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When a whistleblower came to PeopleSoft Inc. managers and told them the company was submitting false data on minority employment to the federal government, she got the ax. Now PeopleSoft is feeling the pain. An Alameda County, Calif., jury on Wednesday ordered the Pleasanton, Calif.-based software maker to pay $5.5 million for wrongfully terminating the employee. “This is one of the largest whistleblower awards that has come down,” said Philip Kay, a San Francisco solo practitioner who represented plaintiff Kaaren Yarborough. “The case sends a message that employees that blow the whistle on a company’s illegal activities should be protected and not fired.” The verdict followed a four-month trial in Alameda County Superior Court. Yarborough, formerly a recruitment manager for the computer software company, alleged in her suit that PeopleSoft fired her after she discovered that the company was not in compliance with federal affirmative action regulations. She claimed that despite her objections PeopleSoft submitted incorrect data on minority hires and terminations to the U.S. Labor Department’s Office of Federal Contract Compliance Programs. The office, which monitors the racial and sexual diversity of government contractors, was conducting an audit of PeopleSoft at the time Yarborough was dismissed. Specifically, Yarborough said she discovered that the company was terminating and losing minority employees at approximately three times the rate it was terminating and losing nonminority employees. According to the suit, such information could have threatened PeopleSoft’s government contracts, which were worth approximately $18.7 million for 1995-1996. “PeopleSoft feels that the verdict as rendered is not consistent with the evidence that we presented at trial,” the company said in a statement. “We are analyzing the verdict with our attorneys and will determine what steps to take next. Despite the plaintiff’s allegations, which date back to 1995, PeopleSoft has continuously complied with all federal and state laws.” While the company declined to comment further on the case, Steve Swasey, director of corporate public relations, said PeopleSoft “has always been regarded as a great company to work for.” He said PeopleSoft ranked No. 6 in Fortune magazine’s 1999 list of the “100 Best Companies to Work for.” In addition, Swasey said PeopleSoft recently hired back 100 employees that had left during the dot-com craze. PeopleSoft is represented by Fenwick & West partners Patricia Lucas and John Fox in Palo Alto, Calif. Attorneys at Thelen Reid & Priest handled the case initially, but the matter was transferred to Fenwick before it went to trial. Neither Lucas nor Fox could be reached for comment Thursday. Yarborough v. PeopleSoft Inc., 775 405-2, was filed in November 1996, one year after Yarborough’s dismissal. Kay said PeopleSoft had rejected an offer to settle the case for $975,000 — which was equal to half the $1.85 million in stock options that Yarborough lost upon her dismissal. The jury award includes $3.5 million in punitive damages and $1.9 million in compensatory damages. Kay said he and his co-counsel would seek to recover attorneys’ fees, which totaled $4 million to $5 million. While the jury found that PeopleSoft wrongfully terminated Yarborough, it rejected her claim that the dismissal was an act of retaliation. Kay said a finding of retaliation requires proof of discrimination under the Fair Employment and Housing Act. “The jury didn’t find there was enough evidence that discrimination was taking place,” Kay said. But it found that PeopleSoft fired Yarborough “for complaining that they filed false reports.” Kay has handled several high-profile employment discrimination and harassment cases. Most notably, he won a $7.2 million jury verdict for legal secretary Rena Weeks in her sexual harassment suit against Baker & McKenzie. Kay’s associate attorney Lawrence Organ questioned the tack PeopleSoft took in arguing the case. In the liability phase, they said that “she cost the company money and alleged she was scattered,” he said. Then in arguing against punitive damages they said she was such a great employee she should have gotten a job in two weeks. “It was an incredibly arrogant and wrong tactical move on the part of PeopleSoft to suggest the jury is stupid and wouldn’t realize there is a contradiction there,” Organ said.

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