In a recently issued opinion, the United States Court of Appeals for the Third Circuit held that an employee’s suspension with pay typically does not constitute an “adverse employment action” under Title VII of the Civil Rights Act of 1964 (“Title VII”). This was an issue of “first impression” before the court and had not previously been addressed by the Third Circuit.

Michelle Jones was an administrative assistant for the Southeastern Pennsylvania Transit Authority (“SEPTA”) under supervisor Alfred Outlaw. In December 2010, Outlaw discovered apparent fraud in Jones’ timesheets and suspended her with pay. Jones subsequently complained to SEPTA’s Equal Employment Opportunity Office that Outlaw had sexually harassed and retaliated against her. SEPTA conducted an internal investigation and concluded that Outlaw had once asked Jones to step on his back to relieve spinal pain. SEPTA noted this “lapse in judgment” in Outlaw’s performance evaluation and required him to attend sexual harassment training.

Meanwhile, SEPTA investigated the timesheet matter. After an extensive independent investigation, it concluded that Jones had submitted fraudulent timesheets. Thus, SEPTA suspended Jones without pay on February 22, 2011 and terminated her in April 2011. Jones sued SEPTA and Outlaw alleging, among other things, gender discrimination and retaliation under Title VII. The District Court granted summary judgment to SEPTA and Outlaw on the Title VII claims, and Jones appealed.

The Third Circuit agreed with the District Court’s “linchpin” holding that Jones’ initial suspension with pay was not an adverse action. Specifically, the Third Circuit held that paid suspensions, without more, are not adverse actions under Title VII’s substantive provision, which prohibits employers from failing or refusing to hire, discharging, or otherwise discriminating against an individual with respect to compensation, terms, conditions, or privileges of employment based on sex. In so holding, the Third Circuit joined six other Courts of Appeals that had reached the same conclusion. The Third Circuit noted that the statute did not mention paid suspensions pending investigation of an employee’s alleged wrongdoing among the list of adverse employment actions. Further, such suspensions did not “serious[ly] and tangibl[y]” alter the terms and conditions of employment, which ordinarily include the possibility of discipline in appropriate circumstances.

The Third Circuit also affirmed the District Court’s grant of summary judgment to SEPTA on Jones’ gender discrimination and retaliation claims. To the extent her claims were based on her subsequent unpaid suspension and termination, there was no evidence that these actions were anything but the natural result of SEPTA’s investigation into her alleged timesheet fraud.

Even assuming that Jones had evidence of harassment, the court found that SEPTA would not be liable for Outlaw’s conduct because it was entitled to invoke the Faragher-Ellerth affirmative defense. Under that defense, an employer who exercised reasonable care to avoid and eliminate harassment is not liable for a supervisor’s harassment in the absence of a “tangible employment action” if the employee failed to take advantage of the employer’s safeguards and otherwise prevent avoidable harm. First, the court found that Jones’ initial paid suspension, the only action that she could possibly link to the alleged harassment, was not a “tangible employment action.” Second, the court found that SEPTA’s response to Jones’ allegations, including its investigation and formal findings, requiring Outlaw to attend sexual harassment training, and noting the single incident of inappropriate conduct on his evaluation, constituted appropriate remedial action. Finally, the court found that Jones unreasonably failed to report Outlaw until after he accused her of timesheet fraud, despite alleging that Outlaw had harassed her throughout the 10 years she worked for him.

Although this decision is encouraging for employers, it is important to keep in mind that the Third Circuit did not say that paid suspensions can never be adverse actions. In this case, the facts were clearly in SEPTA’s favor. However, where an employee can show that her suspension with pay was atypical in a way that brings it within the scope of Title VII’s substantive provision, a court may determine that such a suspension can support a claim of unlawful discrimination. In addition, the Third Circuit left open whether a paid suspension could support a retaliation claim under Title VII, as opposed to a discrimination claim.