A recent decision from the Second U.S. Circuit Court of Appeals reiterates an employer’s obligation to ensure that its decisionmakers act without discriminatory or retaliatory animus. The employer in the following case allowed a decisionmaker whom it knew harbored racial animus to fire a black worker for poor performance. That move cost the employer big ― to the tune of $1.6 million.
Mastering HR Report: Discrimination
In May 2000, iStar Financial, Inc., hired Kenneth Thomas, who is African American, as a staff member in the accounts payable department. His employment duties included paying and processing invoices, obtaining approval of invoices before processing them, verifying that they hadn’t already been paid, entering them into the accounts payable computer system, and generating checks for signature. In March 2001, he was promoted to accounts payable manager. He continued to work in that capacity until August 2003, when his employment was terminated.
Following his discharge, Thomas sued iStar and Ed Baron, the vice president of administration and operations, alleging unlawful race discrimination and retaliation. Specifically, he claimed iStar and Baron (1) terminated him on the basis of race, (2) created a hostile work environment, and (3) retaliated against him for complaining about discriminatory treatment.
iStar claimed that it terminated Thomas’ employment because of performance deficiencies. Thomas refuted the company’s claims of poor performance, claiming instead that he was terminated in retaliation for complaining about race discrimination in the workplace — and he had plenty to complain about:
- When Baron introduced himself to black employees (including Thomas), he stated he could identify with their ethnicity and knew what it was like to grow up poor. He added that some of his best friends are black and that he came from where they came from and grew up in the “hood,” poor and on welfare. He told Thomas that his daughter looked like a “black dot” in a company picnic photo and asked him why he was friends with a Hispanic employee whom Baron called a “street rat.” Further, when referencing a Hispanic vendor, Baron remarked that he didn’t like dealing with “those Mexicans.” Finally, he called a former iStar employee a “nigger” and told her she had to try harder because she is black.
- Baron (1) generally targeted black employees for criticism, (2) was involved in firing several black workers in various iStar offices, and (3) regularly called Thomas into his office to “interrogate” him about various issues. On one occasion, he falsely accused Thomas of sexually harassing another employee. Finally, he regularly criticized Thomas to his supervisors, caused him to pay invoices late by deliberately withholding them, and vowed he would “get rid of” him because he is black.
- iStar accountant Jay Agarwal made inappropriate racial comments, addressing Thomas on one occasion with “What’s up my Nigger?” He also used the word “nigger” in phone conversations, tried to tell Thomas “nigger jokes,” called black women he saw on porn websites “bitches,” told Thomas he looked like Al Sharpton, and asked him if he smoked crack on his breaks. Additionally, he asked Thomas if the hair between his legs was the same as the hair on his head and told him he thought only 95 percent of blacks are bad and that Thomas must be in the other five percent.
According to Thomas, “every time [he] complained about Ed Baron, the situation would get worse, and Ed Baron would start treating [him] even worse.” iStar denied that Thomas ever made any complaints.
Mastering HR Report: Firing
Trial court’s decision
Baron and iStar convinced the court to dismiss Thomas’ hostile work environment claim, but the race discrimination and retaliation claims were tried before a jury. The jury determined that iStar and Baron were not motivated by racial animus when they terminated Thomas’ employment. Nevertheless, it concluded that they did retaliate against him for complaining about what he perceived to be race discrimination and harassment. As a result, he was awarded compensatory damages in the form of front pay, back pay, and pain and suffering as well as punitive damages in the amount of $1.6 million. Baron and iStar appealed to the Second Circuit.
HR Guide to Employment Law, a comprehensive guide for HR including chapters on firing and discrimination
Second Circuit’s decision
On appeal, iStar and Baron argued, among other things, that there was insufficient evidence to support a finding of unlawful retaliation. The appellate court disagreed.
The Second Circuit concluded that sufficient evidence was offered from which a jury could infer that Baron, who was involved in the decision to terminate Thomas, harbored retaliatory animus against him. At trial, Thomas submitted evidence showing that following his complaints of race discrimination, he (1) heard Baron tell an administrative assistant that he would “get rid of Thomas” and (2) was told that his complaints didn’t matter because he was on the “five-year plan.”
In addition, the court concluded there was sufficient evidence that iStar acted recklessly in allowing Baron to participate in the termination decision because senior officials knew that he and Thomas did not get along. Nevertheless, the company allowed Baron to participate in the decision to terminate Thomas. In fact, it invited him to attend the termination meeting. That move made the company susceptible to a punitive damages award. Thomas v. iStar Financial, Inc.
Significance for employers
If you are contemplating taking an adverse employment action against an employee who has engaged in protected activity, you must be extra cautious and take steps to make sure the decisionmakers who are involved are acting in a nonbiased way. In certain circumstances, it may be necessary to completely segregate an individual from an employment decision to ensure that the decision is based on objective, legitimate, and nondiscriminatory factors. Failure to do so may expose you to a sizable punitive damages award.