The 38:1 ratio of punitives to back pay and compensatory damages was justified in light of the employer’s “reprehensible” conduct.
A federal district court in Ohio refused to reduce a jury award of $50,000 in punitive damages to a 17-year old Steak n Shake employee who prevailed in a coworker sexual harassment suit against the restaurant chain. The employee won only $308 in back pay and was awarded $1,000 for emotional and mental distress in her Title VII suit. But the court, resolving post-trial motions, rejected the employer’s contention that the punitive award was excessive, citing the reprehensible conduct of management in this case in condoning the harassment of female teen workers and protecting the harassers. Although Steak n Shake argued it had zero-tolerance policies in place, along with reporting mechanisms for reporting harassment, “it is clear that the jury was persuaded by plaintiff’s evidence that defendant’s alleged safeguards completely failed her,” the court said, adding that the jury clearly wanted to send a message to the restaurant chain and to punish it for its failure to prevent or properly respond to the sexual harassment of teen employees (Corbin v. Steak n Shake Inc., April 17, 2020, Graham, J.).
The Steak n Shake server alleged that throughout the eight months she worked at the restaurant, two male coworkers made frequent sexual comments to her, including remarks about her butt and breasts. After they learned she had an African-American boyfriend, they referred to their pants as “black from the waist down” and asked if this gave them a chance with her. One of the coworkers “smacked her butt” a few times. The racial comments and smacking stopped after she threatened to tell her boyfriend, but the sexual comments continued.
Reports harassment. The employee reported the harassment to the service manager after she overheard one of the coworkers say, “Isn’t that a nice view?” as she was picking up cardboard. But the manager replied that she “had no proof.” At her request, he gave her the number for the corporate hotline for reporting harassment, which she promptly called, although Steak n Shake claimed it had no record of her call to the hotline and the manager denied that she reported the harassment to him.
She asked to be taken off the work schedule and placed on “pickup shift” status, which meant that she would be available if someone could not work their shift. Interpreting this as a resignation, the service manager had her removed from the schedule and entered her termination date. She arrived at the restaurant a few days later to discover that she was no longer on the schedule at all.
The employee and her mother met with the manager (along with the mother of one of the harassers—also a restaurant employee) and her harassment complaints were hotly discussed. The manager offered to restore her to the system so she could work that day, but she and her mother declined. The manager then reported her complaint to HR, prompting an immediate investigation, which ended with the company being unable to substantiate her allegations.
Lawsuit. The employee filed suit alleging numerous claims against Steak n Shake. She contended that her supervisor disregarded her sexual harassment complaints over a period of months and then deemed her as having resigned when she asked to be taken off the schedule rather than ensuring that she could work free of harassment pending an investigation. In an earlier decision, the court denied Steak n Shake’s motion for summary judgment on her harassment claims but dismissed her retaliation action.
After a five-day trial, a jury returned a verdict in the employee’s favor on her coworker harassment claim but ruled in Steak n Shake’s favor on her claims of supervisor harassment and sex discrimination. The jury award: $308 in back pay; $1,000 in compensatory damages for mental and emotional distress; and $50,000 in punitive damages. At issue before the court were the employee’s motion for attorneys’ fees and the employer’s Rule 59 motion to amend the judgment with respect to the punitive damages.
Conduct was reprehensible. The court upheld the punitive damages award in light of the “deplorable” conduct in this case, citing, as the most “compelling evidence,” the vulnerability of 17-year-old female employees working in an entry-level position as a server. It noted that the teenagers were harassed primarily by an adult male in his mid-twenties, who held a position of authority in the restaurant, and also by other, younger adult male coworkers who joined in on their elder coworker’s conduct and failed to prevent or report it. The plaintiff knew at the time that another minor female coworker was also getting verbally and physically harassed, including “sexual touching out of view of customers or other coworkers.”
Heightening the plaintiff’s sense of helplessness, said the court: the managers were two adult males who themselves directed inappropriate comments toward her and refused to stop the main offender because of their close relationship with him; the main offender’s girlfriend was also a supervisor, and she refused to believe their complaints; and his mother “verbally lashed out and threatened” the employee for accusing her son of harassment. Her call to the Steak n Shake hotline “went nowhere.” Finally, the main harasser was not removed from the workplace despite her complaints.
Ratio was constitutional. Therefore, the court rejected the notion that the 38:1 ratio of punitive damages to combined backpay and compensatory damages was unconstitutional. When the amount of economic harm suffered is minimal, and the non-economic harm is hard to compute, a comparatively larger punitive damages is still justifiable when, as here, the employer’s conduct is particularly egregious, the court explained. “This case fits the mold of one in which reprehensible conduct produces a small amount of economic harm and produces noneconomic harm which is difficult to quantify.”
Here, the high school student didn’t work a lot of hours, and so wouldn’t have earned much as a server. And after her Steak n Shake employment ended, she found another job within a month. Consequently, the nominal back pay award was no surprise; nor was the limited $1,000 mental and emotional distress damages, given how hard it is to measure such injury. The court was persuaded by the facts that: the amount fell well below Title VII’s $300,000 combined statutory cap for compensatory and punitive damages; Steak n Shake is worth $500-600 million; and the award here is in line with similar cases in which employees endured discriminatory conduct but their actual damages were relatively low.
Attorneys’ fees. Much of the court’s written opinion, though, focused on the employee’s attorney fee request, including whether the hourly rate and hours billed were justified and whether a multiplier of 2.0 times the lodestar amount was warranted (bringing her $273,681 fee request to $547,362). Steak n Shake argued for a fee award of just $59,937. It opposed a fee multiplier and argued for a one-third reduction in the fee award in light of the minimal relief obtained. The plaintiff countered that the verdict amounted to an “exceptional success” for a low-wage worker in light of the difficulty in proving sexual harassment. Also, the claim on which she prevailed—hostile work environment due to coworker harassment—”was the focal point of her case.”
The court found neither a multiplier nor fee reduction were appropriate. While it was undisputed that the employee was a prevailing party, the verdicts “were a mixed bag,” it noted, pointing out that, even with the punitive damages award, her overall recovery was $34,000 below her settlement demand. In the end, the court awarded the lodestar amount of $92,978 in fees.
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