by Armando V. Riccio, Esq.
Recently, the New Jersey Supreme Court provided guidance regarding the definition of “upper management” for the purpose of imposing punitive damages against employers in state law discrimination cases. Previously, the Court ruled that a finding of employer liability for punitive damages required two elements: egregious conduct and participation by upper management or willful indifference. Until the Court’s recent decision in Cavuoti v. New Jersey Transit Corp., the definition of “upper management” has remained somewhat elusive.
Factual Background and Legal Issues
Joseph Cavuoti, a 51 year old general foreman, was an 8-year veteran of New Jersey Transit. In late 1993, Cavuoti filed a grievance with his employer’s Equal Opportunity – Affirmative Action officer alleging that he was denied five different promotions over a four-year period due to his age. A few months later, he filed a complaint with the Equal Employment Opportunity Commission. Shortly thereafter, Cavuoti’s immediate supervisor, Deborah Finn, reprimanded Cavuoti for filing the original grievance and threatened that “employees who do so will face problems.” Cavuoti complained to Finn’s immediate superior. The matter continued to escalate and, over a six to eight-month period, Cavuoti repeatedly complained about Finn’s harassment. In late 1994, the EEOC determined that there was insufficient evidence to support Cavuoti’s claims.
Not surprisingly, Cavuoti received unfavorable performance appraisals from Finn for his 1994-1995 and 1995-1996 annual reviews. In August of 1996, Cavuoti was terminated for poor judgment, failure to supervise employees and inability to follow management’s direction. Cavuoti filed a complaint in state court alleging age discrimination and retaliatory discharge under the New Jersey Law Against Discrimination (“NJLAD”). A jury awarded him $222,323 in compensatory damages and $1,000,000 in punitive damages.
Legal Effects of The Supreme Court’s Decision
The Court provided guidance for determining whether an individual is a member of “upper management” for the purposes of imposing punitive damages against employers:
- Identifying “upper management” is a fact sensitive inquiry. Mere job titles will not negate liability. Instead, functional assignments are directly relevant in determining whether an individual is a “supervisor” or “manager.”
- Aside from the most upper tier of management (chief executive officer, chief operating officer or a member of the board of directors), an employee may be considered a member of “upper management” if the employee has either (1) broad supervisory powers over the involved employees, including the power to hire, fire, promote, and discipline, or (2) the delegated responsibility to execute the employer’s policies to ensure a safe, productive and discrimination-free workplace. Notably, under the NJLAD, liability for punitive damages applies to all employers regardless of the organization’s size. A hierarchal structure will not insulate employers from liability.
- Juries will be instructed that the purpose of the definition of “upper management” is to provide employers with incentive to provide voluntary compliance programs and insist on effective enforcement of such programs.
Liability Prevention
The following should aid employers in preventing liability for punitive damages:
- Review, revise, and distribute to all employees written personnel policies which include clear rules on verbal and non-verbal harassment and discrimination, a complaint procedure and a requirement for disciplinary or other remedial action to be taken against offenders. Ensure the company’s complaint procedure addresses all forms of harassment and discrimination, not simply sexual harassment. Implement distribution procedures which document receipt of the policy or revised policy. Post the policy at two visible, accessible locations at each facility.
- Train employees in discrimination and harassment prevention and schedule “refresher” programs. When scheduling such programs keep in mind hiring cycles, human resource planning horizons and employee turn over. Keep accurate attendance records for each program.
- Encourage employees to come forward with complaints at the earliest opportunity and establish an investigative process that ensures a prompt, thorough and fair investigation which culminates in effective remedial action when justified. Ensure protection from retaliatory action for employees who register valid complaints.
- Review present job descriptions to determine whether the description reflects the actual day-to-day activities and responsibilities of the position. Assess whether the functional assignments of the position can result in a finding of supervisory authority. If such a finding is likely, determine whether your organization should transfer certain responsibilities to another job title/position.
