labor lawAdivision of labor law center

A recent court ruling highlights the danger of employers claiming an employee was “laid off” when, in fact, the employee was terminated for another reason.

 

Historically, many employers have made the mistake of claiming that they were merely “laying off” a troublesome employee. However, with today’s prevalence of lawsuits for wrongful termination, that tactic can backfire.

 

In a recent case before the 8^th Circuit Court of Appeals, a rental car company branch manager, Terri Wallace, was laid off 15 days after she complained that her supervisor was sexually harassing her.

 

Wallace dropped the sexual harassment suit before it reached the jury.  

 

However, under Title VII of the Civil Rights Act of 1964, it is illegal to retaliate against an employee who files a sexual harassment complaint in good faith. In this case, “good faith” means without the intention of fraud.

 

The employer, DTG Operations, Inc., initially claimed that Wallace was part of a company-wide lay off due to economic reasons.

 

DTG Operations, Inc. owns and operates both Dollar Rental Car and Thrifty Rental Car. The company has 740 locations, both corporate owned and franchises, in 70 countries worldwide.

 

Wallace filed suit under the Missouri Human Rights Act as well as federal law.

 

During the pre-trial investigation, the EEOC discovered that no other employees were laid off during this supposed “company-wide” reduction in force.

 

Confronted with the evidence, the employer backpedaled and claimed that Wallace was laid off due to poor performance. The jury rejected this argument, even though the employer cited two legitimate performance problems as reasons why Wallace could have been laid off.

 

The jury awarded Wallace $10,000 in lost wages and benefits, $20,000 in compensatory damages, $220,000 in attorney’s fees and a whopping $750,000 in damages.

 

The appeals court upheld the jury’s ruling, noting that the timing of events suggested that Wallace was, in fact, fired as retaliation for her discrimination complaint. In addition, the court noted that the company’s inconsistent enforcement of company policy and – most importantly – their shifting explanations for the termination, supported the jury’s conclusion.

 

The appeals court did reduce the damages to $120,000, resulting in the company paying a total of $270,000, plus their own attorney’s fees, estimated at $200,000 – a very expensive mistake.

 

The SHRM notes that employers should always adequately document employee performance problems, and enforce company policies. They should also refrain from retaliating against employees who file discrimination or sexual harassment complaints in good faith.

 

Most of all, the employer should  not say a performance-related termination is a layoff.  

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