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Discrimination By Proxy

A Supreme Court ruling that a company was liable for firing an employee because his supervisors were biased -- even though the HR person doing the firing was unaware of that -- means that companies need to have better processes in place, including doing independent HR investigations before terminations.

Monday, March 7, 2011
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At first glance, it seems the Supreme Court of the United States currently has it in for employers.

After all, in two major employment cases this term, the Supreme Court has handed down unanimous decisions that, at first blush, employers could view as unfriendly.

The first case, Thompson vs. North American Stainless LP (decided 8-0), was decided in late January and focused on retaliation.

The most recent case, decided last week, Staub vs. Proctor, once again was 8-0, but this time they decided that an employer can be held liable for discrimination even if the decision-maker (the HR person who fired the employee, in this specific case) was not motivated by improper thoughts, but instead was influenced in that decision by another party (in this case, the fired employer's supervisors).

Some employment-law experts believe that the US Supreme Court's decision in Staub vs. Proctor, which overturned a lower-court decision, could create another setback for employers.

"What HR will have to do when they terminate someone is be even more careful," says Mindy Caterine, a partner at Fisher & Phillips in the law firm's Portland, Maine, office, where she practices in the area of labor and employment law.

"They just can't take the word of the supervisor," she says. "They have to look into the matter and uncover a real reason beyond the supervisor's decision."

Gerald Maatman, a partner in the Chicago office of Seyfarth Shaw, a national employment and labor law firm, says that, while an employer or HR professional could see the decision as a victory for plaintiffs, it's not a complete victory.

"In its decision, the Supreme Court recognizes there are ways in which an employer can protect itself against potential lawsuits in similar situations," Maatman says. "The Court doesn't say what to do specifically, but at the bottom of it all, it is saying that, if an employer undertakes some fresh fact-finding, and doesn't rely solely on a supervisor with animus, that is a different situation."

The case hinged on a novel theory of discrimination known as "cat's paw" liability.

The term "cat's paw" derives from the 17th century fable of "The Monkey and the Cat," in which a clever monkey persuades a cat to pull chestnuts from the fire by flattering the cat and promising to share the chestnuts. The unwitting cat burns its paws by removing the chestnuts from the fire while the monkey sits back and eats all of the chestnuts. 

As in the fable, the idea in the legal case is that a biased supervisor can dupe an unbiased decision-maker into taking an adverse employment action based on inaccurate, incomplete or misleading information.

In this case, Staub, who worked at a hospital, was a military reservist whose supervisors were hostile to his military obligations. At one point, Staub received a disciplinary warning, and later, another supervisor reported to the employer's human resources vice president that Staub had violated the terms of the warning.

The HR vice president reviewed Staub's file and decided to fire him. Staub claimed that his immediate supervisor had fabricated the allegation out of hostility to his military obligation.

In a decision written by Justice Antonin Scalia, the Supreme Court held that, "if a supervisor performs an act motivated by anti-military animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA [Uniformed Services Employment and Reemployment Rights Act of 1994]."

Justices Roberts, Kennedy, Ginsburg, Breyer and Sotomayor joined in the decision. Justice Alito filed an opinion concurring with the judgment, in which Justice Thomas joined. Justice Kagan took no part in the consideration or decision of the case.

According to Caterine, the Court's decision adds another layer of potential liability for employers in USERRA and other types of discrimination claims where an individual's protected status is a "motivating factor" in the adverse employment action.

"The decision makes it clear that, if the biased motives of a subordinate supervisor influenced the chain of events that led to the adverse employment action, the employer may be liable for discrimination, even if the ultimate decision-maker had no discriminatory intent," she says.

Even though she suggests that employers now conduct an independent investigation to confirm that there is a legitimate non-discriminatory reason for the adverse employment action, she notes that the Court declined to adopt a blanket rule immunizing an employer who performs such an investigation.

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Instead, the Court provided a very limited exception to liability where subordinate bias is at issue.

"If the employer's investigation results in an adverse action for reasons unrelated to the supervisor's original biased action, then the employer will not be liable," she says. "But the supervisor's biased report may remain a causal factor if the independent investigation takes it into account without determining that the adverse action was, apart from the supervisor's recommendation, entirely justified."  

Accordingly, she adds, the biases of those who make, cause or influence the employment decision are relevant and can be considered when determining employer liability.

"Many times, the HR person will rely on the supervisor's recommendation, and there is nothing wrong as long as there is no bias," she says. "But the burden is now on the employer to prove that no bias existed."

Caterine says the case certainly will make an HR professional's job more difficult.

"It may not increase the number of claims, but it could change the focus," says Caterine, adding that based on the facts in this case, she was not surprised by the decision.

"Under USERRA, the statute says military service has to be a motivating factor. In other cases, a fired employee could use the same language [so that] ... it would also apply to Title VII claims."

Maatman says the Court's decision could lead to increased use of review panels or independent reviews of termination decisions -- and in his view, that's a good thing.

"If you have facts why this person should be terminated, you can create a system to make sound non-discriminatory decisions," Maatman says. "At the end of the day, the goal is to make good decisions on performance-related reasons.

"The Court is saying maybe there is a better way than relying on a supervisor, and we are going to put you through your paces and make this a more exacting process," he says.

Maatman says he has worked with employers who have used such processes for many years.

"They have to do the right thing because the talent investment is there," he says. "People are somewhat surprised by these two cases because they view the Supreme Court as business friendly. But the Court really is very pro-interpretation of the law as decided by Congress.

"The Court also is very protective of due process," he says. "An employer may even win, but the Court wants a full airing of the issues so everyone gets a fair shake."

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