U.S. Supreme Court Rules for Third-Party Retaliation Claims in Case From Carrollton, Ky.

A decision by the U.S. Supreme Court to reactivate a lawsuit — based on a claim that a company retaliated against one employee by firing her fiancee — should result in more lawsuits being filed by spouses and significant others. But the unanimous decision did not define just how expansive the “zone of interests” is, leaving HR leaders in the dark about where to draw the line.

By Tom Starner    Jan. 25, 2011

When the Supreme Court of the United States unanimously reversed an appeals court’s decision on a ground-breaking employer retaliation case on Monday, it gave employers something extra to ponder when thinking about firing anyone.

In the case, Thompson vs. North American Stainless LP, the plaintiff, Eric Thompson, claimed he was fired because his fiancee filed a charge with the Equal Employment Opportunity Commission against their common employer.

A trial court granted the employer’s motion for summary judgment and the U.S. 6th Circuit Court of Appeals agreed. But the Supreme Court reversed that decision and sent the case back to the lower court, in effect giving Thompson the chance to prove his case in court.

The High Court’s 8-0 decision, say employment lawyers, may lead to more litigation alleging similar circumstances — and it could take a long time and many lower court decisions for a consensus to emerge as to who can sue based on this specific type of retaliation. Justice Elena Kagan took no part in the case.

In the majority opinion (PDF), Justice Antonin Scalia writes that “injuring [Thompson] was the employer’s intended means of harming [the fiancee, Miriam] Regalado.”

“Hurting him was the unlawful act by which the employer punished her,” Scalia writes. “In those circumstances, we think Thompson well within the zone of interests sought to be protected by Title VII [of the 1964 Civil Rights Act].”

Thompson’s fiancee filed a charge with the EEOC in September 2002, alleging her supervisors discriminated against her based on her gender. About five months later, the EEOC notified North American Stainless of the charge, and less than a month later, North American Stainless fired Thompson, saying it was for performance-based reasons.

According to Steve Hurd, a partner and co-head of Proskauer Rose’s employment-litigation and arbitration group in New York, Monday’s decision creates the potential for additional retaliation claims because it expands the class of workers who can file such complaints under Title VII.

The key question in the case, he says, was how Title VII protection is extended to those close to the complaining worker.

In the opinion, Hurd says, Scalia noted that that broad wording of the law made it difficult to define a “comprehensive set of clear rules” about who is covered by the law. Scalia also wrote, however, that it is “obvious that a reasonable worker might be dissuaded from” filing a complaint “if she knew that her fiancee would be fired.”

“The decision,” Hurd says, “wasn’t a major surprise because of the facts in this specific case. But in this decision, the Court didn’t establish where this line is in terms of who can be considered to be in what the High Court calls the ‘zone of interests.’ And because they don’t define who that is, employers can be in a difficult spot.”

That definition will initially be left to the lower courts as they hear this and similar cases — which will leave the law unsettled for employers, he says.

“I expect courts will be inundated with these types of cases, until it gets sorted out,” he says. “It certainly creates a chilling effect on employers who want to fire someone, because now they don’t know where the line is.”

Ron Chapman Jr., a Dallas-based shareholder in the law firm Ogletree, Deakins, Nash, Smoak and Stewart, says that, while the new ruling makes it easier for employees and former employees to sue companies, it is just another in a line of Supreme Court decisions that have made it easier to sue for retaliation.

“It is unusual for one employee toallege he was retaliated against because of the actions of another employee, so the factual scenario presented in this case will not arise very often,” Chapman says. “But the Court’s recent decisions make it is easier to sue for retaliation than for discrimination, even though the same statute makes both illegal.”

Chapman says that, when reading the statute literally, the employer should have won. However, the conservative Supreme Court unanimously ruled the spirit of the statute permitted the claim being asserted, even though the actual text of the statute did not.

“Considering many members of the Court frequently chastise those who interpret statutes broadly, this ruling is ironic and flies in the face of a strict constructionist philosophy,” he says. “On the other hand, based on the allegations in the case, it is not surprising.”

According to EEOC statistics, retaliation became the most frequently cited form of on-the-job discrimination in 2009 (33,613 charges), overtaking race discrimination (33,579 charges) by a slim margin.

Chapman says employers need to re-examine policies and procedures for dealing with internal complaints, so as to minimize the risk of a retaliation complaint.

“These days, employers face numerous complaints from current employees, not just former employees,” he says. “Dealing with the current employee who has lodged a complaint can be tricky.”

In theory, Chapman explains, the law allows an employer to hold an employee accountable for his or her performance, regardless of whether they previously filed a complaint. In reality, however, when the employer tries to hold that employee accountable, he is likely to claim retaliation.

“Whether the employer can defeat that claim of retaliation is going to depend in large part on the policies the employer has in place and the degree to which it followed its standard procedures,” Chapman says. “Employers should make sure those policies and procedures are up to date, thereby creating the best legal defense possible.”

John Quinn, a Philadelphia-based employment attorney at Eckert Seamans, says it comes down to the Supreme Court’s determination of “zone of interests.” According to the Court’s opinion, Thompson was not “an accidental victim” and “injuring him” was the way the company opted to retaliate against the fiancee who had filed the EEOC complaint.

“If you are going to fire someone, make sure you have a valid reason, a nondiscriminatory reason,” Quinn says, adding that Justice Ruth Bader Ginsburg, in a concurring opinion, points to the manual of the EEOC, which prohibits retaliation against someone closely related to the person filing a claim.

“Employers just need to follow basic guidelines, the old truisms apply,” he says. “What did you do and why did you do it? And, most of all was it fair, consistent and documented? This case is not as shocking as it might seem. Not being ‘an accidental victim’ is the key phrase.”

Simon Sandoval-Moshenberg, a Washington-based attorney, represents an ex-employee in a similar case that has yet to be resolved.

Sandoval-Moshenberg’s client alleges he was fired from an Alexandria, Va., car dealership five days after his wife sued the company in an EEOC complaint based on pregnancy discrimination (she lost her job while recovering from a pregnancy-related medical procedure).

The case had been on hold until the High Court’s decision in the Thompson case.

“Of course, we are thrilled with Monday’s decision,” says Sandoval-Moshenberg, who, along with his client, sat in on the Supreme Court’s oral arguments. “But based on the questioning, it could have come down in a different way, because many of the questions from the justices wondered where to draw the line on which employees deserve protection.”

Sandoval-Moshenberg says that, from an HR perspective, this decision doesn’t change much. That is, if employers are doing things properly.

“The EEOC always considered this an unlawful practice, and HR managers should be guided by that,” he says. “But even without the EEOC, you would think this would be illegal because it conforms with the sense of what the law ought to be.”

He says the Supreme Court did a very good job of taking a step back, closely looking at the nature of the employment relationship and the realities on the ground.

“They didn’t get bogged down in technicalities,” he says. “Defense attorneys tried to say this would open the litigation floodgates, but the true takeaway message is, ‘Don’t retaliate.’ If you want to fire someone for cause, document it.”

Proskauer’s Hurd reiterates that there will be added lawsuits, and justified or not, employers will carry the costs and the angst of dealing with that ever-increasing trend.

“This will mean another analysis employers will have to do before they fire someone,” he says. “The first half the decision I agree with … completely, because it was retaliation. But extending it to third parties without defining where the line is drawn will be the issue. Spouses are one thing, but how far will it be pushed is another.”

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