THE MISTAKES OF OTHERS

A Sampling of Cautionary Cases

Nothing drives home the point of how devastating employment law violations – even inadvertent violations – can be than reviewing some of the verdicts and settlements that have been recently reported. We can all learn from the mistakes of others. We urge our clients to learn from the mistakes these employers were alleged to have made.

• Schepel Buick & GMC Truck, Inc., a car dealership, employed a used car manager for many years. The manager developed muscular dystrophy, and had delegated some of his inspection functions to other personnel due to decreasing mobility. After recovering from an accident, he was not permitted by Schepel to return to work, and brought an ADA claim, seeking lost back wages, lost future income, and mental distress. A jury awarded $1,050,000.
  
  
• Farmers Insurance Exchange was found liable for $90 million in unpaid overtime pay. Farmers had improperly classified its claims representatives as administrative personnel exempt from overtime requirements. Farmers appealed, the verdict was upheld, and $34.5 million was added to the judgment. Farmers had offered $8 million to settle the case before trial.
  
  
• Coca-Cola Co. paid a record $192.5 million to settle a racial discrimination suit alleging the company discriminated against African American salaried employees in pay, promotions and evaluations. The settlement consisted of cash, future salary adjustments and the establishment of an independent panel to stand watch over its employment practices. The panel required, among other things, a review of the company’s diversity efforts and human resources operations as well as annual diversity training.

• Ford Motor Co. reached a settlement with the EEOC to pay $7.75 million to as many as 900 women to settle complaints that they were groped and subjected to crude comments and graffiti at two Chicago-area plants. The settlement also called for sensitivity training by outside consultants at Ford plants across the nation at a cost estimated by the EEOC at $10 million. "This settlement demonstrates the EEOC's commitment to eradicate harassment from the workplaces of America," the commission's chairwoman, Ida L. Castro stated.
  
  
• Aydin Corporation agreed to pay $4.1 million to settle a class-action suit brought by former employees and executives who claimed that they were entitled to overtime pay. Aydin had classified the employees as exempt salaried workers, but docked their pay for absenteeism, as if they were non-exempt. This fact dramatically strengthened the case against Aydin, and led to the settlement.
  
  
• Home Depot settled a sex discrimination class action brought by female workers at its west coast stores for 87.5 million, including attorneys’ fees and costs. In addition, the company committed itself to modifying its hiring, promotion, and compensation practices in ways that will ensure that interested and qualified women will be hired for, and promoted to, sales and management positions. Through 2002, the injunctive relief created thousands of new job opportunities in sales and management positions at Home Depot, generating the equivalent of over approximately $100 million per year in wages for female employees.
  
  
• A female newscaster for WWOR in New Jersey was fired after filing a workers' compensation claim and an EEOC complaint. The jury awarded $2,000,000 for pain and suffering and emotional distress and $2,835,436 for economic loss. The jury also found that the conduct of WWOR’s upper management was in reckless disregard of the newscaster’s rights, and on that basis awarded punitive damages in the amount of $2,500,000. The total verdict amounted to $7,335,436.
  
  
• Two female branch managers in their 50’s sued a New Jersey bank, National State Bank, and obtained a total verdict of $4,248,025. The bank laid off a substantial number of employees as part of a reduction in work force and a number of branches were closed. The plaintiffs, however, were falsely advised by managers that they were terminated for poor performance, and they contended that this caused them extreme emotional upset, since they had always been model employees. They also contended that it took more than a year to obtain appropriate alternative banking employment, and one of the plaintiffs claimed gender discrimination as well. The jury’s verdict included $2,000,000 in punitive damages for each plaintiff.
  
  
• The only African-American employed in the shipping department at Potomac Corporation alleged race discrimination in the form of racial slurs and jokes. The jury found in favor of employee and awarded $5,612 in back pay, $30,000 for emotional distress, and $1,000,000 in punitive damages.
  
  
• Two female employees sued Tidyman’s Inc., charging that their employer failed to pay them wages and compensation equal to their male counterparts, failed to promote them on the basis of gender, and retaliated against them after they complained of the discrimination. Both started in entry level positions, one in accounts payable and the other in data entry, and were denied management positions even though they appeared to have superior qualifications. The jury returned a verdict of $3.3 million for past lost wages and future lost wages and awarded each plaintiff $1 million in punitive damages.
  
