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When an employer is sued for discrimination, its senior managers often go through the same stages as if they had learned of a serious illness: anger, denial and, ultimately, acceptance. Well, actually, most employers get stuck somewhere between anger and denial — and may stay there for as long as they have to interact with, or even think about, the employee. If the scale tips further towards anger than denial, the question inevitably arises: “can’t we sue him/her?” Such appears to have been the scenario in the recent case of Hernandez v. Crawford Building Material Co., 321 F.3d 528 (5th Cir. 2003). Juan Hernandez had worked for Crawford for almost 25 years when, in June 1999, his employment was terminated for poor performance. The company’s dissatisfaction with Hernandez had been growing for years and the immediate mistake that led to his termination was simply the “last straw.” COMPANY COUNTERCLAIMS FOR THEFT At some point after Hernandez brought suit for age and national origin discrimination, the company came to believe that he had stolen the company’s property and was selling it from his home. Crawford, therefore, answered Hernandez’s complaint and raised a counterclaim for theft. Hernandez, in turn, supplemented his original complaint with a claim that the counterclaim was retaliatory, in violation of Title VII and the ADEA. Crawford’s counterclaim of theft was dismissed following a summary judgment motion, as the alleged thefts occurred up to six or seven years before the date of alleged discrimination, and Crawford had no substantial evidence that Hernandez had stolen anything. The remaining claims of discrimination went to trial. The jury found that Crawford had not discriminated against Hernandez because of his age or national origin. The jury did find, however, that Crawford’s counterclaim had been retaliatory, and awarded Hernandez $75,000 in compensatory and punitive damages. Crawford appealed on the grounds that the filing of a counterclaim was not the kind of “ultimate employment decision” upon which a claim of retaliation could be based in the 5th Circuit. FIFTH CIRCUIT’S NARROW DEFINITION OF “ADVERSE ACTION” The Hernandez case highlights the 5th Circuit’s singular approach to retaliation claims under Title VII. Courts in the 5th Circuit begin their analysis of retaliation claims with the standard three-part test: (1) has the employee engaged in protected activity?; (2) has the employer taken an “adverse employment action” against the employee?; and (3) is there a causal connection between (1) and (2)? It is in defining the “adverse employment action” that the 5th Circuit separates itself from others, as only an “ultimate employment decision,” such as “hiring, granting leave, discharging, promoting and compensating,” can rise to the level necessary to evidence the second part of the test. The narrow definition of “adverse employment action” is hardly semantics. While retaliation claims resulting in the loss of a job, pay or promotion are viable in the 5th Circuit, decisions before Hernandez have declined to find adverse actions where, for instance, employees were subjected to the loss of certain job duties, reprimands, formal discipline, rude treatment and low evaluations allegedly in retaliation for protected activity. RETALIATION CLAIM REJECTED In this light, it took relatively little analysis for the court to reverse the district court’s denial of Crawford’s motion for judgment as a matter of law, based upon a finding that “a counterclaim filed after an employee has been discharged in no way resembles the ultimate employment decisions described [in Title VII].” While the 8th Circuit also uses the “ultimate employment decision” language in defining retaliation claims, it has defined such a decision to include such seemingly “non-ultimate” decisions such as a “tangible change in duties or working conditions that constitute … a material employment disadvantage.” Manning v. Metro Life Ins. Co., 127 F.3d 686 (8th Cir. 1997). FIFTH CIRCUIT STANDS ALONE The 5th Circuit’s approach to retaliation claims has been implicitly, and often explicitly, rejected by the 1st, 4th, 7th, 9th, 10th and 11th Circuits. The 1st Circuit’s decision in Wyatt v. City of Boston, 35 F.3d 13 (1st Cir. 1994) exemplifies the broader approach, finding that “employer actions such as demotions, disadvantageous transfers or assignments, refusals to promote, unwarranted negative job evaluations and toleration of harassment by other employees” are all covered by Title VII’s anti-retaliation prohibition. While all courts recognize that the “adverse employment action” in question must be substantial, the broader definition is clearly more permissive than that used by the 5th Circuit. A number of courts outside the 5th Circuit have considered whether a counterclaim or lawsuit filed during the course of litigation can support a retaliation claim under Title VII. The strong majority of such courts have found that the filing of a lawsuit or counterclaim may be retaliatory. The discrimination plaintiff’s status as a former employee will not be dispositive following the U.S. Supreme Court’s decision in Robinson v. Shell Oil, 519 U.S. 337 (1997), in which the Court found that retaliatory acts against ex-employees are actionable under Title VII. As such, employers considering whether “the best defense is a good offense” should at least be aware that any counterclaim may support an additional, and perhaps more dangerous, retaliation claim for the employee. Sidney R. Steinberg is a shareholder in the business law and litigation department of Post & Schell, (www.postschell.com). He concentrates his national litigation and consulting practice in the field of employment and employee relations law and may be reached at [email protected].

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