Scottsdale, Arizona Warning: “Cat’s Paw” Doctrine Big Problem for Employers

The U.S. Supreme Court has just come out with a ruling (download ruling by clicking here) that confirms a focus on employers.  An 8-0 ruling in Staub vs. Proctor Hospital greatly expands tremendous liability for discrimination to parties who don’t appear to have discriminatory intent, and broadened tactics that an employee can use to prove discrimination.  While the effect can be a staggering blow to law-abiding companies, the fact that the decision was written by conservative Justice Scalia is especially sobering.

This is one that CEOs and Boards of companies, large and small, cannot afford to ignore.  For employers, the case is probably the most significant of this year’s Court term and we can certainly expect to see this doctrine come up time and again.

CEOs’ summary of case: There are conflicting opinions from several circuit courts of appeal concerning when employers can be held liable for the illegal motives of low-level supervisors when the management team was not aware of and did not condone the motives.  The U.S. Supreme Court agreed to decide the matter and issued a ruling that allows liability to spread to parties who don’t appear to have discriminatory intent but are influenced by others who do, often called the “cat’s paw” principle.  Having the latest policy against discrimination and not being aware of it in your company used to be a good place to be – but no longer.  At the 35,000 foot level, discrimination is bad and if it exists in your company you are likely screwed.  At ground level, it’s time you get help (as a part-time CFO, I recognize the value of outsourcing) with your human relations function and follow the Dos and Don’ts at the end of this article.

The Cat’s Paw Doctrine: “Cat’s paw” is a term derived from La Fontaine’s “The Monkey and the Cat.”  In the story, a monkey induces a cat to extract roasting chestnuts from a fire.  The cat does so, burning its paws in the process.  The monkey takes off with the chestnuts and leaves the cat with nothing.

The lesson of the story in employment claims: One unscrupulous person uses a second person to unwittingly do what the first person wants.  In other words, a supervisor with a biased intent can trick (or unduly influence) an unbiased decision-maker to take an illegal action against an employee.  It was noted in the U.S. Supreme Court case that the employee brought a cat’s paw case, meaning that he sought to hold his employer liable for the ill will of a supervisor who was not charged with making the ultimate employment decision.

Facts of the case: Vincent Staub was an angiography technician employed at Proctor Hospital in Peoria, Illinois.  He was also a member of the U.S. Army Reserve.  This required him to attend drill one weekend a month and to train full time for two to three weeks a year.

Staub’s immediate supervisor (Janice Mulally) and her supervisor (Michael Korenchuk) were “hostile” about Staub’s military obligations, according to the Supreme Court.  Staub’s immediate supervisor, Mulally, scheduled him for additional shifts without notice so that he would, “pay back the department for everyone else having to bend over backwards to cover his schedule for the Reserves,” the High Court states.  Supervisor Korenchuk referred to Staub’s military obligations as “a bunch of smoking and joking and a waste of taxpayers’ money.”

According to the Court record, immediate supervisor Mulally issued Staub a “Corrective Action” disciplinary warning because he purportedly violated a company rule requiring him to stay in his work area when he was not working with a patient.  Staub disputed the existence of such a rule and argued that even if it did exist, he did not violate it.

Two months later, Proctor Hospital’s COO directed supervisor Korenchuk and HR Vice President Linda Buck to create a plan that would solve Staub’s “availability problems.”  Korenchuk informed Buck that Staub had violated the Corrective Action by leaving his desk without informing a supervisor.  Buck relied on this accusation, reviewed Staub’s personnel file, and decided to fire him.

Staub claimed Mulally fabricated the allegation of violating the Corrective Action out of hostility toward his military obligations.  Staub sued Proctor Hospital under the Uniformed Services Employment and Reemployment Rights Act (USERRA).  He did not contend that Buck had any hostility toward him.  He contended that supervisors Mulally and Korenchuk were hostile toward him “and that their actions influenced Buck’s ultimate employment decision.”

The court noted that a “jury found that Staub’s ‘military status was a motivating factor in Proctor’s decision to discharge him.”  Even though the person who ultimately fired him wasn’t discriminating against him, she was influenced in a “cat’s paw” way.

Decision favors employee. The court concluded in favor of Staub’s assertions, stating:

“There was also evidence that their [the supervisors’] actions were motivated by hostility toward Staub’s military obligations, and that those actions were causal factors underlying Buck’s decision.  Finally, there was evidence that both Mulally and Korenchuk had the specific intent to cause Staub’s termination.”  Thus, “The employer  is at fault because one of its agents committed an action based on discriminatory animus [intent to do wrong] that was intended to cause, and did in fact, cause, an adverse employment decision.”

How to Help “De-Claw” the “Cat’s Paw” Threat: Here are some steps your business can take to help protect it from liability:

1. Be aware that the “Cat’s Paw” doctrine can apply in other types of illegal employment discrimination actions. The court pointed out that the USERRA employee protections are “very similar” to other laws.

In addition to rights under USERRA, federal (and possibly state and local) laws protect employees and job applicants against:

  • Discrimination or harassment because of race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability, or genetic information.
  • Denial of a reasonable workplace accommodation that an employee needs because of religious beliefs or disability.
  • Retaliation because the employee complained about job discrimination, or assisted with a job discrimination investigation or lawsuit.

Expect courts in the future to apply the “Cat’s Paw” decision to similar cases growing out of such laws as Title VII (the civil rights law) and the Americans With Disabilities Act.

2. Do thorough investigations and reviews of all pertinent circumstances and issues before making a disciplinary and/or a firing decision.  This will ensure that the decision is not influenced by or motivated by illegal intent or illegal actions by persons who represent the employer.  The court’s decision stated that “if the employer’s investigation results in an adverse action for reasons unrelated to the supervisor’s original biased action… then the employer will not be liable.”

3. Regularly – at least annually – train managers and supervisors about their obligations under various civil rights and equal employment laws, and the proper way to document their employment-related decisions.

4. Consider establishing a more formal Human Relations function in your company.  As a part-time CFO, I recommend outsourcing as an especially cost-effective way to do this.

5. Consult with your employment law attorney for guidance in manager-supervisor training and in investigations.

What Not to Do: What happened to the employee in this case is a clear example for employers of how NOT to deal with staff members.  From this case and the court’s decision, here’s what you can learn about handling personnel decisions:

  • Don’t set up an employee for failure to create a pretext for disciplining or terminating the employee.
  • Don’t enforce a “rule” that is arbitrary and that has not previously been communicated to all employees.
  • Don’t hound, discipline, or fire an employee in ways that violate the employee’s legal rights.  In Staub v. Proctor Hospital, the employee’s violated rights were protected under the Uniformed Services Employment and Reemployment Rights Act.  But, as described above, employees have legal protections under other laws.

To protect your company, make sure that supervisors’ recommendations and decisions are well supported and documented.  Beef up the HR function within your company.  Consult with your attorney if you need guidance in your situation.

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