A Good Faith Defense to Punitive Damage Claims

Third Quarter 2010Newsletters California Update Employment Law

While some may find this counterintuitive, the defense of an employment discrimination or harassment claim should begin before any alleged wrongful conduct occurs. A recent Ninth Circuit Court of Appeals decision (Boswell v. Federal Express Corp. (filed June 16, 2010)) illustrates this point.

In Boswell, Federal Express had asked the trial court for a jury instruction that it would not be liable for punitive damages if the jury found it engaged in good faith efforts to implement policies prohibiting and addressing discrimination, harassment, and retaliation. As the Supreme Court explained in 1999, "in the punitive damages context, an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where those decisions are contrary to the employer's good faith efforts to comply with Title VII." This is so, the Ninth Circuit panel noted, even when the punitive damages stem from actions taken by managers, unless the manager is "sufficiently senior" to be treated as "the corporation's proxy." Because the trial court failed to instruct the jury on the good faith defense to a punitive damages claim, the Boswell court overturned the punitive damage award.

The Boswell decision is unpublished and, perhaps because of that, did not go into detail in defining and elaborating on some of these terms. It provides a valuable reminder, however, that the defense of a claim for discrimination, harassment, and retaliation begins with policies, practices, and training implemented long before any complaint is filed.