Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
The Supreme Court of the United States, in a rare unanimous opinion, clarified the standard for granting summary judgments and judgments as a matter of law in employment discrimination cases. The case of Reeves v. Sanderson Plumbing Products, Inc., ___S. Ct. ___ (2000), may apply to all discrimination cases, and not just those under the Age Discrimination in Employment Act (ADEA).
Whether the Court's decision in Reeves will make it more difficult for employers to avoid trial or reverse adverse jury verdicts in discrimination cases will depend on the circuit in which the case was brought. Hailed by many as a victory for employees, the decision maintained the present law in some jurisdictions, while making it more difficult for employers to obtain summary judgments or judgments as a matter of law in other jurisdictions.
The Facts in Reeves
In October 1995, Roger Reeves was 57 years old and had spent 40 years working for Sanderson, a manufacturer of toilet seats and covers. His supervisory responsibilities included recording the attendance and hours of those under his supervision, and reviewing the weekly report that listed the hours worked by each employee.
In the summer of 1995, Reeves' supervisor informed the director of manufacturing that "production was down" in Reeves' department because employees were often absent and were "coming in late and leaving early." Reeves' supervisor ordered audits of timesheets and claimed that his investigation revealed numerous timekeeping errors and misrepresentations on the part of plaintiff and two other employees. Reeves' supervisor, along with the vice president of human resources and vice president of operations, recommended to the company president that Reeves and one co-employee be fired. The company president accepted that recommendation.
Reeves filed suit contending he had been fired because of his age in violation of the ADEA. The case in many respects resembled the typical ADEA suit. At trial the employer contended it fired plaintiff because of his failure to maintain accurate attendance records, while plaintiff attempted to demonstrate that the explanation was a pretext for age discrimination. Plaintiff introduced evidence that he accurately recorded the attendance and hours of the employees under his supervision and that his supervisor, who was described as wielding "absolute power" within the company, had demonstrated age-based animus in his dealings with him.
The District Court twice denied oral motions by the employer for judgment as a matter of law. The jury returned a verdict in favor of the plaintiff, awarding him compensatory damages. It also found defendant's age discrimination was willful, thereby awarding double damages. The employer renewed its motion for judgment as a matter of law and alternatively moved for a new trial, while plaintiff moved for front pay. The District Court denied the employer's motions and granted plaintiff additional front pay.
The Court of Appeals for the Fifth Circuit reversed, holding that plaintiff had not introduced sufficient evidence to sustain the jury's finding of unlawful discrimination. 197 F.3d 688 (5th Cir. 1999). After reviewing the defendant's justification for the discharge, the Court of Appeals acknowledged that plaintiff "very well may" have offered sufficient evidence for a reasonable jury to have found that the employer's explanation for its employment decision was pretextual. However, the Court explained that this was not dispositive of the issue of whether plaintiff presented sufficient evidence that his age motivated the employment decision. Addressing this question, the Court weighed Reeves' additional evidence of discrimination against other circumstances surrounding his discharge. On this basis, the Court concluded that the petitioner had not introduced sufficient evidence for a rational jury to conclude that he had been discharged because of his age.
The Supreme Court granted certiorari to resolve a conflict among Courts of Appeals whether a plaintiff's prima facie case of discrimination, combined with sufficient evidence for a reasonable fact finder to reject the employer's non-discriminatory explanation for its decision, is adequate to sustain a finding of liability for intentional discrimination. One line of cases from the Third, Sixth, Seventh, Eighth, Ninth and Eleventh Circuits held that a prima facie case combined with sufficient evident to disbelieve an employer's explanation always creates a jury issue of whether an employer intentionally discriminated. The contrary line of cases, from the District of Columbia, Second and Fourth Circuits, held that a plaintiff's discrediting of an employer's explanation is endowed with considerable weight, such that a plaintiff should not routinely be required to submit evidence over and above proof of pretext. This standard was sometimes referred to a "pretext plus."
The Supreme Court's Decision:
The Court ruled 9-0, with a concurring opinion by Justice Ginsburg, that the Fifth Circuit erred and applied the wrong standard of proof, and that under the proper standard of proof, plaintiff presented sufficient evidence to support the jury's verdict in its entirety. It therefore reinstated the judgment in Reeves' favor.
