In a case of first impression, the US Court of Appeals for the Third Circuit recently ruled that  a suspension with pay generally does not constitute an “adverse employment action” under the substantive discrimination provision of Title VII. Jones v. Southeastern Pennsylvania Transportation Authority et al., No. 14–3814 (3rd Cir. August 12, 2015).

The District Court Case

Michelle Jones was fired in 2011 by her employer, the Southeastern Pennsylvania Transportation Authority (SEPTA). SEPTA claimed it dismissed her for submitting fraudulent timesheets; Jones asserted her termination was the culmination of years of unlawful sexual harassment, gender discrimination, and retaliation.

In 2001, Jones began working as an administrative assistant in SEPTA's Revenue Operations Department under the supervision of Alfred Outlaw. On December 1, 2010, Outlaw suspended Jones with full pay after he discovered apparent fraud in her timesheets. Jones promptly informed SEPTA's Equal Employment Opportunity (EEO) Office that she intended to file a complaint against Outlaw. At a meeting the following week, Jones told the EEO Office that he had “sexually harassed” and “retaliated against” her.

In the meantime, Outlaw referred the timesheet matter to SEPTA's Office of Inspector General (OIG). After an extensive investigation, OIG concluded in February 2011 that Jones collected pay for days she hadn't worked by submitting fraudulent timesheets. SEPTA suspended Jones without pay on February 22, 2011 and formally terminated her in April of that year.

In March 2011, Jones filed a complaint with the Pennsylvania Human Relations Commission alleging that Outlaw had sexually harassed her and other female employees, ordered her to do personal work for him during business hours, and retaliated against her for resisting this mistreatment by accusing her of timesheet fraud. SEPTA therefore ended its internal investigation, but not before concluding that Outlaw had engaged in inappropriate behavior by once asking Jones to step on his back to relieve spinal pain. This “lapse in judgment” was noted in Outlaw's annual performance evaluation, and he was required to attend a training session regarding SEPTA's sexual harassment policy.

Jones ultimately filed suit against SEPTA and Outlaw in the United States District Court for the Eastern District of Pennsylvania. Her amended complaint alleged gender discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964 and the Pennsylvania Human Rights Act (PHRA). She also alleged a violation of the Fourteenth Amendment of the United States Constitution, common law wrongful termination, and retaliation in violation of the Family and Medical Leave Act. The District Court dismissed the wrongful termination claim and subsequently granted summary judgment to SEPTA and Outlaw on the remaining claims. Jones appealed only the Court's summary judgment on the Title VII, PHRA, and constitutional claims.

The Third Circuit’s Opinion

The Third Circuit noted that a Title VII plaintiff must prove that she suffered an adverse employment action in order to state a prima facie case of discrimination. The Court has described an adverse employment action as “an action by an employer that is serious and tangible enough to alter an employee's compensation, terms, conditions, or privileges of employment.” Although this was a case of first impression for the Third Circuit, many other courts of appeals (i.e., the Second, Fourth, Fifth and Sixth) have unanimously concluded that “placing an employee on paid administrative leave where there is no presumption of termination” is not an adverse employment action under the substantive provision of Title VII.

The Third Circuit thought “this chorus is on pitch.”  It reasoned that “[a] paid suspension pending an investigation of an employee's alleged wrongdoing does not fall under any of the forms of adverse action mentioned by Title VII's substantive provision.” A paid suspension “is neither a refusal to hire nor a termination, and by design it does not change compensation.” Nor does it effect a “serious and tangible” alteration of the “terms, conditions, or privileges of employment,” because “the terms and conditions of employment ordinarily include the possibility that an employee will be subject to an employer's disciplinary policies in appropriate circumstances.” The Court therefore agreed with its sister courts that a suspension with pay, without more, is not an adverse employment action under the substantive provision of Title VII. However, the Court did not consider and did not decide whether a paid suspension constitutes an adverse action in the retaliation context.

The Court also affirmed the dismissal of her specific claims under Title VII, the PHRA, and the Constitution. The Court found no causal nexus between her gender and her adverse treatment by SEPTA. As for her retaliation claim based on her unpaid suspension and eventual termination, the Court also found no causal connection between her internal and external complaints and those actions  Finally, the Court dismissed Jones’s constitutional claims because they were waived on appeal and were indistinguishable from her other claims.

Conclusion

This case demonstrates that suspending an employee with pay during an investigation can generally mitigate an employer’s exposure to claims of adverse action based on that suspension. Spending some extra money during an investigation could ultimately save employers from some claims down the road.