Arguing that in a Claim of Employment Discrimination Under Mass. G.L. c. 151B, an Employer Should Not Be Held Vicariously Liable for Punitive Damages Based on a Supervisor’s Egregious Misconduct Towards a Subordinate Employee, if the Employer Has Made Good Faith Efforts to Comply with c. 151B, Namely by Taking Preventive and Corrective Steps to Eliminate Discrimination in the Workplace.
In this case, the Massachusetts Supreme Judicial Court was presented with the novel issue whether an employer should be held strictly liable under the Massachusetts Employment Anti-Discrimination Act (Mass. G. L. c. 151B) for punitive damages based on the egregious misconduct of a supervisor toward a subordinate employee. The issue was significant because the SJC held many years ago, in College-Town v. Mass. Comm’n Against Discrimination, 400 Mass. 156 (1987), that employers are strictly liable in actual damages for actionable supervisory misconduct under c. 151B. And so the Court was presented with the question whether the same College-Town standard of strict liability should apply to employers with respect to punitive damages, given the markedly different purposes that distinguish punitive from actual damages.
The plaintiff, Emma Gyulakian, was an employee of Lexus of Watertown from 2003 through 2012. In 2014, she prevailed in a jury trial on her claim that her immediate supervisor had sexually harassed her for an extended period of time and had thereby created an unlawful hostile work environment in violation of c. 151B. The jury awarded her $40,000 in compensatory damages and $500,000 in punitive damages. On Lexus’ post-trial motions, the trial court vacated the award of punitive damages. The lower court apparently concluded that, as a matter of law, an employer cannot be held vicariously liable in punitive damages for egregious supervisory misconduct.
In the SJC appeal, NELF filed an amicus brief supporting the decision below, arguing that the College-Town standard of strict liability should not apply, and that an employer should not be liable for punitive damages unless it has engaged in blameworthy conduct itself. Recognizing such a standard is appropriate, NELF argued, because punitive damages serve to punish and deter an employer’s wrongful conduct, not to provide the injured employee with a remedy for the actual harm inflicted by the rogue supervisor. Accordingly, NELF argued that an employer should not be held liable for punitive damages if it can show that it has taken affirmative steps to eliminate discrimination in the workplace, such as by implementing an antidiscrimination policy, through education and training, and by providing internal grievance procedures and acting appropriately on grievances. Indeed, NELF argued, recognizing such a standard would create an incentive for employers to take measures to carry out c. 151B’s important social goal of eradicating discrimination in the workplace.
In its decision of August 24, 2016, the SJC adopted NELF’s position that an employer should not be held liable in punitive damages for a supervisor’s egregious misconduct unless the employer itself has engaged in blameworthy misconduct. The Court announced that the standard to be applied is whether the employer was on notice of the supervisor’s misconduct and egregiously or outrageously failed to respond. “We consider first whether the employer was on notice of the harassment and failed to take steps to investigate and remedy the situation; and, second, whether that failure was outrageous or egregious.” The Court then applied this two-step test to the record and concluded that Lexus was liable in punitive damages for the supervisor’s harassment of Gyulakian. Therefore, the Court reinstated the award of punitive damages. Nonetheless, the principle articulated in NELF’s amicus brief is now the law in Massachusetts. Employers cannot be held liable for punitive damages unless they have engaged in outrageous or egregious misconduct of their own.
In this case, the Massachusetts Supreme Judicial Court was presented with the novel issue whether an employer should be held strictly liable under the Massachusetts Employment Anti-Discrimination Act (Mass. G. L. c. 151B) for punitive damages based on the egregious misconduct of a supervisor toward a subordinate employee. The issue was significant because the SJC held many years ago, in College-Town v. Mass. Comm’n Against Discrimination, 400 Mass. 156 (1987), that employers are strictly liable in actual damages for actionable supervisory misconduct under c. 151B. And so the Court was presented with the question whether the same College-Town standard of strict liability should apply to employers with respect to punitive damages, given the markedly different purposes that distinguish punitive from actual damages.
The plaintiff, Emma Gyulakian, was an employee of Lexus of Watertown from 2003 through 2012. In 2014, she prevailed in a jury trial on her claim that her immediate supervisor had sexually harassed her for an extended period of time and had thereby created an unlawful hostile work environment in violation of c. 151B. The jury awarded her $40,000 in compensatory damages and $500,000 in punitive damages. On Lexus’ post-trial motions, the trial court vacated the award of punitive damages. The lower court apparently concluded that, as a matter of law, an employer cannot be held vicariously liable in punitive damages for egregious supervisory misconduct.
In the SJC appeal, NELF filed an amicus brief supporting the decision below, arguing that the College-Town standard of strict liability should not apply, and that an employer should not be liable for punitive damages unless it has engaged in blameworthy conduct itself. Recognizing such a standard is appropriate, NELF argued, because punitive damages serve to punish and deter an employer’s wrongful conduct, not to provide the injured employee with a remedy for the actual harm inflicted by the rogue supervisor. Accordingly, NELF argued that an employer should not be held liable for punitive damages if it can show that it has taken affirmative steps to eliminate discrimination in the workplace, such as by implementing an antidiscrimination policy, through education and training, and by providing internal grievance procedures and acting appropriately on grievances. Indeed, NELF argued, recognizing such a standard would create an incentive for employers to take measures to carry out c. 151B’s important social goal of eradicating discrimination in the workplace.
In its decision of August 24, 2016, the SJC adopted NELF’s position that an employer should not be held liable in punitive damages for a supervisor’s egregious misconduct unless the employer itself has engaged in blameworthy misconduct. The Court announced that the standard to be applied is whether the employer was on notice of the supervisor’s misconduct and egregiously or outrageously failed to respond. “We consider first whether the employer was on notice of the harassment and failed to take steps to investigate and remedy the situation; and, second, whether that failure was outrageous or egregious.” The Court then applied this two-step test to the record and concluded that Lexus was liable in punitive damages for the supervisor’s harassment of Gyulakian. Therefore, the Court reinstated the award of punitive damages. Nonetheless, the principle articulated in NELF’s amicus brief is now the law in Massachusetts. Employers cannot be held liable for punitive damages unless they have engaged in outrageous or egregious misconduct of their own.
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