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 | Punitive Damages in Employment Cases

When it comes to punitive damages in employment cases, a recent jury verdict and appeal provides some great fodder for discussion for South Carolina employees.

Back in October 2021, a federal jury in North Carolina awarded a David Duvall, a white male executive, a $10 million punitive damages verdict after Novant Health fired him without cause and replaced him with two female employees, all as part of a diversity, equity, and inclusion (DEI) program. And two days ago, the Fourth Circuit Court of Appeals (which covers South Carolina federal courts as well) gutted that award and reduced it from $10 million down to zero (Duvall v. Novant Health, Inc., 2024 U.S. App. LEXIS 5868). The trial judge had already reduced the $10 million in punitive damages down to $300,000 (the statutory cap under Title VII of the Civil Rights Act) back in August 2022, but with this week’s ruling, the Fourth Circuit threw it out altogether. 

The Standard for Punitive Damages in Employment Cases

The Fourth Circuit determined that punitive damages shouldn’t be awarded because Duvall failed to provide evidence or testimony that the decisionmaker “discriminated despite perceiving a risk of unlawfulness.” In essence, in order to receive punitive damages in employment cases, the employee needs to show that the company acted discriminatorily in the face of the perceived risk that the company’s actions would violate federal law. Duvall argued that the decisionmaker was a highly educated executive with a long career who would certainly have knowledge that hiring an employee because of race, age, sex, etc. is illegal. And in reality, that’s certainly the case. HR training, posters in hallways, and possible prior lawsuits make just about any employee aware of the law. But Duvall simply failed to put any evidence into the record about that, and the Fourth Circuit gutted the punitive damages award because of that omission.  

However, Duvall was still awarded $2.3 million is back pay (lost wages from date of termination until replacement employment was found) and $1.07 million in front pay (reinstatement was not an option due to the negative relationship between the employee and the company, so future lost wages/pay was awarded instead). The judge also awarded nearly $300,000 in pre-judgment interest. The interest, back pay, and front pay awards were upheld by the Fourth Circuit. The judge later awarded attorney’s fees to the employee in the amount of $400,000. 

Diversity, Equity & Inclusion Program Results in Duvall’s Unlawful Termination

In the case itself, Duvall (a white man) worked as a high-performing executive for Novant Health in North Carolina from 2013 until 2018. He performed exceptionally well and received national recognition for his work. But in 2015, Novant Health began a Diversity, Equity & Inclusion program with the explicit goal of making the leadership in the company more diverse (i.e., less white and less male). At that time, the leadership of the company was, in fact, overwhelmingly white and male. Eventually, as part of that DEI program, Novant terminated Duvall for no stated reason (other than the classic “going in a different direction”) and replaced him with a white female employee and a black female employee. 

Although Duvall was an excellent employee who was fired without cause, nonetheless Novant later tried to smear Duvall’s reputation by alleging that he had “lost the confidence of the leadership team,” although the company could not point to any disciplinary actions or write-ups related to their claim. This is not unusual. I often tell clients that no matter how great of an employee they were while they were employed, as soon as you file a charge of discrimination or a lawsuit, the company will endeavor to paint a pretty unrecognizable picture of you as an employee. In this case, however, the jury clearly didn’t believe the company’s ever-shifting reasons, finding that Novant did terminate Duvall based on his race and sex. It’s always a red flag when a company keeps changing the reasons for the termination. 

Takeaways for South Carolina Employees

While this case was tried in North Carolina, the Fourth Circuit’s ruling is binding on South Carolina cases in federal court as well. Thus, it’s a case we need to pay attention to. 

One of the first takeaways for South Carolina employees to recognize is the length of time that these cases can take. Duvall was fired in 2018, the case was tried in 2021, and the appellate decision wasn’t issued until 2024, nearly six years after the termination. Employment cases are difficult to prove, and even the ones with great facts, like this one, still take a long time to work their way through the system. Litigation is not for the faint of heart or those unwilling to spend the time and resources necessary to pursue the case to trial if needed. 

Second, I expect we will continue to see challenges to DEI programs in the future. Any employment decision that is motivated by a person’s age, race, sex, national origin, religion, or disability is illegal under Title VII of the Civil Rights Act, even decisions based on a company’s laudable desire to improve diversity in the workplace. The U.S. Supreme Court is currently considering a case about adverse actions under Title VII that could have implications for D&I programs across the country. The Court will issue a decision prior to June 2024.  

Third, a big part of Novant’s attack on Duvall related to his job search efforts after his termination. For an employee to recover lost wages, the employee has to show that he or she was diligently seeking replacement employment that is comparable to what was lost. Turning down a job offer of comparable employment may impact that claim for lost wages. I’ve had clients who have failed to follow my instructions in looking for work and in tracking those job search efforts, and no matter how good the facts are, failing to look for a job will significantly reduce the value of the case. 

Fourth, punitive damages in employment cases are not automatic. Plaintiffs have to show specific facts that will support a jury’s finding for punitive damages. 

As always, if you believe you’ve been wrongfully terminated on the basis of your age, race, sex, national origin, religion, or disability, you should reach out a South Carolina employment discrimination lawyer for a fact-intensive review of your situation. 

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