The Second Circuit recently issued a troubling decision for employers in Kwan v. Andalex Grp. LLC, 737 F.3d 834 (2d Cir. 2013), reviving a former employee’s retaliation claims under Title VII, the New York State Human Rights Law and the New York City Human Rights Law based on a finding that the employer’s purported “general corporate knowledge” of the employee’s alleged complaint and its purportedly inconsistent explanations for firing the employee, coupled with the temporal proximity of the employee’s alleged complaint and her termination, were sufficient to defeat summary judgment. Zann Kwan (“Kwan”), former Vice President of Acquisitions for the Andalex Group LLC (“Andalex”), a small real estate management company, claimed that she was terminated about three weeks after she allegedly complained to Andalex’s COO of gender discrimination and that her termination was in retaliation for her complaint. Andalex denied that Kwan ever lodged such a complaint. Andalex asserted that the decision to terminate Kwan’s employment was made by the CIO of Andalex. Kwan was terminated the day after she left work early, which, according to Andalex, she did without permission. The prior day, Andalex terminated a male executive on the basis that Andalex’s business focus had changed.
The Second Circuit held that although the district court properly dismissed Kwan’s discrimination, hostile work environment and COBRA claims, the district court had erred in its determination that Kwan failed to satisfy the knowledge and causation prongs necessary to establish a prima facie case of retaliation and had thus improperly dismissed Kwan’s retaliation claims. While the district court concluded that Kwan could not demonstrate Andalex’s knowledge of her alleged protected activity because Kwan did not even allege that the CIO had knowledge of her complaint when he made the decision to terminate her, the Second Circuit nonetheless found that Kwan’s alleged complaint to the COO of Andalex was sufficient to impute to Andalex “general corporate knowledge” of her protected activity sufficient to satisfy the knowledge prong of her prima facie case of retaliation. While the language used in the court’s opinion is expansive, it remains to be seen whether this principle is limited to smaller employers (here, Andalex had fewer than twenty-five employees) or also applies to large companies.
The court found that Kwan satisfied the causation prong of the prima facie case through temporal proximity because the three-week period between Kwan’s alleged complaint and her termination was sufficiently short to make a prima facie showing of causation. Despite the United States Supreme Court’s recent decision in University of Texas Southwestern Medical Center v. Nassar, 133 S. Ct. 2517 (2013), which held that Title VII retaliation claims must be proved according to traditional principles of “but-for” causation, the Kwan court ruled that a plaintiff could still demonstrate causation at the prima facie stage on summary judgment through temporal proximity.
Moreover, according to the Second Circuit, the alleged “discrepancies” in the explanations given by Andalex for Kwan’s termination could allow “a reasonable juror . . . [to] infer that the explanation given by the defendant was pretextual, and that, coupled with the temporal proximity between the complaint and the termination, the . . . complaint was a but-for cause of Kwan’s termination.” The court noted that Andalex’s “explanations for the plaintiff’s firing have . . . evolved over time” as “Andalex initially contended that its change in business focus . . . made the plaintiff’s skill set obsolete,” but that “[s]ubsequently, it shifted to an explanation that the plaintiff’s poor performance and bad behavior were the reasons for the termination.” Specifically, the court found that in the position statement that it submitted to the EEOC, Andalex claimed that Kwan, like the male employee who was terminated the day before Kwan, was terminated primarily because its business focus had changed, and not because of performance reasons. But this asserted rationale was undercut by the deposition testimony of the CIO, the decision-maker with respect to the termination, who testified that the business model had already changed by the time that Kwan began to work at Andalex. In seeking summary judgment, Andalex then argued that Kwan was terminated primarily based on her poor performance, as illustrated by three discrete incidents, only one of which was referenced in Andalex’s position statement. In addition, while Andalex claimed on summary judgment that Kwan’s behavior contributed to the decision to terminate her, this alleged conduct, although mentioned in the position statement, was not relied on as a primary reason for Kwan’s termination.
The Kwan decision establishes a troubling legal precedent that is inconsistent with the Supreme Court’s decision in Nassar and with firmly established standards of proof for plaintiffs in retaliation cases. As noted in the lengthy dissent to the portion of the decision reinstating the plaintiff’s retaliation claims, “Kwan’s prima facie case was particularly weak” as she relied entirely on temporal proximity between her purported complaint and her termination, which at best has “modest probative value,” and “the legal fiction of general corporate knowledge” without even alleging that her complaint “was actually communicated to or known by the executives who terminated her . . . .” In addition, Andalex presented extensive evidence of legitimate, non-discriminatory reasons for its termination of Kwan, which were “complementary justifications” for her termination and based on a consistent set of facts. As observed by the dissent, “[a]s our precedent recognizes, . . . it is not uncommon for an employer to have multiple reasons for terminating an employee, and . . . where the employer offers variations . . . on the same theme rather than separate inconsistent justifications, there is not sufficient evidence of pretext to preclude the entry of summary judgment.” Moreover, Kwan failed to present evidence refuting Andalex’s justifications for her termination and thus did not meet her burden of demonstrating that retaliation was the “but-for” cause of her termination, as she must under Nassar. After Kwan, plaintiffs in the Second Circuit may have an easier time evading summary judgment on retaliation claims and getting before a jury on such claims.
In order to best protect themselves against the precedent created by Kwan, employers in the Second Circuit must ensure that they are consistent in the explanations they provide for adverse employment actions both before any litigation commences and during the entire course of any ensuing litigation. Accordingly, employers are strongly advised to conduct a complete investigation of claims at the outset to understand any and all rationales for the adverse employment action at issue, and to involve legal counsel as soon as possible, including in any agency proceedings and submissions. In the wake of Kwan, an employer’s proffered reason(s) for taking an adverse employment action will be scrutinized by both the plaintiff’s counsel and the courts and must be consistent throughout the litigation.