McKennon v. Nashville Banner: Law of After-Acquired Evidence

McKennon v. Nashville Banner: Law of After-Acquired Evidence

What happens when an employer, having wrongfully terminated an employee (in violation of federal employment law), discovers in litigation that the employee did something that would have legitimately and lawfully lead to termination, had the employer known about it before wrongfully firing the employee? Does the employer still have to pay lost wages for the wrongful termination, or does this “after-acquired evidence” excuse the violation?

The Supreme Court addressed these questions in McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (1995). The Court rejected the argument that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, the Court also indicated that such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination.

Facts

McKennon worked thirty years for Nashville Banner Publishing Company until she was terminated at age sixty-two. McKennon filed suit, alleging that her discharge violated the Age Discrimination in Employment Act of 1967 (ADEA). McKennon’s suit sought a variety of legal and equitable remedies available under the ADEA, including backpay. In her deposition, McKennon admitted that during her final year of employment she had copied and taken home several of the Banner’s confidential financial documents. 513 U.S. 354-56.

For the purposes of summary judgment, the Banner conceded that it had discriminated against McKennon because of her age. Id. The District Court, however, granted summary judgment for the company, holding that McKennon’s misconduct in taking the confidential documents was grounds for termination and that neither back pay nor any other remedy was available to her under the ADEA. The Court of Appeals affirmed on the same reasoning. McKennon appealed. Id. at 355-56.

The Court’s Decision

The Court reversed. It held that an employee who is fired in violation of federal employment law is not barred from all relief when, after her discharge, her employer discovers evidence of wrongdoing that would have led to her termination on lawful and legitimate grounds had the employer known of it. 513 U.S. 356-360.

After-Acquired Evidence Not a Complete Bar

First, the Court held that this kind of “after-acquired evidence” is not a complete bar to recovery. The Court reasoned that even if the employee engaged in misconduct that would have prompted a termination, the employer’s discrimination that actually prompted the discharge cannot be disregarded. The Court assessed the purposes of the ADEA’s remedial provisions, 29 U.S.C. § 626(b) and 29 U.S.C. § 216(b), which (like the remedial provisions of other employment laws) were designed both to compensate employees for injuries caused by unlawful discrimination and to deter employers from discriminating in the first place. The Court concluded that allowing after-acquired evidence to bar all relief would frustrate both of these important objectives. Therefore, the Court held that after-acquired evidence did not bar all relief for unlawful discrimination. Id. at 358-360.

Relevance to Crafting an Appropriate Remedy

Second, however, the Court observed that trial courts should take into account after-acquired evidence of an employee’s wrongdoing in determining the specific remedy for the employer’s discrimination. To hold otherwise, and bar any consideration of employee misbehavior in the relief analysis, would be to ignore the employer’s legitimate concerns about employee misconduct. The ADEA, like other employment laws, just prohibits discrimination. It does not limit employers from having legitimate rules and exercising appropriate lawful discretion in hiring, promoting, and firing employees. Therefore, the Court noted, employee wrongdoing is relevant in taking due account of such lawful prerogatives and the employer’s corresponding equities arising from the wrongdoing. Id. at 360-61.

General Rule: No Reinstatement or Front Pay

Third, the Court discussed how trial courts might balance these competing concerns — on one hand, the prohibition against unlawful discrimination, and on the other, the employer’s right to address legitimate employee misconduct in an appropriate manner. The Court decided that remedial relief in such cases should be addressed on a case-by-case basis. However, the Court stated that as a general rule, if the employer proves the employee engaged in misconduct that would have prompted a lawful termination had the employer known about it, neither reinstatement nor front pay is an appropriate remedy. Id. at 362. This is because “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.” Id.

Possible Limitations on Back Pay

The Court indicated that the more difficult issue, in after-acquired evidence cases, is the proper measure of back pay. This is because even a guilty employer cannot be required to ignore information it learns about employee wrongdoing that would lead to a legitimate discharge, even if it is acquired during the course of a discrimination lawsuit and might have gone undiscovered in the absence of the discrimination that led to the lawsuit. Id. at 362. The Court stated that the “beginning point in formulating a remedy should therefore be calculation of backpay from the date of the unlawful discharge to the date the new information was discovered.” Id. In determining the appropriate relief, the court can consider extraordinary equitable circumstances that affect the legitimate interests of either party. But an “absolute rule barring any recovery of backpay, however, would undermine the [federal employment law’s] objective of forcing employers to consider and examine their motivations, and of penalizing them for employment decisions that spring from … discrimination.” Id. Thus, as a general rule, after-acquired evidence does not bar back pay, but it might limit the amount of back pay an employee can recover.

No Bar to General Compensatory, Punitive, or Liquidated Damages

It is also worth noting that McKennon did not state or suggest that compensatory damages for past or future emotional harm should be time-limited. The decision only addressed possible limitations on lost wages and reinstatement. Allowing full emotional distress damages even if the defendant prevails on an after-acquired evidence defense makes good sense in light of McKennon’s reasoning. This is because no legitimate business prerogative would be served by allowing a proven discriminator to avoid paying the full cost of the emotional damage caused by the discrimination. The same reasoning supports the conclusion that after-acquired evidence does not bar punitive damages or liquidated damages, in cases where the usual standards for awarding punitive or liquidated damages are met. Here is a link to EEOC’s guidance on this issue.

Employer’s Burden of Proof

Finally, the Court discussed the employer’s burden in attempting to prove an “after-acquired evidence” defense. When an employer seeks to use this defense, it must first establish that the wrongdoing was of “such severity that the employee in fact would have been terminated on those grounds alone had the employer known of it at the time of the discharge.” Id. at 362-63. The Court also expressed concern that, due to the possibility of uncovering after-acquired evidence, employers might routinely undertake extensive discovery into an employee’s background or job performance to resist employment discrimination claims. Id. at 363. However, the Court concluded the trial courts’ authority to award attorney’s fees under §§ 216(b) and 626(b) and to invoke the appropriate provisions of the Federal Rules of Civil Procedure would likely deter most abuses of the discovery rules. Id.

Analysis

The Court in McKennon rejected the notion that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination. To use this defense, an employer must prove that the employee engaged in misconduct of such severity that the employee would have been terminated on those grounds alone had the employer learned of it during her employment. As a general rule, if the employer meets this burden, reinstatement is not an appropriate remedy and back pay may be limited.

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