Economic Straits Fueling Rise In Retaliation Claims

Statistics indicate a startling rise in the number of retaliation claims brought against employers by their former and current employees.

Federal laws protect employees who allege and report unlawful practices like discrimination or harassment perpetrated by their employers, supervisors and fellow employees. The retaliation occurs when the employer takes an adverse action against the employee for making the allegations.

It is the adverse action, such as termination of the employee, denial of a promotion, a demotion or a negative evaluation that is baseless, that often spurs the employee to make a retaliation claim which may lead to an employment practices liability lawsuit.

Whether or not such a lawsuit is justified, employers have discovered that they still may incur costly legal fees to defend against the claim.

The number of retaliation claims skyrocketed 55 percent between 2000 and 2009, from 21,613 to 33,613 claims, respectively, according to the Equal Employment Opportunity Commission. In 2010, for the first time ever, retaliation under all statutes (36,258) surpassed race (35,890) as the most frequently filed charge, according to the EEOC. Retaliation claims currently account for 36 percent of all EEOC charges–the highest percent yet and one that many legal experts anticipate will grow as federal laws make it easier to sue for retaliatory charges.

One factor in this alarming rise appears to be the persistent, high unemployment rate. Out of work and increasingly desperate about their economic situations, former employees may argue that their job termination was a retaliatory act by their employer for something they had complained about prior to their discharge.

Here's a fictitious but not uncommon scenario:

An employee makes a complaint about a perceived job discrimination or harassment committed by a supervisor against a fellow worker. This complaint is investigated and determined to be unfounded.

Months later, the supervisor fails to promote the employee who made the initial complaint or fires the individual as part of a company downsizing effort. The employee files a retaliation claim alleging that the adverse action was a consequence of having made the initial complaint.

While the underlying charge of discrimination was unsubstantiated, the employer is still on the hook financially to defend against the retaliation claim.

Although data on median settlements and awards involving retaliation claims are difficult to come by, individual cases point to the financial severity for companies. In one recent case, a former employee working at a private preparatory school received a $950,000 settlement.

The employee had served as the chair of an accreditation study, and during the course of this work discovered that the institution paid men more than women with similar educational backgrounds and credentials. When he queried administrators about the apparent inequity, he was fired.

He then called his lawyer and filed the retaliation claim.

In this case the underlying charges of discrimination were found to be true. With many other retaliation claims, the initial act of wrongdoing is unfounded.

In a case involving charges of racial discrimination brought by an African-American employee–Frank Kevin Fischer v. United Parcel Service–the employer, United Parcel Service, obtained a jury verdict in its favor. The employee continued working for the company for two years, until he was discharged. He then filed a retaliation claim alleging that the job termination was an adverse action by his employer because of his previous allegations of discrimination.

The jury awarded back pay of $150,000, plus $650,000 in compensatory damages and $1.3 million in punitive damages, later decreased to $300,000.

Recent U.S. Supreme Court rulings are another factor contributing to the rise in retaliation claims frequency. In Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, the court basically held in 2009 that an employee who participates in an internal investigation of another employee's claim of job discrimination or harassment is protected against adverse actions taken by the employer.

In Burlington Northern & Santa Fe Railway Co. v. White, the court ruled in 2006 that retaliation extends beyond employment-related retaliatory acts like termination or failure to promote and can include job transfer.

In the case, a female employee had complained about a supervisor's inappropriate remarks. The supervisor was suspended. When he returned to work in the same position, he reassigned the female employee's job duties. She argued that this was an adverse action taken in retaliation for her initial complaints. The court concurred.

The burden of proof in a retaliation claim is considered lower than in the initial charge of discrimination. Even if the initial charge is not valid, the risk of the plaintiff prevailing in the retaliation claim is real and significant. Indeed, the legal landscape is littered with examples of a retaliation claim surviving summary judgment in the wake of an unproven discrimination or harassment claim.

Agents and brokers can assist their commercial clients to manage both the risks of the initial allegation of wrongdoing and the separate claim of retaliation. Underwriters favorably view commercial clients that have a clearly worded document defining discrimination and harassment, and then strictly prohibiting this conduct.

It also is considered good policy to inform employees that they can file such claims without fear of job-related retaliation. The document perhaps should also define what retaliation is, how employees can file a claim of retaliation, and what to expect afterward.

If an employee alleges employment-related discrimination or harassment, companies obviously should take the charges seriously and immediately begin an internal investigation.

Anyone coming forward with evidence supporting or contrasting with the initial charges should be informed of the company's firm stance on anti-retaliation. Make it clear that the individual filing the complaint will not incur a demotion, a decrease in pay, or a transfer to a position that may be more physically demanding or varies significantly from current duties.

If transfer from the current job is required to remove the person from an uncomfortable work environment, it may be better to consider granting the employee a leave of absence with pay than to transfer the individual to a position involving more demanding duties.

Most importantly, supervisors and managers must be trained about the adverse actions that may constitute retaliation. This includes seemingly innocuous statements, gestures or symbolic threats.

The training should not be a once and done deal; consider providing refresher courses annually or semi-annually. And from a legal best practices standpoint, it is considered prudent to document the scope and extent of this training to indicate the actions taken by the company to limit the possibility of retaliatory actions.

While employment practices liability insurance is the last line of defense, all companies can benefit by giving more thought to the risk of retaliation claims. Innocent moves that seemed prudent at the time may have adverse consequences later on, often unintentionally.

Companies may expect to see a continued uptick in retaliation claims, but by following best practices, they may avoid becoming a part of this trend.

Catherine M. Padalino is a vice president and worldwide employment practices liability product manager at the Chubb Group of Insurance Companies.