  
• A manager for NJ Transit claimed that he was retaliated against by his employer for bringing an age discrimination case. The jury found for plaintiff and awarded $222,323 in compensatory damages, which included $152,892 for retaliatory discharge, $24,431 for failure to promote and $45,000 for emotional distress. The jury also awarded $1,000,000 punitive damages. The punitive damages judgment was remanded for reconsideration in light of a faulty jury charge.
  
  
• A customer service representative for U-Haul International, brought suit alleging sex discrimination after being fired and replaced by a male shortly after she was hired. The employer claimed she was fired because she did not have hitch installation experience and there was no time to train her. The jury believed the employee, and returned a verdict of $625,000 which was later reduced to $285,000 by the district court to conform with a statutory damages cap.
  
  
• American Express Financial Advisors Inc. paid $31 million to settle a lawsuit brought by female employees alleging that male advisors were paid higher salaries, received more training and mentoring opportunities and were given promising leads for potential clients. In addition to paying damages, American Express also promised to change some of its practices, including setting goals for increased hiring of women through 2005, random distribution and tracking of sales leads, a revised promotion system and diversity training for supervisors.

• A male corrections officer sued the State of New Jersey, claiming that he was continuously subjected to extensive harassment by a female corrections officer because he rebuked her advances, and that he was also continually harassed by a number of her co-worker/friends because of the hostility generated by the harassing female co-worker. Plaintiff contended that the continued harassment created a hostile work environment and caused him to suffer severe emotional distress. He also charged that the State’s managers failed to respond in an appropriate and timely manner and that their repeated failure to take remedial action over a nine year period constituted outrageous conduct and deliberate indifference to the continuing harassment, warranting punitive damages. The jury awarded $750,000 in compensatory damages and $3,000,000 punitive damages.
  
  
• Salomon Smith Barney was ordered to pay $3.2 million, including $1.5 million in punitive damages, to a female stockbroker who accused it of sexual harassment. The stockbroker had brought the issue to the personnel department, but the company’s investigation of the allegations was found to be lacking and, instead, management blamed the women for complaining.
  
  
• An airline pilot for Ryan International Airlines was demoted after failing a required proficiency check. The pilot believed that her test had been rigged because employer’s male leadership did not want women flying its planes. The case went to trial on a claim of retaliation, and the jury awarded plaintiff $6,000 in compensatory damages and $3.5 million in punitive damages, eventually reduced to the statutory cap of $300,000, plus back pay and attorneys' fees.
  
  
• Buffalo Hilton Hotel employed a bartender who tested positive for HIV. His condition became known when he submitted a disability insurance form. Buffalo Hilton Hotel fired the bartender, who then brought a claim under the ADA and the New York Human Rights Law. The jury awarded the bartender compensatory damages consisting of $65,000 in back pay, $50,000 for future health insurance premiums, $324,000 for future medication costs, and punitive damages of $1 million, for a total award of $1,439,000. The judgment was later modified in light of certain statutory caps.
  
  
• CEC Entertainment, Inc. operated a restaurant, and employed a mentally retarded, autistic and nonverbal man to perform janitorial duties. He was terminated, and instituted suit under the ADA. The jury awarded the employee $70,000 in compensatory damages and $13 million in punitive damages. The total award was statutorily capped at $300,000.
  
  
• State Farm Insurance paid $157 million to resolve claims that it refused to hire females as agents. Previous settlements in the case bring the total recovery to $200 million. Allegations that State Farm required female agents to have college degrees but did not have the same criteria for men were coupled with statements that State Farm management flatly declared that it did not hire women for agent positions. The total cost to State Farm, including damages, costs, and attorneys' fees, was approximately $230 million.

