United States: North Carolina Worker Misclassification Law Takes Effect December 31

The U.S. 4th Circuit Court of Appeals (whose rulings apply to all North Carolina employers) recently held that an HR director's retaliation claim against her former employer failed because there was no evidence that the person who terminated her was aware she had engaged in protected activities. While the 4th Circuit's decision worked in favor of the employer, in this case, you should take the opportunity to review your organization's internal complaint systems to ensure that decision-makers have complete information before terminating employees.


Sciences and Engineering Services, LLC (SES), is a research and development company with facilities in Columbia, Maryland, and Huntsville, Alabama. SES hired Terri L. Smyth-Riding as the director of HR for the Columbia office in 2007. During her employment, Smyth-Riding complained on multiple occasions about corporate policies, interview questions, and hiring and firing practices that she believed could be perceived as discriminatory.

In late 2008, Smyth-Riding noticed that she could no longer access the company's salary and bonus database, and in early 2009, she received a pay raise. She complained about the pay raise, her inability to access the company's salary and bonus database, and her ongoing conflicts with other employees about the company's hiring and firing practices. A short time later, the company's president and CEO, Dr. Hyo Sang Lee, decided to terminate her for "fit" reasons and because the company's Huntsville location was going to "become the nexus for much of the support operations."

After her termination, Smyth-Riding filed discrimination charges with the Maryland Human Rights Commission and a complaint in Maryland federal court alleging numerous claims of discrimination and retaliation against Lee and SES. The case proceeded to trial, and at the close of Smyth-Riding's case, the court dismissed all of her claims, concluding, with respect to her retaliation claim, that she failed to prove Lee knew of her efforts to ensure compliance with federal nondiscrimination laws. On appeal, the 4th Circuit held the trial court's dismissal of her claims had been correct.

Court's Decision

An employee who alleges retaliation must proceed in one of two ways: She can present direct evidence that the employer terminated her because of her complaints (e.g., the decision maker specifically said she was being terminated because she complained), or she can present what is called "circumstantial evidence," which relies on an inference to connect the evidence to a certain conclusion (e.g., other employees who made similar complaints were also terminated). Regardless of which avenue an employee chooses, she must show that her termination wouldn't have occurred without the employer's retaliatory animus. In other words, causation must be established.

Courts have routinely held that to succeed on a retaliation claim, an employee must show that the person who made the decision to terminate her knew she had previously complained about the company's allegedly illegal practices. Based on that precedent, the 4th Circuit hung its hat on the fact that Smyth-Riding failed to present any evidence that Lee was aware she had objected to SESs allegedly illegal practices.

Indeed, Smyth-Riding admitted during the trial that she never voiced any of her concerns to Lee. The court, therefore, concluded that it couldn't infer Lee harbored retaliatory animus simply because Smyth-Riding received a pay raise and was fired within two months of some of her complaints. Evidence that the decision maker was aware of the employee's protected activity is mandatory, even if the termination occurred shortly after the protected activity.

Interestingly enough, Smyth-Riding presented some evidence at trial that Lee knew about her dissatisfaction with being unable to access the salary and bonus data and believed she had been "agitating" other employees about their salaries being incorrect. But that limited evidence wasn't enough to imply that he knew she had complained about allegedly illegal practices by the company.

The Importance of Having All Your Ducks in a Row

The fact that Lee didn't have all of the information before he decided to terminate Smyth-Riding ultimately worked in his and the company's favor, but this legal battle might have been avoided had he known about the substance and extent of her past complaints. If her complaints had made it up the chain of command, HR, legal counsel, and other upper-management employees could have reviewed Lee's proposal to terminate her to ensure it wasn't based on unlawful retaliation.

To avoid allegations of retaliation, you should establish clear guidelines for employees to report any complaints to their supervisors and for supervisors to relay complaints to management, HR, or legal counsel. And if an adverse action is proposed, you should routinely examine whether the adverse action is consistent with how you have treated employees with similar performance problems, whether it's supported by proper documentation, and whether it's reasonable. While your ultimate decision to take the adverse action may not change, thoroughly reviewing all the facts will, at the very least, allow you to weigh the inherent risks that taking the action may entail.

This article originally was published in the North Carolina Employment Law Letter.

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.

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