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High court to rule on supervisor bias case

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WASHINGTON—The U.S. Supreme Court has agreed to decide when an employer can be held liable for a subordinate manager's alleged racial bias in firing an employee, a ruling that could significantly affect employers, employment law experts say.

The high court earlier this month agreed to hear arguments in BCI Coca-Cola Bottling Co. of Los Angeles vs. the Equal Employment Opportunity Commission. The EEOC brought suit on behalf of Stephen Peters, a black employee at BCI's Albuquerque, N.M., facility.

Mr. Peters was fired in October 2001 after refusing to work overtime while ill. His immediate supervisor, who allegedly had previously made racially disparaging remarks, sought advice from a Phoenix-based human resources manager on how to handle the situation. The HR manager had never met Mr. Peters, did not know his race, and approved the termination without investigating the situation on her own, relying instead on the supervisor's comments, court records state.

Mr. Peters filed a discrimination complaint under Title VII of the Civil Rights Act of 1964. Although a federal district court granted a summary judgment to dismiss the case, a three-judge panel of the 10th U.S. Circuit Court of Appeals in Denver reinstated the suit last June. The appeals court stressed that the HR manager relied solely on the account of what happened from Mr. Peters' supervisor without checking even basic information with Mr. Peters. The appeals court also noted the supervisor's alleged pattern of racial bias and that he had failed to discipline a Hispanic employee who refused to work on her day off.

In making the decision to terminate Mr. Peters, "the human resources official relied exclusively on information provided by Mr. Peters' immediate supervisor, who not only knew Mr. Peters' race but allegedly had a history of treating black employees unfavorably and making disparaging racial remarks in the workplace," the appeals court held.

The court also wrote that "recognition of subordinate bias claims forecloses a strategic option for employers who might seek to evade liability, even in the face of rampant race discrimination among subordinates, through willful blindness as to the source of reports and recommendations."

"We are committed to ensuring that justice is served in this case," said EEOC Phoenix District Director Chester V. Bailey in a statement issued by his office shortly after the appeals court issued its decision. "Unfortunately, race discrimination continues to be a problem in the 21st century workplace, more than 40 years after passage of the landmark Civil Rights Act."

Employment law attorneys say the Supreme Court's ruling could have significant practical consequences for employers.

"While the issues in the BCI Coca-Cola Bottling case involve nuts and bolts proof issues, they typically spell victory or defeat for employers in job bias lawsuits," said Gerald L. Maatman Jr., a partner with Seyfarth Shaw L.L.P. in Chicago.

"The Supreme Court will resolve an issue to open the courthouse doors wider or to narrow them in circumstances where employers defend their cases on the theory that discrimination is not present when a neutral decision-maker makes the firing decision," Mr. Maatman said. "Plaintiffs claim the doors to the courthouse ought to be expanded to allow suits where those neutral decision-makers nonetheless rubber stamp the biased decision-making of a subordinate official with direct responsibility for the worker's employment situation. The debate will resolve the conflicting interpretations of the circumstances in which a company is legally responsible for biased decision-making."

"I think it's a very important case," said Philip M. Berkowitz, a partner in the New York office of Nixon Peabody L.L.P. "It represents a very difficult situation where a large company whose decision on whether to terminate somebody needed to be affirmed by a human resources office that might not have direct contact with the individual who's terminated. Companies necessarily rely upon their manager for their recommendations and to tell them the truth regarding an employee's performance problems," he said.

"What this (appeals court) decision makes clear, is that if the manager or the employee reporting the performance problems has an underlying bias, if their decision is tainted with bias, then the company can be liable even if the person who affirms the decision or actually makes the decision to terminate, is untainted by discrimination," said Mr. Berkowitz.

"There's a lot at stake," said Mr. Berkowitz, who noted that the appeals court did indicate how a company can protect itself in such cases.

It's "significant that the court said the employer can avoid liability if the decision-maker conducts an investigation. The court said that simply asking the employee for his or her side of the story can defeat this inference that the decision was racially discriminatory," he said.

The appeals court decision "makes clear that no company can simply rely on the word of supervisor to take an adverse action without taking some measure of investigation to make sure that the decision was not tainted by bias," Mr. Berkowitz said.

"The high court will have a chance to clarify exactly how far an employer's obligation extends in investigating claims" such as Mr. Peters', said Robin Conrad, senior vp of the National Chamber Litigation Center in Washington, which handles litigation for the U.S. Chamber of Commerce.

"The total scope of what they call subordinate liability is an unanswered question," Ms. Conrad said. "There is a split in the circuits and it's really important for employers to know how deep they need to dig in investigating discrimination claims."