Harassment, discrimination and retaliation can be costly for employers, even when employees do not suffer substantial injuries as a consequence of the conduct.  Employees who sue their employers under Title VII for harassment, discrimination or retaliation are subject to its statutory caps on compensatory and punitive damages.  The caps are based on the size of the employer, from 15 employees to more than 500 employees.  When punitive damages are recoverable under state common-law claims, they must be proportional to the violation.  However, a recent decision determined that proportionality does not need to be assessed for the statutory punitive damages caps established under Title VII.

In Arizona v. ASARCO LLC, 773 F.3d 1050 (9th Cir. 2014),  a female employee filed federal claims against her former employer for sexual harassment under Title VII (federal law).  The employer was a large employer with more than 500 employees.  The employee prevailed on her sexual harassment claims.  She apparently did not suffer a substantial compensable injury, so the jury awarded her nominal damages of $1 to formally recognize that she had been harassed.  The jury also awarded her $868,750 in punitive damages, which the court reduced to $300,000 in accordance with the statutory cap under Title VII based on the size of the employer.  The employer challenged the constitutionality of the award in light of the disparity between the nominal and punitive damage awards.  The court of appeal upheld the award despite the disproportionality because it determined that Title VII sufficiently informs employers of the conduct that subjects them to punitive damages and the maximum amount of such damages – in this case, capped damages of $300,000 for an employer with more than 500 employees.

Employers should take all allegations of harassment, discrimination and retaliation seriously.  If they have not already, employers should adopt and implement anti-discrimination and harassment policies.  Employers also need to enforce their anti-discrimination and harassment policies, investigate complaints, and take prompt and effective remedial action when a violation occurs.  While caps exist for punitive damages under federal law, punitive damages are not capped under California Law, the Fair Employment and Housing Act (“FEHA”).  And whereas Title VII applies to employers with 15 employees, FEHA’s discrimination and retaliation provisions apply to employers with just 5 employees, and its harassment protections apply to all employers, regardless of size.

DID YOU KNOW…

The FEHA imposes a continuing obligation on employers to communicate with employees or applicants to determine effective reasonable accommodations in response to a request for a reasonable accommodation (i.e., the interactive process).  Employers may be liable if they are responsible for a breakdown in the interactive process.  See, Swanson v. Morongo Unified Sch. Dist., 232 Cal. App. 4th 954 (2014).