaliation.

• Conduct training for executives and managers, encompassing both the substantive aspects of the employment laws and the anti-retaliation rules.

• Ensure that annual or other periodic employee evaluations are completed and completed accurately. Do not permit supervisors to give inflated evaluations of employees who are not performing properly.

• Document employee poor performance or misconduct and do so promptly. Frequently, an employee who believes his or her job is in jeopardy will file a retaliation, harassment, workers compensation, overtime or other claim as a preemptive measure. It is important that the disciplinary process be commenced before such a claim is made.

• Avoid singling out employees. While discipline and documentation are necessary, they should not appear to be efforts to "build a file."

• Involve neutral decision makers wherever possible once an employee has engaged in protected activity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.