Acknowledging that discrimination claims often arise from circumstantial evidence, the Court reviewed the allocation of burden and of production and order for presentation of proof in discriminatory treatment cases it established in McDonnell Douglas v. Green, 411 U.S. 792, and subsequent decisions. First, the plaintiff must establish a prima facie case of discrimination. The plaintiff does so by showing at the time of termination he or she was a member of the class protected by the ADEA; he or she was otherwise qualified for the position; he or she was discharged by the employer. The burden thereafter shifts to the employer to produce evidence that the plaintiff was terminated for a legitimate, nondiscriminatory reason. Once the employer produces sufficient evidence to support a nondiscriminatory explanation for its decision, the employee must be afforded the opportunity to prove by a preponderance of the evidence that the legitimate reasons offered by the employer were not its true reasons, but were a pretext for discrimination. The Supreme Court held that Reeves satisfied his burden to establish a prima facie case. Because the employer introduced evidence of a nondiscriminatory reason for the termination, the ultimate issue became pretext.
The employer's evidence consisted primarily of testimony by supervisors and documentation of Reeves' alleged shoddy record keeping. However, in the Court's opinion, plaintiff made a substantial showing that the employer's explanation was false. Evidence showed that the office time clock frequently malfunctioned, and that plaintiff and other supervisors checked to see whether employees arrived at their shift at the time they claimed. Plaintiff also cast doubt on whether he was responsible for failure to discipline late or absent employees. Evidence showed that plaintiff was not responsible for citing employees for violation of the company's attendance policy, and that there had never been a union grievance or employee complaint arising from record keeping. Nor had the company ever calculated the amount of alleged overpayments attributable to Reeves' errors. Plaintiff also introduced evidence that the supervisor principally responsible for his firing had said that plaintiff "was so old [he] must have come over on the Mayflower" and on another occasion, stated that plaintiff "was too damn old to do [his] job." A fellow supervisor, roughly 24 years younger than plaintiff, corroborated that there was an "obvious difference" in how their ultimate supervisor treated them.
The Supreme Court found the Court of Appeals ignored the evidence supporting Reeves' prima facie case in challenging Sanderson's explanation for its decision. It said the Court of Appeals misconstrued the employee's evidentiary burden of attempting to prove intentional discrimination through indirect evidence. Citing its previous decision in St. Mary's Honor Center v. Hicks, 509 U.S. 502, where it held that the fact finder's rejection of the employer's legitimate nondiscriminatory reason for its action does not compel judgment for the plaintiff, the Supreme Court also reasoned it is permissible for the trier of fact to infer the ultimate fact of discrimination from the falsity of the employer's explanation. It stated, "proof that the defendant's explanation is unworthy of credence is simply one form of circumstantial evidence that is probative of intentional discrimination, and it may be quite persuasive." The Court of Appeals erred in proceeding from the premise that the plaintiff must always introduce additional, independent evidence of discrimination. Although the court should review the record as a whole, it must disregard all evidence favorable to the moving party that the jury is not required to believe. A court should give credence to evidence favoring the nonmovant, as well as that evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that the evidence comes from disinterested witnesses.
The Supreme Court acknowledged that the standard it set was not perfectly clear. It stated Reeves' prima facie case, combined with evidence to find that the employer's asserted justification was false, would not always be adequate to sustain a jury's finding of liability. It said there would still be instances where despite that evidence, no rational fact finder could conclude that the action was discriminatory. An employer would be entitled to judgment as a matter of law if the record conclusively revealed some other, nondiscriminatory reason for the decision or if the plaintiff created only a weak issue of fact as to whether the employer's reason was untrue and there was abundant and uncontroverted independent evidence that no discrimination had occurred.
The decision in Reeves is significant because it underscores the importance of investigating and documenting employment decisions before terminating an employee. Prima facie cases are generally easy to prove. While the ultimate issue is whether the decision was motivated by improper discrimination, in reality, notwithstanding instructions that juries are not to second-guess the wisdom of employment decisions, what ultimately persuades juries is whether they believe the company treated the employee fairly and had good cause for the termination. In Reeves' case, the company's justifications for termination, while appearing reasonable, did not stand up to the facts. Coupled with ageist comments by a supervisory decision-maker, Sanderson found itself liable not only for age discrimination, but willful age discrimination.
