United States: Failure To Train Managers Held To Be An “Extraordinary Mistake”

Anthony Mathis applied for a sales job at Phillips Chevrolet in May of 1996. Mathis, who is African-American and over 40 years of age, had considerable experience in car sales. When he did not hear from the company, Mathis left a second application. The application form allegedly asked for the date of his discharge from the military; he indicated that he left the service in May of 1959.

Phillips Chevrolet did not interview Mathis for the job. Instead, the dealership hired seven white salespersons – all of whom were younger than Mathis. He then sued Phillips Chevrolet.

A jury ruled that Mathis had been discriminated against on the basis of his age and awarded him $50,000 in compensatory damages. Because the jury found that the dealership’s violation of the Age Discrimination in Employment Act (ADEA) was "willful," the judge assessed an additional $50,000 in "liquidated damages." Phillips Chevrolet appealed this ruling.

Under the ADEA, courts are required to assess liquidated damages equal to the compensatory damages if the employer’s violation of the statute is found to be "willful." A violation is considered willful if "the employer knew or showed reckless disregard for the matter of whether its conduct was prohibited by the ADEA."

Phillips Chevrolet argued that its conduct should not have been classified as willful because there was no direct evidence that anyone with hiring authority received a copy of Mathis’ application. The Seventh Circuit rejected this argument, finding: "[T]his went to the question of whether anyone at Phillips ever made a conscious decision not to interview Mathis because of [his] age; the jury necessarily decided that it did make such a decision when it found Phillips liable."

The court also noted that Jamie Pascarella, the general manager and the person with ultimate hiring authority at Phillips Chevrolet, often noted the age of applicants on their applications. Further, Pascarella testified that he was not aware that it was illegal to consider age in hiring decisions. According to the court, "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."

The court also rejected the dealership’s argument that including an equal employment opportunity statement in its application referring to the ADEA proves that it made a good-faith effort to comply with the statute. "[T]his evidence appears more harmful to Phillips than helpful," the court held, "because the jury could easily have concluded that printing this statement on the application but then making no effort to train hiring managers about the ADEA shows that Phillips knew what the law required but was indifferent to whether its managers followed that law." Based on this evidence, the court affirmed the liquidated damages award.

According to Reginald Jones, a shareholder in Ogletree Deakins’ Washington, D.C. office who served as a commissioner on the EEOC from 1996 through 2000: "The Mathis case raises the stakes for employers. The court’s ruling essentially takes the common knowledge in the business community that anti-discrimination training is necessary in the modern American workplace and turns it into another potential anti-employer club. Unfortunately for employers, this ruling suggests that a jury could conclude that, in light of the universal knowledge that training is good, failure to train could be taken as a callous disregard for compliance with the law."

Jones adds: "Any employer subject to the federal equal employment laws that fails to provide anti-discrimination training to its workforce is asking for trouble. Ignorance of the law has not been a valid excuse in American jurisprudence for centuries and the court reaffirms that notion here."

© Ogletree Deakins Nash Smoak & Stewart