NYC Labor Contract Allowed Discretion, Not Discrimination

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Jon Steingart

Oct. 19 — A New York City teacher who was absent from work for four months after a car accident has no claim that the city discriminated against her when it gave her a bonus—based on students' achievement—that was smaller than her colleagues got, a federal appeals court ruled Oct. 19.

A lower court erroneously concluded that reducing Catharine Davis's bonus couldn't be an adverse employment action under the Americans with Disabilities Act because the collective bargaining agreement gave the employer wide discretion regarding bonuses, the U.S. Court of Appeals for the Second Circuit said. Even when an employer has “the right to allocate a bonus on any ground,” it must do so in a way that doesn't violate the law, the appeals court said.

Nevertheless, it ruled against Davis because she didn't present any evidence that the city had discriminatory motivation in awarding her a smaller bonus, which is an essential element of a discrimination claim.

Judges Pierre N. Leval, Chester J. Straub, and Christopher F. Droney joined in the unsigned opinion.

Bonus Reduced After Absence

Davis's recovery from the car accident kept her out of work for about three months, and she was out of work for a fourth month because of grand jury service.

The school received $3,000 per full-time employee for its bonus pool. The collective bargaining agreement suggested the entire staff should receive a distribution, but it gave the school's compensation committee discretion to vary the awards individual employees received. In particular, it allowed smaller bonuses for personnel who worked less than the full school year.

Davis was told she would have to share her bonus with the substitute teacher who covered her classroom during her absence, and she received $1,000. She initiated a charge of disability discrimination after learning that a $3,000 bonus was awarded to a teacher who missed about two months of work for maternity leave, and $3,000 was awarded to another teacher who missed two months as a result of being transferred to another school.

Discretion Must Be Free From Discrimination

The lower court ruled that “the employer’s decision not to award a discretionary bonus … cannot constitute an adverse employment action” because Davis had no reason to expect or rely on it. the court reached this conclusion by relying on the U.S. Court of Appeals for the Seventh Circuit's decision in Hunt v. City of Markham, 219 F.3d 649, 83 FEP Cases 635 (7th Cir. 2000), which held that denying a bonus doesn't affect terms or conditions of employment when the employee didn't even anticipate it.

At the outset, the appeals court said, the lower court erred by relying on out-of-circuit precedent in reaching its conclusion. Hunt is “not the law in this circuit,” the Second Circuit said.

Hunt's reasoning that expectation of a benefit is a factor in deciding whether its denial is an adverse employment action was incorrect, the court said. Employees who sue for discrimination seldom have an entitlement to the benefits they seek, it said. If they did, discrimination laws would be unnecessary, the court said. Aggrieved employees “would have a valid claim based on contract or some other statute,” it said.

Although the school had discretion in how to distribute bonuses, it had to ensure that it didn't do so in a discriminatory way, the court said.

“The fact that the employer had the right to allocate a bonus on any ground that does not violate the law does not mean that the employer had the right to allocate it on a ground that did violate the law,” the Second Circuit said.

Davis represented herself. The city's law department represented the school.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the opinion is available at http://www.bloomberglaw.com/public/document/Davis_v_NYC_Dept_of_Education_Docket_No_1401034_2d_Cir_Apr_07_201.