By Kyla J. Miller and Tracy M. Billows

Seyfarth Synopsis: The 4th Circuit rejected a punitive damages award won by a male AutoZone worker who accused the Company of blatantly ignoring complaints of sexual harassment by his female co-worker, finding that managers who failed to act on his complaint, without proof of intentional conduct, did not warrant a punitive damages award against the Company in a hostile work environment case under Title VII.

Female on Male Harassment & Subsequent Complaints

Plaintiff Keith Ward, a part-time commercial driver, only worked a few months before he started being sexually harassed by his female co-worker, Christina Atkinson. Atkinson began groping him and using sexually explicit language at work. For example, once Atkinson joked to Ward that she had performed oral sex on her husband for three hours the previous evening. On other occasions, she would “drag her fingers” across Ward’s buttocks, would grab Ward’s crotch, poke him in the chest and “grabbed [Ward’s] nipple through [his] shirt and twisted it until he had a bruise.” Ward ultimately quit the company after making repeated complaints but to no avail, and sued under theories of hostile work environment on the basis of his sex, constructive discharge, and retaliation under Title VII, in addition to intentional infliction of emotional distress under North Carolina law.

AutoZone’s Sexual Harassment Policy and Training

Like most Companies, AutoZone had a written sexual harassment policy, which required managers to thoroughly investigate each reported allegation. AutoZone also administered an online test to its managers to assess their knowledge of its sexual harassment policy. Yet, the policy found little purpose at this particular store. There were no copies of the handbooks describing the policy on-site, no in-person training on the sexual harassment policy, and managers merely had to log in to a computer and click “yes” to verify they read the policy.

Not only did this store manager testify that “99 percent of employees [did] not even read the policy,” but he also admitted to illicitly logging in to AutoZone’s verification program and verifying having read the policy on other employee’s behalves. Because the online test would reveal correct answers at its end, failing managers could pass the test with little studying.

Ward’s Complaints & AutoZone’s Meagre Response

Ward repeatedly reported the sexual harassment to management to no avail. He first reported Atkinson’s behavior to his direct manager who actually had witnessed some of the sexually explicit statements and groping. When Ward stated he was “sick and tired” of Atkinson “putting her hands” on him, his direct manager replied “Well, maybe if you’ll give her what she wants, she’ll leave you alone.” Ward then turned to the store manager with his complaints. The store manager confronted Atkinson and admonished her to stop. Still, the store manager also warned Ward to “knock it off,” despite the fact that no one had accused Ward of any misconduct.

The store manager then informed a district manager of the complaints. According to the store manager, the district manager did nothing and the sexual harassment persisted. Later, that district manager told Ward that “as a man,” Ward “should have been able to prevent” his coworker’s abusive conduct.

Once, Ward’s direct manager watched and laughed while Atkinson tried to grab Ward’s hand and put it in her pants pocket after she said she was not wearing any underwear and her pocket had a hole in it. On another occasion, the store manager just “sh[ook] his head” after Ward complained about Atkinson again.

Shortly thereafter, the store manager was replaced, and Ward reported Atkinson again – this time to the new store manager. The new store manager assured Ward that Ward’s direct manager–who was present during the conversation and admitted she witnessed the conduct–would talk to Atkinson about her behavior the next day. Ward quit the next day.

According to Ward, Atkinson physically harassed him at least twenty times, and that he reported her to his direct manager as many as twenty times.

The Jury Awards $600,000 in Punitive Damages, But the 4th Circuit Strikes It

The District Court granted AutoZone summary judgment only on the constructive discharge claim, and all remaining claims went to trial. The jury found in favor of Ward on the hostile work environment and intentional infliction of emotional distress claims, for which they awarded $100,000 in compensatory and $600,000 in punitive damages for the sexual harassment claim. The punitive damages were later lowered to $200,000 along with the $60,000 in punitives for the intentional infliction of emotional distress claim.

But, the 4th Circuit panel disagreed and did not let the punitives stand. The panel found that awarding punitive damages required a closer examination of the managerial status of Ward’s supervisors, which showed that the direct manager who allegedly acted with intentional discrimination against Ward was not a manger under the “managerial capacity test.” As for the store and district managers, whom the panel determined were liable, they were not engaging in conduct that rose to the level of “intentional discrimination with reckless indifference to Ward’s rights,” but were instead merely negligent. The panel went on to explain that a punitive damages award based on two manager’s “mere knowledge” of the harassment was not enough, and would open the floodgates to liability for employers in all similar hostile work environment cases.

The panel stated: “a party seeking to hold an employer vicariously liable for punitive damages based on the theory that employees served in a managerial capacity must establish more than that manager-level employees negligently failed to adequately respond to complaints of harassment. He must show that the managerial employees engaged in an intentionally discriminatory practice themselves with malice or reckless indifference. The evidence here does not make that showing.”

Takeaways For Employers

Train, train, and train your managers to recognize and act immediately when they receive complaints of sexual harassment – and to immediately escalate those concerns to HR or a higher level manager. Even  though the Court ultimately struck a punitive damages award for the two managers who passed the managerial capacity test, any manager receiving this type of report will put the company on notice of the conduct and could put the Company on the hook for any award in the employee’s favor–punitive damages and more.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Workplace Policies and Handbooks Team or the Labor & Employment Team.