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LABOR & EMPLOYMENT LAW — 9/5/08

Court reduces punitive damages award in religious bias jury verdict

Even though an employee produced sufficient evidence under Title VII and the California Fair Employment and Housing Act to support a jury’s verdict that a decisionmaker failed to promote her to a management position because she was not a member of his religious organization, the Fellowship of Friends, a federal district court in California reduced the employee’s $5.9 million dollar punitive damages award because the award was “constitutionally excessive” under the Fourteenth Amendment’s due process clause. The punitive damages award was more than nines times the employee’s $647,174 compensatory damages award.(Noyes v Kelly Services, Inc, EDCal, 91 EPD ¶43,280)

Looking at the “three guideposts” annunciated in BMW of N Am v Gore (517 US 559) for assessing whether a punitive damages award is unconstitutionally excessive: (1) how reprehensible the conduct is; (2) if there is a disparity between the harm suffered by the employee and the amount awarded; and (3) the amounts awarded in similar cases, the district court found that the guideposts as a whole only indicated that the employer’s “conduct displayed a modest degree of reprehensibility.” In particular, the court found that the intentional religious discrimination lodged against the employee was “‘more reprehensible than [it] would appear in a case involving economic harms only.’” In addition, the employee was made financially vulnerable to the employer, the conduct was repeated and the manager acted with “malice, fraud [and] oppression concerning the failure to promote decision.” Though there was sufficient evidence to support a punitive damages award, held the court, the evidence did not support the more than 9 to 1 ratio of punitive damages to compensatory damages, particularly when $500,000 of her compensatory damages award represented recovery for emotional distress.

The district court held that a 1-to-1 ratio of compensatory and punitive damages was a more proper constitutional limit, reducing the punitive damages award to $647,174 and giving the employee a total of approximately $1.3 million in damages.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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