Employers should take note of two recent U.S. Supreme Court decisions that expand employer liability in discrimination claims. As detailed below, these cases highlight the need for employers to thoroughly scrutinize and document the underlying reasons for adverse employment decisions and to regularly provide workplace training on lawful employment practices.

Employer Liability for Discrimination Under the "Cat's Paw" Theory

In the more recent decision, Staub v. Proctor Hospital, decided on March 1, 2011, the Court held that an employer may be liable for discrimination when the discriminatory bias of a supervisor influences an adverse employment decision, even when the ultimate decision maker is unbiased. In this case, plaintiff Vincent Staub worked as an angiography technician for defendant Proctor Hospital while serving as a member of the United States Army Reserve. Staub's immediate supervisors at Proctor Hospital expressed overt hostility towards his military obligations. The supervisors later alleged that Staub violated a corrective action disciplinary warning, prompting Proctor Hospital's vice president of human resources to review his personnel file and terminate his employment.

Staub first filed an internal grievance, claiming that his supervisors had falsely alleged that he violated the corrective action out of hostility toward his military obligations. However, the vice president adhered to her decision to terminate Staub. Staub then sued Proctor Hospital under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), which prohibits an employer from discriminating against any person based on membership in a uniformed service. Staub alleged that although the vice president was not biased against his military membership, the bias of his supervisors was a "motivating factor," which had unlawfully influenced the decision to terminate him. The Court agreed. In reaching its decision, the Court notes that Title VII cases also require analysis under the "motivating factor" standard, signaling that the reasoning in this USERRA case will likely apply more broadly to other types of discrimination claims.

In Staub, the Court affirmed the so-called "cat's paw" theory of liability. Under this theory, an employer is liable for discrimination if an employee who makes a final employment decision acts upon the bias of another employee. The theory derives its name from a 17th-century fable wherein a monkey persuades a cat to pull roasting chestnuts out of a fire. After the cat burns its paws, the monkey runs away with the chestnuts. Analogized to the workplace, cat's paw cases occur when an employer is blamed for discrimination even if the employee who made the final employment decision acted without discriminatory intent, so long as the bias of another employee influenced the decision.

In Staub, the Court clarified that an employer is liable for discrimination when:

(1) a supervisor of an employee acts based on unlawful bias (by writing a negative report about the employee, for instance); (2) that supervisor intends to get the worker fired, demoted or otherwise penalized; and (3) the supervisor's step is the "proximate" cause of the ultimate decision—even if the executive or supervisor who actually carries out the firing or other penalty acts without bias. The Court refused to accept the defense that the unbiased decision maker's independent investigation prior to the termination relieved the employer of liability, as the decision maker relied on facts provided by the biased supervisor. Had the investigation led to adverse action for reasons unrelated to the supervisor's biased action, then the employer would not be liable under the cat's paw theory.

The Court's decision in Staub highlights the importance of performing a thorough investigation and review of the reasons underlying an adverse employment decision, as well as maintaining detailed performance documentation. The decision also emphasizes the need to provide anti-discrimination training and education for all supervisors and managers with a say in the performance management and decision-making processes, so that policies are enforced fairly and consistently at every stage.

Employer Liability for Third-Party Discrimination Claims

In a case decided earlier this year, the U.S. Supreme Court held that the anti-retaliation provisions set forth in Title VII apply to third parties who claim they were retaliated against by an employer due to the protected activity of a co-worker with whom the third party has a relationship.

In Thompson v. North American Stainless, decided on January 24, 2011, plaintiff Erick Thompson and his fiancée, Miriam Regalado, worked for defendant North American Stainless, L.P. Miriam Regalado filed a charge of discrimination against the employer, and the employer discharged plaintiff Eric Thompson three weeks later. Assuming for the purposes of appeal that North American Stainless had in fact fired Thompson because of Regalado's charge, the Court held that the employer's actions constituted unlawful retaliation. The Court also held that Thompson had standing to challenge his termination under Title VII because he fell within the "zone of interests" that Title VII seeks to protect. Specifically, the Court reasoned that Thompson fell within this "zone" because: (1) he was an employee of the defendant, and Title VII aims to protect employees from their employer's unlawful actions and (2) he was not an "accidental victim" or collaterally damaged by the unlawful act, but was actually the subject of unlawful action.

The Court recognized that extending Title VII's anti-retaliation protections to third parties would create "difficult line-drawing problems concerning the types of relationships entitled to protection." However, in the Court's view, this concern did not justify a per se ban on third-party retaliation suits. The Court refused to identify specific relationships that could trigger third-party retaliation complaints, stating only that terminating a close family member would almost always suffice, but a milder reprisal against a mere acquaintance would almost never lead to liability. The Court's lack of guidance as to who may assert a third-party retaliation suit creates a practical issue for employers and, like Staub, broadens the scope of potential liability for discrimination claims and reaffirms the need for employers to thoroughly review and document the reasons supporting adverse employment decisions.