After Thomas White was fired from his job at an Ultramar convenience store several years ago for allegedly stealing a soda, his employer was ordered by a jury to pay $342,000 in lost earnings and punitive damages. And the company’s legal expenses were just beginning, as the case wound its way through the state appeals courts and eventually to the California Supreme Court, which recently upheld the jury’s original damage award. But even though Ultramar lost the case, the court’s decision may end up benefiting California employers by limiting the number of managerial employees whose actions can put you on the hook for punitive damages. Plus, in a continuing trend, the ruling suggests that strong written policies can go a long way toward insulating you from costly penalties.
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Employee Fired After Taking Soda
White, an assistant manager at an Ultramar store in Pacific Beach, agreed to testify against the company at his former boss’s unemployment hearing. On his way to the hearing, White and a co-worker stopped at the store and White helped himself to a soft drink, which he claimed employees were allowed to do. White left the store with his drink and testified at the hearing. When he reported to work later that day, he was fired. White sued for wrongful termination, claiming he was fired in retaliation for his testimony at the unemployment hearing. But Ultramar said White had violated company policy by taking a drink without paying for it, and claimed the termination had nothing to do with his testimony. A jury sided with White, ordering Ultramar to pay $42,000 in compensatory damages and $300,000 in punitive damages. The employer then appealed to the California Supreme Court, arguing that the manager who fired White was not high enough up the corporate ladder to make the company responsible for punitive damages for the manager’s actions.
Definition Of Manager Important
The employer relied on a provision of California law that authorizes punitive damages against a company only when the illegal action is committed by an officer, director or managing agent of the company. Ultramar argued that this does not include lower-level managers or supervisors. White countered that the illegal conduct of any supervisor with the authority to hire and fire could result in punitive damages.The court struck a middle ground, rejecting White’s broad reading of the law but ruling that the manager who fired White still met the definition of a managing agent. The court held that managers who have the authority to make decisions that affect company policy can create liability for punitive damages, regardless of their title. In this case, for example, the manager who fired White was responsible for eight retail stores and 65 employees, and made significant decisions on a daily basis affecting both individual store and company policy.
Policies May Provide Safe Harbor
In an important aside, however, the court strongly suggested that employers can avoid liability altogether for punitive damages if the manager’s actions are contrary to written company policies prohibiting illegal conduct, such as retaliation. The court pointed to a recent decision by the U.S. Supreme Court in which an employer charged with sex discrimination was shielded from punitive damages because it had taken steps to comply with the law – including having a strong anti-discrimination policy.
Review Your Policies
While there’s no guarantee that written policies will insulate you from punitive damages, if consistently enforced, they remain the best way to protect yourself from potentially huge damages – or even from being sued at all. Review your policies now to make sure they prohibit all forms of discrimination and workplace harassment. Plus, spell out that your organization will not tolerate retaliation against employees who complain directly to you or to a government agency about discrimination, harassment or a violation of safety or other laws, or who testify against you in court or in any other government proceeding.