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Ward v. AutoZoners, LLC: Fourth Circuit Rejects Punitive Damages in Hostile Work Environment Title VII Case

A jury ruled in favor of the plaintiff on a hostile work environment claim under Title VII and an intentional infliction of emotional distress (“IIED”) claim under North Carolina law. The Fourth Circuit affirmed the verdict but reversed as to punitive damages, holding that there was insufficient evidence to warrant them. The upshot is that punitive damages for Title VII claims are only available when a manager participates personally in the harassment, though the extent of the required participation remains undefined. This case is also a reminder that it is a good idea to periodically review sexual harassment policies and conduct regular workplace trainings so those policies are actually carried out. 

The claims were based on a series of harassing acts inflicted upon the plaintiff by one of his coworkers. The incidents were protracted, and when the plaintiff reported the incidents no meaningful action was taken. The plaintiff eventually resigned his employment and suffered both physical and emotional distress (hence the IIED claim). There were favorable facts for the plaintiff: the sexual harassment policy was not available in written form at the AutoZone store where he worked; there was no in-person training about the policy at that store; management did not respond when notified of the harassing behavior; and even after the plaintiff resigned management insisted that the whole issue was his fault since he was a man and the harassing employee was a woman. On appeal, defendant did not even contest the validity of the compensatory damages for the Title VII claim. Instead, the corporate defendant sought to eliminate the punitive damages and argued that awarding damages for the IIED claim provided an impermissible double recovery. 

Punitive damages for a Title VII claim require two showings to a preponderance of the evidence. Plaintiff must show that the employer “engaged in unlawful intentional discrimination (not an employment practice that is unlawful because of its disparate impact),” 42 U.S.C. § 1981a(a)(1), and that the employer engaged in the discriminatory practice “with malice or with reckless indifference to the federally protected rights of an aggrieved individual,” 42 U.S.C. § 1981a(b)(1). What constitutes the “employer,” a threshold issue before a court conducts the damages inquiry, is derived from principles of agency. As the employee who actually conducted the harassment was at the same corporate level as the plaintiff, the Fourth Circuit ruled that she did not qualify as the employer. The Fourth Circuit did hold that there was sufficient evidence for the jury to conclude that two other employees involved in the litigation did serve in a managerial capacity and so were the “employer” for Title VII purposes. 

The Fourth Circuit then reviewed the evidence to determine whether there was sufficient evidence for the jury to have found that one of the two managing employees engaged in intentional discrimination with malice or reckless difference towards plaintiff’s rights. As there was no evidence that the two managing employees engaged in any intentional discrimination themselves, there was no basis upon which the jury could have found the employer liable for punitive damages. It was insufficient for punitive damages that the managers did nothing to stop the harassment being directed at the plaintiff by his coworker, though this was negligence supporting the award of compensatory damages. 

North Carolina state law requires an even greater level of proof to award punitive damages—clear and convincing evidence. As there was insufficient evidence to meet the lower burden of preponderance of the evidence, the Fourth Circuit held there was also insufficient evidence to meet this higher standard and reversed the award of punitive damages for the state IIED claim. The Fourth Circuit then rejected defendant’s double-recovery argument and remanded with instructions to modify the verdict. 

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