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A company’s employee headcount at the time of a discriminatory act, not at the time of trial, determines damages caps in an employment discrimination suit, the U.S. Court of Appeals for the 1st Circuit has ruled. On June 29, a unanimous panel tackled the issue of first impression for the circuit. The case, Hernandez-Miranda v. Empresas Diaz Masso Inc., concerned the compensatory and punitive damages caps in a case brought pursuant to Title VII of the Civil Rights Act of 1964. The 1st Circuit reversed a ruling by the District of Puerto Rico reducing damages in a discrimination case from $300,000 to $50,000 and remanded the case with instructions to enter a $200,000 compensatory damages award. The Civil Rights Act of 1991 authorizes verdicts awarding compensatory and punitive damages once a Title VII litigant establishes intentional discrimination. The damages cap of $50,000 to $300,000 is based on the defendant’s number of employees “in each of 20 or more calendar weeks in the current or preceding calendar year.” The central question on appeal was whether the “current” calendar year means the year or years when the discrimination occurred or the year of the damage award. In the underlying case, Edna Hernández-Miranda worked as a laborer, then as a safety officer, at Empresas Diaz, a construction company, from August 2003 until March 2005. According to the trial evidence, the harassment, discrimination and abuse occurred in 2004. According to court papers, Hernández-Miranda testified to continuing sexual abuse by coworkers and supervisors, including being forced to perform oral sex on a supervisor. She also testified that she needed the job to support herself and her children and she sought psychiatric help as a result of the abuse. A jury awarded Edna Hernández-Miranda $300,000 in damages in August 2008. The district court calculated the statutory cap by counting Empresas Díaz’s workers in the year of the award, and it cut the jury award to $50,000. Empresas Díaz’s affidavit indicated that the company workforce shrank from 247 employees in 2004 to 98 workers in 2008. Chief Judge Sandra Lynch authored the opinion, joined by Judge Juan Torruella and 6th Circuit Senior Judge Eugene Edward Siler Jr. Lynch noted that the 4th and 5th circuits have held that the “current” calendar year under the Civil Rights Act of 1991 is the year of discrimination and that the 7th Circuit made the same ruling by implication. Lynch went on to note that the statute’s legislative history indicates a compromise between those who wanted to increase damages under Title VII and the Americans with Disabilities Act and people concerned about excess damage awards harmful to business. Congress intended to protect smaller employers “from ruinously large awards,” and the remedies were designed to be proportional to a company’s ability to pay, Lynch wrote. But, she concluded, “this general principle…does not dispose of the issue in this case.” “Congress, we believe, intended such protection for those who were small employers at the time of the discrimination, and not those who by happenstance or design became smaller employers between the time of discrimination and the time of the verdict,” Lynch wrote. She explained that this interpretation “best serves Title VII’s purpose of encouraging resolution of disputes before litigation commences.” The ruling also spelled out that employers must prove how many employees they had at the time of the discrimination during court proceedings about the cap: “Neither the text nor the legislative history of [the statute] speaks to who bears the burden of showing the relevant number of employees, but due process concerns and the traditional burden of proof dictate that the defendant employer bear the burdens of production and persuasion on the caps.” Neither Hernández-Miranda’s lawyer, Francisco López-Romo of San Juan, Puerto Rico, nor Empresas Díaz’s lawyer, Miguel Simonet Sierra of Simonet Sierra Law in Guaynabo, Puerto Rico, responded to requests for comment. The Equal Employment Opportunity Commission, which filed an amicus brief in the case, is “very pleased with the decision,” said Anne Noel Occhialino, an attorney in the appellate services section of the EEOC’s office of general counsel. “We agree with the court that it is consistent with clarity and certainty to count the number of employees at the time of the violation for purposes of the caps,” Occhialino said. Occhialino also said the 1st Circuit’s conclusion that it’s the employer’s duty to produce evidence about the relevant number of employees when it wants to reduce a damage award is noteworthy. “It was significant to the agency that the court agreed with us that the defendant bears the burden of production [of evidence] and persuasion about the cap,” Occhialino said. The 1st Circuit’s burden-of-proof analysis is important because it’s the first published U.S. court of appeal decision to decide that question, said Paul Mollica, of counsel to to a Chicago office Outten & Golden, who isn’t’ involved in the case. “In this case the court holds it’s the employer’s burden and, in the absence of that proof, whatever the employee puts in as evidence prevails,” Mollica said. “It will change somewhat the strategy employers will use in future, how you count [workers] and the evidence you put on.” Sheri Qualters can be contacted at [email protected]

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