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Answering questions of first impression in the circuit, the U.S. Court of Appeals for the Second Circuit May 9 affirmed a lower court's approval of a sexual harassment verdict in favor of an employee and its rejection of the retaliation claim of a human resources director who investigated the employee's allegations (Townsend v. Benjamin Enters. Inc., 2d Cir., No. 09-197-cv, 5/9/12).
Writing for the court to affirm a ruling for Benjamin Enterprises Inc. (BEI) and its principals on the retaliation claim, Judge John G. Koeltl agreed with other appellate courts that a human resources official's involvement in an internal employer investigation did not constitute protected participation in a proceeding “under” Title VII of the 1964 Civil Rights Act.
But the appeals court also agreed that the employer was properly found liable to former employee Martha Townsend for sexual harassment committed by a corporate officer who was the “proxy or alter ego” of the company.
According to the decision and court records, Townsend was employed as an administrative employee and office manager by BEI, which trains disadvantaged or low-skilled workers. Michelle Benjamin served as president and her husband, Hugh Benjamin, was the corporation's only vice president. Karlean Victoria Grey-Allen was BEI's human resources director.
Townsend, who was hired in 2002, alleged that from 2003 to 2005, Hugh Benjamin sexually harassed her by making suggestive comments and touching her. In March 2005, Townsend reported the conduct to Grey-Allen. Acting on advice she obtained from a New York State Division of Human Rights official, Grey-Allen interviewed Hugh Benjamin and asked him to work at home, away from Townsend.
However, the court said, Grey-Allen also discussed the sexual harassment allegations with a management consultant retained by BEI. When she learned of Grey-Allen's disclosure to the consultant, Michelle Benjamin fired the HR director.
Hugh Benjamin returned to work at the company's office, and Michelle Benjamin retained an outside HR organization to investigate Townsend's sexual harassment claim. Koeltl said the organization found “nothing happened” in a “he said versus what she said case.” Townsend resigned her employment, citing her discomfort about Hugh Benjamin's presence in the BEI office.
Townsend and Grey-Allen, represented by the same attorneys, filed a lawsuit in the U.S. District Court for the Southern District of New York, asserting that BEI and the Benjamins were liable under Title VII and the New York Human Rights Law for sexual harassment of Townsend and a retaliatory discharge of Grey-Allen.
The trial court ruled in favor of the defendants on Grey-Allen's retaliation claim, but Townsend's sexual harassment claim proceeded to a jury trial in which she was awarded $30,400 in damages. The district court then awarded Townsend $141,308.80 in attorneys' fees and costs.
Grey-Allen appealed the rejection of her retaliation claim to the Second Circuit, and the BEI defendants appealed the awards to Townsend.
Addressing the retaliation claim first, Koeltl said the issue was one of first impression in the Second Circuit.
The question for the Second Circuit, Koeltl said, was whether Grey-Allen's investigation of the sexual harassment claim was participation protected by Title VII.
Grey-Allen argued that the anti-retaliation provision of Title VII should be read to encompass participation in “any proceeding intended to remedy employment discrimination under Title VII, including internal sexual harassment investigations not connected with any formal EEOC proceeding or charge.”
Calling the argument a “strained interpretation” of Title VII, the court disagreed.
Citing decisions from the U.S. courts of appeal for the Seventh, Ninth, and Eleventh circuits, Koeltl said every federal appellate court to consider the issue “has held that participation in an internal employer investigation not connected with a formal EEOC proceeding does not qualify as protected activity under the participation clause.” Other decisions in the Fifth and Sixth Circuits have suggested that conduct protected by the participation clause must occur in connection with a formal EEOC proceeding, he added.
Grey-Allen argued that protecting participation in internal investigations would serve the policies of Title VII, but the Second Circuit concluded that “this cannot be squared with the plain language of the participation clause, which requires that the investigation in which the employee participates be 'under' Title VII, not merely integral to effectuating its purposes.”
Judge Raymond Joseph Lohier, in a concurring opinion, said he agreed “completely” with the majority opinion, but wrote separately to explain his view that the text of Title VII's prohibition against retaliation is ambiguous.
In their appeal to the Second Circuit, BEI and the Benjamins argued that the trial court erred in ruling that they could be held liable for sexual harassment by Hugh Benjamin.
Rejecting the contention, the appeals court noted that the vice president was the second-ranking official in the corporation, with a financial stake in the business. Koeltl said Hugh Benjamin's stock ownership in the business was only 5 percent by the time Townsend's lawsuit reached trial, but he had earlier owned 34 percent of BEI. Some of the husband's shares were transferred to his children as an estate-planning tactic, the court said, but his authority in the company remained the same.
Agreeing with the lower court that Hugh Benjamin held “a high managerial rank” in BEI and exercised significant control over its operations, the Second Circuit said the jury reasonably could find that he was the alter ego or proxy for the corporate employer.
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