A California Court of Appeal recently upheld an award of $16 million against Staples for age discrimination in a case called Nickel v. Staples. The majority of that award ($13 million to be exact) was in the form of punitive damages, which are meant to punish the defendant for its wrongful conduct. I found the court’s analysis in this case particularly interesting because many employers have a false sense of security that terminating older employees because they generally have higher salaries and cost the company more is a legitimate business decision. However, it’s evidence of that reasoning that justified the large punitive damages award.
Workers Who Are Over 40 Years Old Protected from Discrimination
Employers with over 5 employees are subject to the Fair Employment and Housing Act’s (“FEHA”) anti-discrimination laws. Government Code Section 12940(a) makes it a wrongful employment practice to discriminate against someone in the terms and conditions of their employment because they are over 40 years old. An easy rule of thumb for employers to remember is:
whenever age the motivating factor for an employment decision, you are exposing yourself to a potential lawsuit.
Employers usually have a non-discriminatory reason for their decisions not to hire, not to promote, or to fire an employee. However, a court will look to see whether the reason given is pretextual. In the Nickel case, the 64-year-old plaintiff was terminated because he took a bell pepper from the refrigerator. There is evidence that it was common practice to take food afterhours and pay for it later. Nevertheless, Staples fired plaintiff for stealing.
Why is this pretextual?
In this case, evidence was presented to the jury (which they believed to be true) that the manager involved in the decision to fire plaintiff made ageist comments. For example, he told other managers to “[t]ake a closer look at the older people. They are starting to drag and slowing down. If they are not top performers, write them up and get rid of them[,]” and asking older workers when they plan on retiring. These statements and other circumstances indicated that the motivating factor for plaintiff’s termination was his age, not really the alleged theft of the bell pepper. Stated simply, if plaintiff was a 24-year-old employee, he probably wouldn’t have been terminated for the bell pepper incident.
But older employees cost me more.
In its decision affirming the trial court’s award of punitive damages, the Court of Appeal specifically pointed out that evidence that “the discriminatory firing was undertaken in order to reduce overhead costs and make Staples more profitable. This motivation likewise increases Staples’ reprehensibility.” In short, cutting costs by targeting a protected class could expose your business to punitive damages in the millions of dollars.
In this case, the vast majority of the evidence of discriminatory animus came from statements made by one manager. As your company grows, it becomes more difficult to monitor various decision-makers’ conduct. Hence, the importance of proper training regarding the California employment laws and federal employment laws applicable to your business.
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