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Supreme Court Creates Potential Safe Harbor for Employers

August 5, 1999
Related Topics: Discrimination and EEOC Compliance, Featured Article
While the Supreme Court's recent decision in Kolstad v. American Dental Association is being viewed by some as a blow to employers, companies that take a closer look at the Court's decision will find both a safe harbor and important guidance on how they can minimize the risk of costly punitive damages. If businesses only focus on the fact that, as a result of the Court's decision, it will be easier for employers who violate antidiscrimination laws to be held liable for large punitive damages, then they are missing the much bigger picture-and a very big opportunity-created by the decision.

Good faith gives employers a safe harbor.
In the Kolstad case, an employee sued and sought punitive damages against her employer, asserting that she had been passed over for a promotion based on her gender in violation of Title VII. Reversing a federal appeals court decision, the Court held that punitive damages may be awarded for intentional violations of Title VII without a showing that the employer engaged in independently egregious conduct. However, in a separate vote, the Court refused to hold employers vicariously liable for managers' discriminatory employment decisions when those decisions are contrary to the employer's good faith efforts to comply with Title VII.

Because the Supreme Court actually rewarded employers who make good faith efforts to implement antidiscrimination programs by providing them with a defense to punitive damage awards, it's now imperative for employers to take advantage of the safe harbor created by the Court by taking necessary steps to defend against discrimination committed by managerial employees.

Establishing a good faith defense
Below are several steps that employers can take to create effective antidiscrimination programs and establish a good faith defense to punitive damages when managers violate Title VII.

Key actions for employers include:

  • Establishing and communicating an antidiscrimination policy. The policy should state that the employer is committed to equal employment opportunity for all persons regardless of race, color, religion, sex, marital status, national origin, citizenship status, disability, veteran status or other forms of protected status established by state or federal law. The policy also should: state that it extends to all aspects of the employment relationship; establish a procedure to complain about violations of the policy, making several complaint options available; and affirm the company's commitment to investigate complaints and take appropriate action against employees or managers who violate the policy.
  • Communicating the policy through corporate intranets, recruitment literature, application forms, handbooks, training, employee orientation, annual reports and other appropriate forums.
  • Reviewing existing policies and practices for compliance with antidiscrimination rules. For example, ensure that managers and supervisors are not asking improper questions at hiring interviews.
  • Training managers and supervisors about the employer's obligations under employment discrimination laws, including who is covered by the law, what types of actions constitute discrimination and what steps should be taken to avoid discriminatory practices.
  • Monitoring all employment actions, such as hiring, discipline, promotion, demotion, staffing, layoffs, termination, wage and salary actions, transfers, training, and working conditions for compliance with discrimination laws.
  • Staying up to date with current developments to demonstrate a good faith attempt to understand employer obligations under federal employment laws.
  • Considering a workplace diversity program to further demonstrate commitment to a bias-free workplace.

It is also very important that employers consult state and local laws to determine what additional requirements may be imposed.

Source: CCH Incorporated is a leading provider of information and software for human resources, legal, accounting, health care and small business professionals. CCH offers human resource management, payroll, employment, benefits, and worker safety products and publications in print, CD, online and via the Internet. For more information and other updates on the latest HR news, check our Web site at

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

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