What if a manager accused of unlawful discrimination based on employees’ religion asserts that the complaint itself is an act of harassment? You owe duties all around, and you may not be able to perform one duty without risking a violation of the other. See how one employer successfully avoided that minefield.
Survey Says . . . My Manager Discriminates Based on Religion
Brent Arave was a managing director for Merrill Lynch (an entity that was later acquired by Bank of America). Arave oversaw the Desert Island Empire complex, which comprises five offices with a total of about 130 employees. In September 2010, Merrill Lynch undertook an anonymous employee satisfaction survey that garnered numerous negative comments about Arave’s leadership. Many of the comments reflected a perception of his favoritism toward members of his Mormon church, including:
- “Are we now Merrill LDS Lynch?”
- “It would be nice if our manager hired people not of his religion.”
- “Stop hiring and favoring one religion in our branch.”
In January 2011, Joseph Holsinger, Arave’s new regional manager, e-mailed everybody in the region about the survey. Holsinger told his subordinates that he wanted his managers to “own” the comments and give constructive positive feedback to their subordinates. Arave asked for the opportunity to respond to the survey, adding that he wanted to be considered for a promotion to become director of a larger area in Orange County. Holsinger informed Arave that he wouldn’t be considered for the promotion, and the survey comments were one of several reasons why. Holsinger and Arave met to discuss the religious favoritism comments, but they tell wildly divergent stories about what occurred in the meeting.
Holsinger claims that he urged Arave to take ownership of the criticism and to report back to his subordinates that their concerns were heard and would be addressed. He assigned HR manager Katherine Anderson to help Arave do that. Arave describes the meetings differently, claiming he was told to apologize for his religious beliefs. Although the company denies it forced him to apologize, it does admit that in one memo it demanded a mea culpa from him (Latin for “It was my fault”).
Manager Sues for Being Forced to Apologize
On March 17, 2011, Arave’s attorneys sent a letter to Bank of America complaining of religious discrimination and retaliation. Arave accused the bank of failing to investigate the discriminatory comments, denying him a promotion because of them, requiring him to apologize for his religion, and otherwise creating a hostile work environment. Bank of America began an investigation of Arave’s accusations, but Arave found the investigator hostile and refused to be interviewed.
On March 29, 2011, Arave resigned and later filed suit against the bank, Holsinger, and Anderson for religious discrimination, harassment, and retaliation. Before trial, the harassment claims against the two individual managers were dismissed by the court. A trial was held that summer, and on September 11, 2013, the jury returned a verdict in favor of the bank on all claims. In addition, the court made the unusual move of awarding the bank almost $100,000 in attorneys’ fees and about $85,000 in costs. Arave appealed the ruling as well as the award of fees and costs.
Arave Appeals to a Higher Authority
Arave first argued that the trial court allowed prejudicial evidence against him and allowed the bank’s counsel to make prejudicial arguments. The court of appeal rejected both assertions. Arave then claimed that the trial judge’s “prejudices and biases pervaded the entire trial,” citing “the rude and discourteous manner in which the trial court treated his counsel and witnesses.” The court of appeal disagreed and found “nothing to suggest judicial bias, much less anything that would draw into doubt the fairness of the trial.”
Arave also complained that the trial court instructed the jury that the bank “cannot be liable for discrimination or harassment based solely on the fact that the survey comments were made.” The court didn’t find that instruction to be an error. Finally, Arave complained that the jury had to find that he was harassed and retaliated against in violation of the law. The court disagreed, finding the jury could have concluded that the bank’s refusal to consider Arave for the Orange County job was based on factors other than his religion, and Holsinger’s request that he communicate with his subordinates was a legitimate business decision rather than an act of harassment.
The court of appeal did reverse the trial court’s award of attorneys’ fees and costs in favor of the bank. Such an award can be made only after an express finding that Arave’s litigation was frivolous. The trial court didn’t make such an express finding, and it therefore couldn’t order him to pay the bank’s attorneys’ fees and costs. The issue was remanded (sent back) to the trial court for an express finding on whether Arave’s case was frivolous and, if so, the appropriate award of fees and costs. Arave v. Merrill Lynch, Pierce, etc. (California Court of Appeal, 4th Appellate District, 1/2/18).
Bottom Line
This case presents the challenging situation in which the nature of the alleged supervisor’s harassment implicates sensitive issues of race or religion. It may also illustrate what can happen when you’re faced with an employee who has a troubling personality and blames everybody else for his problems—first his subordinates, then his managers, then the judge, and finally the jury. In other words, he blames everybody but himself.
But in the end, strong and consistent policies and investigations backed up with documentation generally prove to be the best way through a difficult morass. As a practical 
matter, you must decide which competing risk is more worrisome and then defend against that one. The bank appeared to have made the correct tactical decision. After remand, we may also have guidance on the ongoing question of when a prevailing employer may be awarded attorneys’ fees and costs.
Mark I. Schickman is a partner with Freeland Cooper & Foreman LLP in San Francisco and editor of California Employment Law Letter. You can reach him at schickman@freelandlaw.com.