Any decision to terminate an employee in a protected class should be thoroughly scrutinized by the human resources department, and in appropriate cases, by legal counsel. Even where not required by company policy, procedure or past practice, an employee should be notified of deficiencies and given an opportunity to remediate them. Additionally, counseling provides the opportunity for the employer to hear the employee's version of the facts. Failure to obtain that information before termination may result in obtaining it only as evidence of pretext once suit has been filed.
Man Bites Dog: Employer Obtains Judgment as a Matter of Law
Some cases unfortunately proceed to plaintiffs' verdicts when the evidence consists of little more than a prima facie case, or perhaps not even that much evidence. Fortunately the Supreme Court has held that employment discrimination cases are not insolated from review under Rule 50 of the Federal Rules of Civil Procedure, which governs judgments as a matter of law. The United States Court of Appeals for the Tenth Circuit recently visited one of those cases and reversed a jury's verdict of discrimination and willful discrimination in Manning v. McGraw Hill, Inc., No. 99-1010, 99-1029, and 99-1130 (10th Cir. 2000).
Plaintiff in Manning was a sales account executive terminated after 14 years of employment. Plaintiff's new supervisors required all sales executives to set quarterly goals for themselves. The evidence was uncontroverted that plaintiff had the lowest score for all department employees for four consecutive quarters. Plaintiff's supervisor issued him a final letter of warning. The letter of warning included goals to complete for the following quarter, provided methods for counseling and improving plaintiff's performance, and advised plaintiff that failure to meet the goals would result in his termination. During that quarter, plaintiff's supervisors also revised plaintiff's goals, presented him with a memorandum detailing certain skills needing improvement and follow-up memoranda addressing plaintiff's progress toward his goals. The employer terminated plaintiff's employment when he did not meet his goals for that quarter.
Plaintiff filed suit alleging a violation of the ADEA, and that defendant's violation was willful. A jury agreed and awarded him $649,800. Defendant moved for judgment as a matter of law during and after trial. The District Court denied defendant's motion, but reduced the damages to $401,000.00. Defendant appealed the denial of its motions to the Court of Appeals, which reversed the trial court's judgment and ordered judgment in its favor.
The Court reviewed the evidence most favorable to the plaintiff, and found it wanting. It rejected alleged statements made by a nondecision-maker unrelated to plaintiff's termination. Plaintiff's alleged evidence of a pattern of age discrimination was nothing more than evidence of scattered decisions revealing little about the company's processes. Finally, the Tenth Circuit found little value in plaintiff's evaluations from previous supervisors when the evidence was uncontroverted that he consistently failed to meet his present supervisor's expectations, and most significantly, goals that he himself had helped establish. Holding that the Court would not second-guess those business decisions, it held that the law did not "require an employer to adopt a life of economic altruism and thereby immunize protected class members from discharge or demotion despite their poor performance and inadequate qualifications."
The distinction between the results in Manning and Sanderson lies in the quality of the employer's documentation to support the termination decision. Plaintiff as a result failed to cast a sufficient doubt on defendant's explanation to sustain the verdict in his favor.
A period of uncertainty will follow as courts struggle to follow the standards imposed on them by the Reeves decision. Cases in jurisdictions which previously required evidence over and above a prima facie case and circumstantial evidence rebutting the employer's justification will be subject to a lower standard of proof. Courts are likely to allow more marginal cases to survive summary judgment, and to allow marginal jury verdicts to survive judgments as a matter of law. It is incumbent on the decision-makers to acknowledge their ability to justify their disciplinary decisions. It will be the task of employment counsel to explain and defend this decision to six to twelve strangers summoned to decide the legality of that decision.
Franklin A. Nachman is a shareholder in Littler Mendelson's Denver office. If you would like further information, please contact your Littler attorney at 1.888.Littler, www.littler.com, or email firstname.lastname@example.org, or Mr. Nachman at email@example.com.