Jan 01, 1995 Damages

Supreme Court Limits Use of After-Acquired Evidence

Employers sued for employment discrimination frequently seek to make use of evidence discovered subsequent to the plaintiff-employee’s termination, showing that the employee engaged in wrongdoing during his or her employment. Employers in these cases argue that regardless of any unlawful discrimination in which the employer may have engaged, the subsequently-discovered misconduct would have led to the employee’s termination had the employer been aware of it at the time it occurred. Relying upon what is commonly referred to as the “after-acquired evidence” doctrine, federal courts have in some cases cited such evidence as a basis for outright dismissal of the employee’s complaint of discrimination; other courts have ruled that such evidence does not compel dismissal of the employee’s suit but may affect the remedy he or she receives.

The U.S. Supreme Court has recently curtailed the ability of employers to rely on after-acquired evidence of employee misconduct, holding that it is not a complete bar to a lawsuit instituted by a former employee which alleges a violation of federal employment discrimination statutes. McKennon v. Nashville Banner Publishing Co., 1995 U.S. LEXIS 699 (January 23, 1995). In McKennon, the plaintiff alleged that her discharge violated the Age Discrimination in Employment Act of 1967 (“ADEA”). During discovery proceedings, she admitted to copying several of the employer’s confidential financial documents during her final year of employment. The District Court, affirmed by the Court of Appeals, granted the employer’s motion for summary judgment, holding that even if the employee’s discharge was the result of age discrimination, her misconduct was an independent, lawful ground upon which she would have been terminated had the employer been aware of it during her employment, and that neither backpay nor any other remedy was available to her under the ADEA.

The Supreme Court rendered a unanimous decision, reversing the dismissal of the employee’s suit. The Court assumed at the outset that the sole reason for the employee’s discharge was her age, a discharge clearly violative of the ADEA, and that the employee’s subsequently-discovered misconduct was so grave as to warrant immediate discharge upon its disclosure. The Court concluded that, despite the gravity of the misconduct, it did not make the employer’s unlawful age discrimination against the employee non-actionable. After all, the employer’s unlawful motive was the sole basis for the discharge: “[The employer] could not have been motivated by knowledge it did not have and it cannot now claim that the employee was fired for the nondiscriminatory reason.” Thus, the Court concluded, after-acquired evidence of employee misconduct will not serve as a complete bar to lawsuits alleging violations of federal employment discrimination statutes.

Although the Supreme Court rejected the lower courts’ broad use of after-acquired evidence in this case, the Court made it clear that erring employees will not totally escape the consequences of their misconduct. Evidence of employee misconduct acquired after a discharge, while not a total bar to the employee’s suit, will directly affect the remedy to be awarded in the event the employer is found to have engaged in unlawful discrimination. “In determining appropriate remedial action,” the Court stated, “the employee’s wrongdoing becomes relevant not to punish the employee … but to take due account of the lawful prerogatives of the employer in the usual course of its business and the corresponding equities that it has arising from the employee’s wrongdoing.”

For example, a prevailing plaintiff in an age discrimination case ordinarily can recover back pay, front pay and/or reinstatement. Although acknowledging that the proper boundaries of remedial relief in cases involving after-acquired evidence will depend upon the particular facts involved, the Supreme Court held, “as a general rule in cases of this type, neither reinstatement nor front pay is an appropriate remedy. It would be both inequitable and pointless to order the reinstatement of someone the employer would have terminated, and will terminate, in any event and upon lawful grounds.” Since front pay awards in age discrimination cases can be substantial, this rule may significantly limit the employer’s liability in a case involving after-acquired evidence of misconduct. Similarly, the Court held that the proper calculation of back pay is from the date of the unlawful discharge only to the date the evidence of misconduct was discovered. Since back pay ordinarily continues to run until the court’s judgment, this rule also may significantly limit an employer’s exposure.

The Court cautioned, however, that employers seeking to rely upon after-acquired evidence of wrongdoing to limit the available remedies must be able to establish that the wrongdoing was of such severity that the employee in fact would have been terminated on that basis alone if the employer had known of it at the time of the discharge. For example, an employer who would attempt to limit its liability for an unlawful discharge on the grounds that it subsequently learned that the employee made unauthorized long-distance telephone calls would not be able to rely on such misconduct if other employees had engaged in similar infractions but were not terminated.

Although the Supreme Court in McKennon limited the effect of an employer’s post-termination discovery of employee misconduct, employers can nevertheless take some comfort in the decision. While after-acquired evidence will not be an absolute bar to a lawsuit alleging unlawful employment discrimination, such evidence may, in appropriate cases, significantly limit an employer’s monetary exposure and wholly preclude an award of equitable relief, such as reinstatement.