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Fall 2009

Employment Law Bulletin

A Cautionary Tale: Front Pay and Punitive Damages Awards Upheld by the Supreme Judicial Court of Massachusetts in Haddad v. Wal-Mart Stores, Inc.

In October 2009, the Massachusetts Supreme Judicial Court affirmed a jury verdict of over $1.9 million in damages in favor of plaintiff Cynthia Haddad on her gender discrimination claim against her former employer, Wal-Mart Stores, Inc. The Haddad decision presents a cautionary tale to employers who give conflicting and inconsistent reasons for taking an adverse employment action, which can later be viewed by a jury as pretextual and discriminatory.

Factual Background of Haddad case

Plaintiff Cynthia Haddad had worked at Wal-Mart’s store in Pittsfield, Massachusetts as a pharmacist for ten years. For most of Ms. Haddad’s employment she worked as a staff pharmacist and received consistently excellent evaluations. In March 2003, Ms. Haddad accepted a position of pharmacy manager on a temporary basis, and was supposed to receive additional hourly pay and a bonus as a pharmacy manager. After she made numerous complaints, on April 9, 2004, Ms. Haddad received the pharmacy manager bonus, but never received the thirteen months’ worth of additional hourly pay. During the thirteen months she was acting pharmacy manager, Ms. Haddad was paid an hourly rate considerably lower than any male pharmacy manager in the Pittsfield region. Less than one week after receiving her bonus, on April 14, 2004, Wal-Mart’s district manager and others questioned Ms. Haddad about a fraudulent prescription written and filled eighteen months earlier by a pharmacy technician while Ms. Haddad was on duty as a pharmacist, and about another allegedly fraudulent prescription written while a male pharmacist was on duty. Ms. Haddad denied knowing the prescriptions were fraudulent, but said the first one could have been written while she was nearby purchasing a soda, in the back of the pharmacy, or out front helping customers. Wal-Mart terminated Ms. Haddad’s employment that same day and told her it was for failing to secure the pharmacy in violation of store policy. No other pharmacists were questioned or disciplined about the fraudulent prescriptions.

Ms. Haddad filed a complaint against Wal-Mart asserting gender discrimination and other claims. A jury found for Ms. Haddad on her gender discrimination claim and awarded her $972,774 in compensatory damages (which included special damages, emotional distress, back pay and front pay), and $1 million in punitive damages. The trial judge later vacated the punitive damages award, and both parties appealed.

The Supreme Judicial Court upheld the jury verdict of discrimination, affirmed the $733,307 front pay award, and reinstated the $1 million punitive damages award. In upholding the jury’s finding of gender discrimination, the appellate court noted that the evidence demonstrated, among other things, that Wal-Mart gave conflicting reasons for the termination; that the reason on the exit interview form (“gross misconduct – misappropriation”) was false; that the termination was planned in advance of the April 14th interview; that store policy did not require the pharmacy to be secured when the pharmacist left the pharmacy area; that similarly situated male pharmacists were treated differently than Ms. Haddad for similar violations of Wal-Mart policy; and that Ms. Haddad’s base pay was significantly less per hour than all the male pharmacy managers in the Pittsfield region.

Award of $733,307 in front pay damages upheld

Front pay is an element of damages that compensates a plaintiff for lost employment income from the date of the jury verdict until some point in the future. Ms. Haddad did obtain a new job after six months at a small pharmacy, at a higher hourly rate but fewer hours and benefits, causing her to earn less than at Wal-Mart. The Supreme Judicial Court upheld the front pay award of $733,307, covering a nineteen-year period, holding that the jury could have found that Ms. Haddad would work an additional nineteen years (until she was sixty-five), that there were few employment opportunities in the Pittsfield area, that she had a history of job stability, and that her reputation in the community had been harmed by Wal-Mart’s allegations of her responsibility for drug losses.

One Million Dollar Punitive Damages Award Reinstated

The jury awarded Ms. Haddad one million dollars in punitive damages, apparently finding that Wal-Mart’s conduct met the standard of being outrageous, because of the evil motive or reckless indifference to Ms. Haddad’s rights. The trial court vacated the punitive damages award. In reinstating this award, the Supreme Judicial Court found sufficient evidence of reprehensible or recklessly indifferent conduct to support an award of punitive damages, including the “sham” investigation of Ms. Haddad’s actions, when male pharmacists were not investigated or disciplined; unequal treatment of Ms. Haddad and a male pharmacist; unequal pay; and evidence that Wal-Mart had policies prohibiting discrimination. The Supreme Judicial Court took the opportunity to establish a new standard for awarding punitive damages in the future that required the jury to consider all the factors surrounding the wrongful conduct, including: conscious or purposeful efforts to demean the plaintiff, or the class of which she is a member; awareness that discriminatory conduct would likely cause harm; actual harm caused; defendant’s conduct after learning that the conduct would likely cause harm; and the duration of the wrongful conduct and efforts to conceal it.

Lessons from Haddad

As a result of the Haddad decision, Wal-Mart is responsible for almost two million dollars in damages, interest on that amount, and Ms. Haddad’s attorneys’ fees. Haddad serves as an important (and expensive) reminder that employers must be vigilant in ensuring that adverse employment decisions are carefully made, that the reasons for the decisions are legitimate and consistently articulated, and that policies applicable to these decisions are consistently applied to all employees. By failing to follow these guidelines, employers may be subject to a damage award that consists of years of front pay to the terminated employee and punitive damages for the employers’ outrageous conduct.

If you have any questions regarding the Haddad decision or any other employment issues, please contact Mary Jo Kennedy, who is the Coordinator of the Employment Law Practice Group, or  [email protected].  Carol is located in the firm’s Boston office and can be reached at  617-368-2502 or [email protected].