New York Law Journal
05-10-2012
A fired employee has no viable claim for retaliation under Title VII of the Civil Rights Law of 1964 for participating in an internal investigation prior to any proceeding before the Equal Employment Opportunity Commission, a federal appellate court held yesterday.
That was one of two questions of first impression on sexual harassment and retaliation resolved by the U.S. Court of Appeals for the Second Circuit.
The circuit also concluded that an affirmative defense to an employer's vicarious liability for a hostile work environment created by a plaintiff's supervisor is not available where the supervisor has enough authority and control so as to be the "proxy" or "alter ego" of the employer.
The new circuit law was made in Townsend v. Benjamin Enterprises, 09-0197-cv, where Martha Townsend sued her former employer Benjamin Enterprises, a firm that helps disadvantaged and low-skill workers train to work for local companies; its president Michelle Benjamin; and her husband, Hugh Benjamin, the sole vice president of the company. Both Benjamins are also shareholders.
Townsend was a receptionist who reported to the company's human resources director, Karlean Grey-Allen, that she was being sexually harassed by Hugh Benjamin.
Grey-Allen asked Townsend for a report, spoke to the New York State Division of Human Rights, asked Mr. Benjamin to work from home during her investigation and spoke about the allegations with a management consultant working for the company.
The talks with the consultant prompted Michelle Benjamin to fire Grey-Allen. Ms. Benjamin retained an outside human resources company to pursue the allegations and, after the company concluded nothing had happened, and it was a "he said, she said" case, Mr. Benjamin returned to work in the office.
Unable to tolerate working with Mr. Benjamin, Townsend resigned on March 23, 2005.
She and Grey-Allen filed suit in the Southern District, with Townsend charging hostile work environment and sexual harassment and Grey-Allen alleging retaliation for her investigation.
In February 2006, the Benjamins served Townsend with a Rule 68 Offer of Judgment for $50,000. She rejected the offer.
Southern District Magistrate Judge George Yanthis (See Profile) dismissed Grey-Allen's retaliation claim because her investigation was not associated with an ongoing EEOC proceeding, and she was not engaged in a protected activity.
On Dec. 12, 2008, a jury returned a verdict for Townsend for $30,400, finding that Mr. Benjamin had subjected her to a hostile work environment and that he was the alter ego of the company and his actions could be imputed to the company.
The amount of the award under Title VII against the company and the Benjamins was $5,200; $25,200 was against Mr. Benjamin for civil battery; and Yanthis awarded legal fees and costs of $141,308 to Townsend.
Appeals in the case were heard on Aug. 30, 2011, by Second Circuit Judges Debra Ann Livingston (See Profile) and Raymond Lohier and, sitting by designation, Southern District Judge John Koeltl (See Profile).
Koeltl wrote the court's 43-page opinion affirming Yanthis. Lohier penned a concurrence.
Retaliation Claim
Grey-Allen sought liability for retaliation under the participation clause of the Civil Rights Act's §704(a), which states it is unlawful to retaliate against a person "because he has opposed any practice made an unlawful practice by this subchapter, or because he has made a charge, testified, assisted, or participated in an investigation, proceeding or hearing under this subchapter."
Koeltl explained that the subchapter largely deals with the enforcement powers of the EEOC and the procedures by which it carries out investigations and hearings.
Every other Court of Appeals to consider the issue, he said, "has squarely held that participation in an internal investigation not connected with a formal EEOC proceeding does not qualify as protected activity under the participation clause."
Grey-Allen had argued that two U.S. Supreme Court cases bring internal investigations "under" Title VII within the language of the participation clause, Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries v. Ellerth, 524 U.S. 742 (1998).
In Faragher/Ellerth, the court established an affirmative defense to vicarious liability for hostile work environment by a supervisor where the employer has not taken a tangible employment action against the plaintiff and the facts show "(a) that the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise."
Koeltl said the Faragher/Ellerth affirmative defense creates an incentive for employers to conduct internal investigations, but "it does not impose an obligation on employees to participate in such investigations as a necessary prerequisite to bringing a discrimination claim under Title VII."
And the rulings "do not provide a basis for bringing internal investigations not associated with a formal EEOC charge 'under this subchapter' within the language of the participation clause," he said.
Lohier wrote he was "reluctantly" concurring with the decision affirming the dismissal of Grey-Allen's claim. Observing that the text of Title VII's anti-retaliation provision is ambiguous, he urged Congress to clarify Title VII if it wants to protect employees "merely because they participate in internal investigations of discrimination complaints prior to any involvement by the EEOC."
Affirmative Defense
The Benjamins argued on appeal that the Faragher/Ellerth affirmative defense still holds where the alleged harasser holds a sufficiently high position in the company to be considered a proxy or alter ego.
But Koeltl said that argument "cannot be squared with a fair reading of Faragher or Ellerth."
The EEOC enforcement guidelines, he said, state that the defense is not available to a proxy and that guidance "is entitled to deference," as it is persuasive.
Nothing in Faragher or Ellerth, Koeltl said, was a departure from the case law on proxy/alter ego liability.
Faragher quoted the Second Circuit case of Torres v. Pisano, 116 F.3d 625 (1997), for the proposition that "a supervisor may hold a sufficiently high position 'in a management hierarchy of the company for his actions to be imputed automatically to the employer.'"
"This doctrine," Koeltl said, "as approvingly described by Farragher, thus holds an employer liable in his own right for wrongful harassing conduct, rather than vicariously liable for actions of the employer's agents."
And both Faragher and Ellerth make clear that they "did not intend to depart from these well-established theories of employer liability in sexual harassment cases," he said.
Here, he said, the jury "reasonably could have concluded that Hugh Benjamin occupied such a position."
Stephen Bergstein of Bergstein & Ullrich in Chester represented the plaintiffs. He said the Townsend side of the opinion was good for plaintiffs, and he is weighing a petition for a writ of certiorari to the Supreme Court with regard to the Grey-Allen holding.
"I don't see how Congress could have wanted a result like this. How can you be fired for participation in an in-house investigation?" Bergstein said. "Human resources has to investigate but they are vulnerable to terminations. They won't do investigations because they are afraid and that's inconsistent with what Title VII stands for."
The Second Circuit also turned aside a challenge to the attorney fee award by the defendants.
Richard Kass and Amy Culver of Bond, Schoeneck & King represented the defendants.
@|Mark Hamblett can be contacted at mhamblett@alm.com.
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