Saturday, June 16, 2012

A Bright Line Retaliation Test, High Ranking Harassers, and Judgment Offers, All in One Case!

Every so often you read a case that has important concepts littered through it like those unpopped kernels at the bottom of the popcorn bag (I love those things).  Here's an example from the Second Circuit, involving harassment, retaliation, and some litigation strategy advice.

Retaliation claims in employment discrimination law are based on the concept of "protected activity."  This is not exactly the kind of protected activity discussed below under the NLRA  social media cases ("protected, concerted activity"), but rather activity in which an employee either complains about discrimination to management (because he experienced discrimination or observed it), or participates in some type of investigation or litigation activity in a way that undercuts or damages his employer's interest.

One of the issues that arises in "participation" retaliation cases is determining when the protected activity starts.  Generally, any employee participation in an EEOC or state fair employment practice agency investigation is protected.  But what about a situation where there is no EEOC charge or other formal claim of discrimination filed, yet?  Where the employer starts its own investigation of alleged discrimination, is participation in that process protected?

This case (and a number of others that it cites) says "no".  An HR director was terminated shortly after she commenced investigating a claim of sexual harassment against the company president's husband.  She claimed that she was fired because of her investigation, which was running before any EEOC or other process had been invoked by the harassment victim.

The Second Circuit Court of Appeals held that there was no liability here, because an employer investigation is not protected activity under the terms of Title VII.  An employee must be participating in a formal investigative process prescribed by statute before his conduct in that investigation becomes protected.

There are several other important points in the case.  Sexual harassment claims involving a supervisor of the victim are generally subject to the Faragher defense.  The defense is a doctrine that allows an employer to escape liability from a harassing supervisor if it can show that there was a systematic effort to prevent such harassment, complete with an adequate reporting system for victims, and that the victim unreasonably failed to avail herself of the opportunity to report the conduct.

But, as the Second Circuit, held, the Faragher defense is not available when the harasser is of such a high rank that he is effectively the alter ego of the corporate entity itself.  There is an excellent discussion of how much business authority gets you tagged as the equivalent of the company, but the short answer is that high level managers, especially those who report directly to the company president and who happened to be married to the president, are particularly bad defendants in harassment cases.  Their stature severely limits the ability of the company to defend itself.

Finally, there is an unusually clear discussion of the requirements and ultimate effect of an offer of judgement, a litigation tool seldom used by defendants, but that ought to be considered more often.  A offer of judgement under federal litigation rules allows a defendant to essentially place a bet on the amount the plaintiff will recover.  The defendant offers a specific amount of money at a pretrial stage; if the plaintiff rejects the offer, and doesn't recover at least as much as the offer (and the attorneys fees expended at the time of the offer) at trial, then the defendant can recover its costs (attorneys fees, for example) from the time the offer is made.

As noted above, the offer must account for the plaintiff's attorneys fees that have accrued at the time of the offer is made.  Here, the defendants made an offer that they thought would catch everything, and they would have been right, except that the trial court did not base its fee calculation on the rates charged in plaintiff's retainer agreement.  Instead, the court used (properly, the Second Circuit held) the prevailing fee rates in the community.  Those rates were higher than the contract rates, and pushed the award past the offer's value.  Thus, no recovery for the defendants.

So the lesson here is that offers of judgement must be calculated carefully--use the prevailing counsel rate, and be a little generous.

This is a highly highly instructive opinion.

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