Gone, but not forgotten

published in Oklahoma Employment Law Letter | July 1, 2011

As you know, Title VII of the Civil Rights Act of 1964 forbids not only discrimination in employment but also retaliation against an employee who has engaged in certain “protected activity.” What you may not have considered is the fact that actions taken even after an employee is terminated could form the basis for a retaliation claim. A recent case from the Tenth U.S. Circuit Court of Appeals (which covers Oklahoma) highlights some of the ins and outs of post-termination retaliation claims and confirms a few principles useful to employers involved in Title VII litigation.

Meteoric Rise

In February 2005, Santa Fe Protective Services hired Lynn McDonald as a nonexempt clerical and accounting worker without benefits. Santa Fe is a small company run by a female president, Christina Maki. It provides security services and obtains its work through competitive bidding, qualifying for certain contracts as a woman and minority-owned business.

McDonald’s rise in the company was meteoric. Within months, she had been promoted to a manager position with a salary and benefits. Over the course of the following year, she received another performance-based raise, a bonus, and an additional eight percent salary increase reflecting the benefits costs no longer required to be expended on her behalf since she had married the company’s chief operating officer (COO), Terry Cuba, and become his dependent for health insurance purposes. In addition, although she was an exempt manager, she was required to work only 40 hours per week and was allowed to work an alternative weekly schedule of four 10-hour days instead of the usual five eight-hour days.

Nonetheless, McDonald (now McDonald-Cuba) complained that Santa Fe was discriminating against her (and other female supervisors) by classifying them as “managers” rather than “directors.” In response, Maki promoted McDonald-Cuba to director of accounting and finance and increased her compensation yet again. That promotion in February 2007 made her the third highest-paid full-time management employee at the company’s headquarters, second only to Maki, the president, and Cuba, the COO. Her duties remained mostly clerical, however.

To recap, then, within a two-year span of time, McDonald-Cuba went from being a nonexempt worker to becoming the third-highest-paid employee in the company, with compensation increases of more than 20 percent and a personalized work schedule. By contrast, the two other director-level employees at Santa Fe headquarters, both male, made several thousand dollars less than she did, worked more than 60 hours per week, and were responsible for hiring, disciplining, and terminating employees in addition to their operational duties.

No good deed goes unpunished

A couple months later, Cuba resigned from Santa Fe, and he and his wife formed a company called Brahma Defense Enterprises, LLC. They told Maki that Cuba was “getting out of the security field” and that Brahma was a consulting company for unions. However, they registered their new business in the database for federal contractors, the Central Contracting Registry (CCR), under the North American Industry Classification System (NAICS) code for “Security Guards and Patrol Services.” It was also identified as a woman- and minority-owned business, which made it eligible to compete with Santa Fe for contracts.

In the fall of 2007, the two male directors at Santa Fe received larger percentage pay increases than McDonald-Cuba did, although they still made less than she did. Maki explained that the directors were given the larger raises because they hadn’t received salary increases in previous years.

In early December 2007, Maki learned of Brahma’s CCR registration status and NAICS code. She believed the registration represented a “huge conflict of interest” and felt that she had been misled by her former COO and his wife. She was also concerned about the potential misuse of confidential Santa Fe information. Two days later, she terminated McDonald-Cuba’s employment.

McDonald-Cuba turned around and filed a charge of discrimination and retaliation with the Equal Employment Opportunity Commission (EEOC). She also filed a claim for unemployment benefits, which Santa Fe opposed. After receiving her right-to-sue letter, she filed suit.

McDonald-Cuba alleged that Santa Fe discriminated and retaliated against her by (1) giving the male employees higher raises, (2) terminating her employment, and (3) making false statements in the unemployment proceeding. In response, Santa Fe counterclaimed for breach of contract, intentional interference with prospective economic advantage, and breach of the duty of loyalty. McDonald-Cuba then amended her complaint to allege that the counterclaim itself was retaliatory.

Fortunately for Santa Fe, both the trial court and the Tenth Circuit agreed that it  was entitled to judgment in its favor. In the course of its ruling, the Tenth Circuit repeated several helpful principles commonly relied on by employers in making employment decisions. What can be learned from the court’s opinion.

Case dismantled, claim by claim

First, the court confirmed that all alleged discriminatory acts must first be reviewed by the EEOC, even if they occur posttermination or once a lawsuit has commenced. It is firmly established that federal courts lack jurisdiction to review Title VII claims that aren’t part of a timely filed EEOC charge. The law encourages resolution of discrimination issues before a lawsuit is filed, and that can only happen if the employer — and the EEOC — has notice of all the acts claimed by the employee to be discriminatory.

In 2002, the U.S. Supreme Court distinguished between “discrete” actions that occur at a fixed point in time, such as termination, and “hostile environment” claims, which involve the cumulative effect of repeated conduct. Since hostile environment claims involve an ongoing pattern of conduct, even acts occurring more than 300 days before a charge is filed, so long as at least one of the acts contributing to the claim took place within the 300-day statute of limitations period.

