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Leslie Bonacum
Neil Allen

Supreme Court  Creates Potential Safe Harbor For Employers In Discrimination Decision

(RIVERWOODS, ILL., June 25, 1999) -- While the Supreme Court’s recent decision in the employment discrimination case of Carole Kolstad v. American Dental Association is being viewed by some as a blow to employers nationwide, companies that take a closer look at the high Court’s decision will find both a safe harbor and important guidance on how they can minimize the risk of costly punitive damages, according to CCH INCORPORATED, a leading provider of human resources and employment law information.

"If businesses only focus on the fact that, as a result of the Court’s decision, it will be easier for employers who violate antidiscrimination laws to be held liable for large punitive damages, then they are missing the much bigger picture – and a very big opportunity – created by the decision," said Eric Bryn, JD, CCH human resources and employment law analyst. "Kolstad charts a course for all employers who want to protect themselves from these additional significant damages."

Good Faith Gives Employers a Safe Harbor

In the Kolstad case, an employee sued and sought punitive damages against her employer, asserting that she had been passed over for a promotion based on her gender in violation of Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination.

The Court, reversing a federal appeals court decision, held that punitive damages may be awarded for intentional violations of Title VII without a showing that the employer engaged in independently egregious conduct. However, in a separate vote, the Court refused to hold employers vicariously liable for managers' discriminatory employment decisions when those decisions are contrary to the employer's good faith efforts to comply with Title VII.

"The Supreme Court actually rewarded employers who make good faith efforts to implement antidiscrimination programs by providing them with a defense to punitive damage awards," said Bryn. "Now, it’s incumbent upon employers to take the necessary steps that will allow them to take advantage of the safe harbor created by the Court and defend against discrimination committed by managerial employees."

Establishing A Good Faith Defense

CCH has identified several steps that employers can take to create effective antidiscrimination programs and establish a good faith defense to punitive damages when managers violate Title VII.

Key actions for employers include:

  • Establishing and communicating an antidiscrimination policy. The policy should state that the employer is committed to equal employment opportunity for all persons regardless of race, color, religion, sex, marital status, national origin, citizenship status, disability, veteran status or other forms of protected status established by state or federal law. The policy also should: state that it extends to all aspects of the employment relationship; establish a procedure to complain about violations of the policy; and affirm the company’s commitment to investigate complaints and take appropriate action against employees or managers who violate the policy.
  • Communicating the policy through corporate intranets, recruitment literature, application forms, handbooks, training, employee orientation, annual reports and other appropriate forums.
  • Reviewing existing policies and practices for compliance with antidiscrimination rules. For example, ensure that managers and supervisors are not asking improper questions at hiring interviews.
  • Training managers and supervisors about the employer’s obligations under employment discrimination laws, including who is covered by the law, what types of actions constitute discrimination and what steps should be taken to avoid discriminatory practices.
  • Monitoring all employment actions, such as hiring, discipline, promotion, demotion, staffing, layoffs, termination, wage and salary actions, transfers, training, and working conditions for compliance with discrimination laws.
  • Staying up to date with current developments to demonstrate a good faith attempt to understand employer obligations under federal employment laws.
  • Considering a workplace diversity program to further demonstrate commitment to a bias-free workplace.

It is also very important that employers consult state and local laws to determine what additional requirements may be imposed.


CCH INCORPORATED, Riverwoods, Ill., is a leading provider of employment law information and software for human resource professionals, including Human Resources Management, Pension Plan Guide, Benefits Guide and Payroll Management Guide. CCH also provides tax and business law information in print and electronic form for accounting, legal, health care and small business professionals. CCH is a wholly owned subsidiary of Wolters Kluwer U.S. The CCH web site can be accessed at

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