• Under the category of “no employer is immune,” the federal government agreed to pay a record $508 million to more than 1,000 women who claimed they were refused employment by the now-defunct U.S. Information Agency and the Voice of America (the government’s radio broadcaster abroad) solely on the basis of their sex. The consistent allegation from the plaintiffs was that highly-qualified women with relevant experience were routinely rejected in favor of men with fewer skills and less experience. The case went to trial and the government was found guilty of discrimination, twice lost on appeal, and the Supreme Court refused to hear the matter. In addition to the $508 million settlement, the court also ordered the government to pay the women back pay and interest, bringing the total cost to $530 million. Many of the women also were awarded job relief and federal government retirement accounts.

• Rent-a-Center agreed to a $47 million settlement to resolve claims of sexual discrimination, including failure to promote or forced resignations based upon gender bias and harassment. The offending conduct included, among other things, eliminating job classifications typically held by women and imposing weight-lifting requirements. In addition to the monetary settlement, Rent-a-Center was also required to create a new human resources department within the company to help it avoid future violations, impose penalties for managers who discriminate against women, create a hotline to report violations of company policy, and train workers in equal employment opportunity and non-discrimination.
  
  
• Mitsubishi Motors paid a record $34 million to settle claims brought by female auto workers who alleged that they had been groped and subjected to lewd jokes and behavior while working on the assembly line at its Normal, Ill., plant. The EEOC publicized the outcome as a warning. ``Make no mistake about it, the Mitsubishi situation is not unique and no employer should assume that it can't happen in my company,” EEOC Chairman Paul M. Igasaki told a news conference. “Other employers should take heed. EEOC will aggressively pursue problems like this.”
  
  
• Radio Shack Corporation paid $29.9 million to settle an overtime claim brought by its managers. Radio Shack claimed the managers were properly exempt from overtime requirements; the plaintiffs claimed they were essentially non-exempt sales persons. In similar circumstances, Starbucks settled for $18 million, and SBC Pacific settled for $35 million.
  
  
• A former employee of Connaught Labs, Inc., brought an ADA claim, alleging that she had MS, that her symptoms were exacerbated by stress, and that her employer did not take that into account in assessing her job performance. She was awarded $2.5 million in compensatory and punitive damages by a Pennsylvania federal court jury.
  
  
• The University of Pennsylvania was held for more than $115,000 in damages, including $25,000 in punitive damages, plus $175,000 in attorneys fees, in a reverse sex discrimination suit filed by a male candidate for the position of coach of the women’s crew team. The University hired a qualified woman for the position, but the court found that the University based its actions on gender, not just qualifications, in violation of its own policies.
  
  
• A jury awarded nearly $550,000 as damages (including back pay, front pay, liquidated damages, attorney fees and interests) against Caesar’s Atlantic City Hotel & Casino. The court found that Caesar’s violated the federal Family and Medical Leave Act (FMLA) when it terminated a blackjack dealer because of absenteeism related to the worker’s documented back complaints.
  
  
• Texaco, Inc’s $176.1 million settlement of a race discrimination lawsuit was the largest agreement of its kind in history and has forever changed the status of employment discrimination claims. The case was originally brought by African American employees who alleged disparity in pay and promotion as compared to non-minority employees. In addition to statistical evidence, Texaco executives were caught on tape using racial slurs against minority employees while discussing a discrimination lawsuit against the company. In addition to cash damages and retroactive salary increases, the settlement agreement required the creation of an Equality and Fairness Task Force. The Task Force was charged with eliminating policies, practices and procedures that had discriminatory effects.

• Supercuts, Inc., a nationwide chain of hair salons based in Minneapolis, Minn., settled an EEOC race discrimination charge for $3.5 million. The EEOC claimed that the company had failed to hire and promote African Americans. In addition, Supercuts agreed to pay the cost of an administrator to distribute the money, post ads in newspapers regarding the discrimination claims, and implement several preventive measures, including the production of a one-hour training video to be shown to approximately 750 store managers on an annual basis over three years.
  
  
• The EEOC and Cheap Tickets announced a $1.1 million settlement of a sexual harassment charge, alleging that female agents working at Cheap Tickets' Los Angeles Call Center were subjected to a sexually hostile work environment by their supervisors. The settlement including payments to women who had been afraid to report harassment for fear of retaliation.