In the case of a “discrete” act, however, the Court determined that each act constitutes its own unlawful employment practice, so it must be expressly included in a claim filed with the EEOC within 300 days (in Oklahoma) of the act in question. As a result, allegations of discrimination cannot be “swept” by reference into an existing claim or subsequent lawsuit.

In this case, McDonald-Cuba alleged that the counterclaims filed by her ex-employer were retaliatory. Santa Fe’s filing of its answer to her lawsuit, which included the counterclaims, was clearly a finite, “discrete” action. Thus, the court found that McDonald-Cuba should have filed a separate EEOC charge and allowed the agency and Santa Fe an opportunity to address and perhaps resolve that charge instead of initially making her claim in the context of her lawsuit. Because she failed to do so, the trial court didn’t even have jurisdiction to review her retaliation claim, and it was properly dismissed.

Next, the court summarily dismissed McDonald-Cuba’s allegation that Santa Fe’s opposition to her unemployment claim was retaliatory. McDonald-Cuba didn’t argue that the company’s statements were made in retaliation for her pretermination complaints about job titling and raises for her male coworkers. She argued that the company’s opposition to her unemployment claim was in retaliation for her decision to file the EEOC charge, lawsuit, and unemployment claim.

To prove retaliation, and employee must first establish that she engaged in “protected activity,” by either opposing discrimination on the basis of race, color, national origin, sex, or religion, or making a charge, testifying, assisting, or participating in a Title VII investigation, proceeding, or hearing. The court easily found that merely filing an application for unemployment benefits, without more, doesn’t constitute “protected activity” under Title VII.

That isn’t to say, however, that the court’s opinion stands for the proposition that opposing an unemployment claim, filing a counterclaim, or engaging in posttermination harassment could never be the basis of a retaliation charge. If McDonald-Cuba had filed a timely EEOC charge and received a right-to-sue letter, she could have asked the court at that point for permission to amend her complaint and include her retaliation claim, which the court is required under the rules of federal procedure to “freely give” if it finds that “justice so requires.”

Keep in mind that according to the Supreme Court, retaliation isn’t confined to actions that occur at a workplace but includes any action that is so harmful that it could dissuade a reasonable worker from making or supporting a charge of discrimination. In a 2007 case, in fact, the Tenth Circuit recognized that an employer’s opposition to an unemployment benefits claim could represent retaliation. In that case, the employer intentionally presented false evidence at the unemployment proceedings and repeatedly drew a connection between actions in the unemployment case and the employee’s discrimination charge. The court found there were sufficient questions of fact for the case to proceed to trial on the retaliation issue.

It’s therefore important to understand that opposition to an employee’s allegations during postemployment legal proceedings must be confined to the issues at hand — in the unemployment context, you must focus on the employee’s work-related misconduct. Your response must be carefully drafted and handled in good faith based on well-documented facts. Remember, too, that even though the filing of an unemployment claim isn’t protected activity under Title VII, an employer in Oklahoma that discriminates against someone for making a claim for unemployment benefits or obstructs or impedes the filing of a benefits claim in any manner can be subject to fines and even jail time for doing so.

Final points

Returning to the case at hand, here are a few final points to remember. In a discrimination case in which there is no “smoking gun” evidence, the employee will attempt to prove that the employer’s stated legitimate reason for its action isn’t believable and thus, by implication, is instead a cover-up for a discriminatory motive. Usually, that’s done with evidence of a supervisor’s failure to follow company policies or inconsistencies in internal documentation. The law will not second-guess whether an employer’s proffered reason was wise, fair or correct — only whether it’s undermined by inconsistencies that could make it appear to be dishonest.

In this case, McDonald-Cuba argued that her claim should proceed to trial so that a jury could determine whether Maki’s actions were reasonable. The court dismissed that argument, stating that whether Maki acted reasonably wasn’t the issue. Because there was no evidence to show that she didn’t honestly believe her reasons for terminating McDonald-Cuba, or that she didn’t act on her beliefs in good faith in firing her, the reasonableness argument failed. Your goal is to eliminate potential inconsistencies to the greatest extent possible by documenting ongoing issues promptly, thoroughly, accurately, objectively, and fairly, so that your legitimate business justifications are supported by your records.

Finally, McDonald-Cuba complained that Maki didn’t really believe that she was entitled to her promotion to director but did it condescendingly, as a “fig leaf,” to avoid the appearance that Santa Fe discriminated against women. To claim that a promotion plus a raise is evidence of discriminatory bias because the (female) employer didn’t fully embrace the employee’s true merit is a novel argument, to say the least. The trial court called it “absurd.” The Tenth Circuit declined to go that far but noted that giving a promotion and raise, however grudgingly, doesn’t establish any “cover-up” for an underlying discriminatory motive.