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It is well settled that an employer can be wrong about an employee’s evaluation without discriminating against the employee. But just how wrong can an employer be? The answer, according to the recent 7th U.S. Circuit Court of Appeals decision in Balderston v. Fairbanks Morse Engine Division, No. 00 C 68 (7th Cir. Apr. 17, 2003), appears to be very. In John Balderston’s 27 years with Fairbanks, a manufacturer of large engines used to generate power for naval vessels and private industry, he had risen from the position of engineer to Vice President and General Manager of Product Installation and Service. Balderston’s responsibilities included sales, installations and overseeing a number of Fairbanks’ customer service centers throughout the United States. A PLAN TO ELIMINATE EXECUTIVES OVER 55 Balderston was 58 years old in 1998, when Warren Martin, age 44, was appointed President of Fairbanks. Martin had been a Vice President of Fairbanks when, in 1996, he stated that he would like to eliminate all managers over the age of 55. The company apparently considered this action, but found that it was not economically advantageous. Martin was not a fan of Balderston’s. His impression, from both personal observation and from others, was that Balderston arrived late for work, left early and treated his fellow workers badly while at work. Shortly after becoming President, Martin wrote a memorandum to Balderston in order to establish “a specific set of rules, guidelines and expectations for your work habits, work ethic, treatment of personnel, travel and business focus going forward.” These expectations were confirmed in a meeting between Martin and Balderston. Martin engineered a corporate reorganization shortly after this meeting and Balderston was effectively demoted in favor of a younger (now) Senior Vice President, Barry Cockerham (age 45). Balderston now reported to Cockerham, who was in the process of reorganizing the sales and marketing departments for which he was now responsible. MULTIPLE MISTAKES ABOUT BALDERSTON From July to September, Cockerham worked with Balderston and came to the decision that Balderston was simply not suited to be a manager at Fairbanks. This was based on a series of business failures during that period. Significantly, it was also based on Cockerham’s belief that Balderston’s service group was $1 million dollars below its estimated earnings. In fact, at the time of his termination, Balderston’s group was meeting its expectations. This was not Cockerham’s only mistaken belief about Balderston. Cockerham’s reorganization of the sales and marketing department included various director-level positions that went to Balderston’s subordinates. Balderston was not considered for any of these positions because Cockerham believed that Balderston had not been a working manager for many years. In fact, Balderston had been a working manager until the time of his termination. John Gabriel, age 54, was a senior manager working directly under Balderston in the service department. There was no dispute that he had the most experience of any service department employee at the time of his termination, 20 minutes after Balderston. Gabriel’s duties were distributed to three younger employees. EVIDENCE OF PATTERN OF DISCRIMINATION DENIED Balderston and Gabriel brought suit against Fairbanks, claiming that their firings were part of a systematic “campaign to elevate [Fairbanks'] more youthful employees because of their age.” This led, predictably, to a request for company-wide personnel information on any present of former employees at the level of supervisor or above, who had left the company involuntarily, from 1989 to 1998. Fairbanks objected and, eventually, the discovery was limited to the “relevant corporate department, similarly situated employees, time period and decisionmakers.” This, of course, was a substantial limitation on the discovery sought. The district court granted Fairbanks’ Motion for Summary Judgment and the former employees appealed both the ultimate ruling and the discovery limitations imposed by the lower court. Initially, the 7th Circuit held, summarily, that the district court had “substantial discretion to curtail the expense and intrusiveness of discovery” and had not abused that discretion in this case by limiting the discovery to those employees who were similarly situated to Balderston and Gabriel. FAILURE TO SHOW SIMILARLY SITUATED EMPLOYEES With respect to the substance of Balderston’s claims, the court found that he had failed to set forth a prima facie case of discrimination, as he could not prove that he had been treated worse than similarly situated co-workers. This was based primarily on Balderston’s failure to present evidence that those with whom he compared himself had similar “qualifications, education, experience, skills or abilities.” The court also found that one former subordinate was not similarly situated because Cockerham did not have a negative opinion of him (as he did of Balderston). This reasoning has a chicken and egg-element to it, as Balderston claimed that the negative opinion held by Cockerham was discriminatory. Given Balderston’s claims, one would expect Cockerham to have had a better impression of a younger employee, regardless of the basis for the opinion. MISTAKES IRRELEVANT Finally, the court considered Balderston’s argument that Cockerham’s decision was pretextual, as some, but not all of the reasons, cited for the termination were factually wrong. “Cockerham’s reasons may have been foolish or trivial or even baseless. However, there has been no showing, other than Balderston’s own statements, that Cockerham did not honestly believe his assessment of Balderston.” The court continued that the only valid inquiry is whether the employer believed the reasons for the decision to be true, not whether they were right or wrong. “Although Balderston might wish us to review Fairbanks’ decision on the merits, this court does not sit as a super-personnel department that reexamines an entity’s business decisions.” As far as the two-year old comment by Martin (the Company President) that he wished to eliminate the positions of all those over the age of 55, the court held that the comment was remote in time, made by a non-decisionmaker and did not relate to the specific action at issue. As such, it was irrelevant. It is not clear whether Balderston pointed out that the only reason Martin’s plan was not implemented was the expense of the buy-out packages for older executives and that, while the president of the company may have been a non-decision maker, he was almost certainly a “tone-setter” for the executives beholden to him for their jobs. 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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