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Damages and Penalties in Discrimination Cases
Penalties: The penalties for engaging in unlawful employment discrimination differ based on the violated law and the agency or court in which the penalty is assessed. All cases can have a substantial financial impact and lay the groundwork for similar claims by other employees. Once you receive a complaint, consult with legal counsel to determine the best option for your company. Options include:
Remedies Under FEHA: If you are found to have engaged in an employment practice that is unlawful under the FEHA, you can be required to:
The may bring a civil action directly to court if the agency determines an employer has failed to eliminate an unlawful employment practice. SB 1038 eliminated administrative adjudication of claims brought by the DFEH, and authorizes the DFEH to bring cases directly to court. SB 1038 also eliminated the prior cap on actual damages ($150,000) which was in place for administrative adjudication of FEHA claims.
Front Pay Unlimited Under Title VII: The U.S. Supreme Court created the possibility of unlimited awards in employment discrimination lawsuits in federal court, despite the $300,000 cap on damages in Title VII. The Court ruled that the cap does not apply to front pay — money an employee would have continued earning if he/she was not illegally terminated.
Compensatory and Punitive Damages under Title VII: The federal Civil Rights Act of 1991 expanded the right of plaintiffs to compensatory and punitive damages. It allows those who claim intentional discrimination or harassment based on sex, race, religion, national origin or color under Title VII, or disability under the ADA or Rehabilitation Act, to obtain compensatory and punitive damages. The damages are measured by the size of the employer’s workforce, up to a maximum of $300,000.
Compensatory or punitive damages are allowed under the Civil Rights Act only when you engage in intentional “disparate treatment” discrimination. Where “disparate impact” discrimination is found, punitive and compensatory damages are not allowed. In addition, plaintiffs who sue under these statutes for compensatory or punitive damages have the right to jury trials. Courts cannot inform juries about the legal limits on punitive and compensatory damage awards.
Punitive Damages Under Title VII: In, the U.S. Supreme Court defined the circumstances under which punitive damages can be awarded against employers for unlawful intentional discrimination under Title VII. An employee claimed that she was passed over for promotion due to intentional discrimination based on her sex. The lower courts found that intentional discrimination occurred. They granted the employee back wages, but did not award punitive damages against the employer.
The U.S. Supreme Court held that an employer may not be held liable for punitive damages for the discriminatory supervisorial employees’ employment decisions if those decisions are contrary to the employer’s good-faith efforts to prevent discrimination. You might demonstrate good-faith efforts by implementing employer and employee anti-discrimination education programs, instituting an open-door policy for employees to report discrimination, and conducting effective discrimination investigations.
Limits on Punitive Damages in Discrimination Lawsuits: The U.S. Supreme Court limited a jury’s ability to grant unreasonable punitive damage awards. The Court ordered recalculation of a punitive damage award consistent with due process rights under the 14th Amendment.
A male employee caused a fatal auto accident. He had a policy limit of $50,000 with State Farm Insurance Company. However, State Farm unreasonably refused to settle the case for this amount. In the lawsuit that followed, the jury awarded $185,849 against him. State Farm refused to pay more than the $50,000 policy limit and told him to pay $135,000.
In , he sued State Farm for bad faith, fraud and intentional infliction of emotional distress. He won $2.6 million in compensatory damages and $145 million in punitive damages. The trial judge reduced the compensatory damages to $1 million.
The U.S. Supreme Court said that where $1 million compensatory damages are awarded, punitive damages of $145 million are excessive. The 14th Amendment of the U.S. Constitution prohibits imposing grossly excessive or arbitrary punishments.In , the California Supreme Court addressed limits on punitive damages awards. An employee was harassed, discriminated against and wrongfully terminated based on her medical condition and related disability. In the original trial, the jury found in favor of the plaintiff. The jury awarded her substantial compensatory damages and punitive damages of $15 million against both her employer and the supervisor who harassed her.
The California Supreme Court struck down most of the punitive awards. The due process clause of the 14th Amendment of the U.S. Constitution limits state court punitive awards. According to the court, the rationale for this limit is that someone who commits a wrong must have fair notice “not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.” In this case, the California Supreme Court took into account the low level of culpability on the employer’s part and found that, given the facts of the case, the punitive damages could be no greater than the compensatory damages, that is a 1:1 ratio.
What saved the employer in this case is that most of the blame rested with the supervisor, and the corporation’s culpable conduct was “relatively low.” This one-to-one ratio may not be applied in other circumstances. Unlike the supervisor, the corporation itself did not engage in repeated misconduct. The court explained that there was no evidence that the supervisor’s “actions toward Roby were the product of a corporate culture that encouraged similar supervisory conduct. Rather, they appear to be the isolated actions of a single supervisor, combined with the one time failure on the part of the employer ... to take prompt responsive action when these events came to its attention.”
Remember to take any claims of and/or discrimination seriously. Investigate an employee’s need for family and medical leave.