Wisconsin Lawyer: Helping Employers Protect Against Increased Damages:

Business attorneys who advise clients about termination and other employment decisions have always added value for their clients. Since the enactment of 2009 Wisconsin Act 20, attorneys can add even more value by working with their clients to ensure appropriate actions are taken to protect against the increased damages a complainant may now obtain under the Wisconsin Fair Employment Act (WFEA). Even before a claim is filed under the WFEA, attorneys can take important steps to position clients for the best possible defense.

Potential liabilities a company will face in defending against a fair employment action in Wisconsin include back pay for lost wages, attorney fees and costs, and potential reinstatement or other equitable relief such as front pay. For alleged violations of the WFEA occurring on or after July 1, 2009, complainants who are successful at an administrative hearing on the merits of their claim may now attempt to obtain compensatory and punitive damages in circuit court. In addition to potential damages, clients should be advised about the potential cost of defending not only a claim before the Department of Workforce Development (DWD) but also a claim filed in circuit court.

Business attorneys and their clients should heed the points below, which will help in constructing a solid defense to a WFEA claim:

Legal counsel should be involved early in the employment-decision process to discuss scenarios and risks associated with the decision. Employers can take actions to position themselves to defend against, and ultimately win, WFEA claims filed by job applicants, employees, or former employees. Attorneys should advise clients to prepare contemporaneous documentation of the legitimate business reasons for termination or the decision not to hire, prepare documentation of supporting evidence, and determine whether and how to articulate to the employee or applicant the reasons for the action. The cost of involving counsel early will quickly be repaid and, in the end, is a good business investment.
The phase during which a DWD investigator decides whether there was probable cause for discrimination is even more important after the enactment of Act 20. The compensatory and punitive damages provided for by Act 20 are only available to complainants who have obtained a probable cause finding and subsequently prevailed at a hearing on the merits. It is as important as ever to win at the investigation stage of the complaint process to avoid having to mount a more vigorous legal defense later.
Counsel also should be involved in the process after the discrimination claim is filed, starting with writing the position statement. Mistakes made in the investigation and position statement phase can create unnecessary problems later on. Legal counsel can add value to a position statement by providing a relevant, succinct recitation of the important facts as well as a legal argument that draws on legal defenses and arguments that are recognized by Wisconsin law and are typically the focus of a prudent investigator’s review.
Counsel should make sure that the client includes in the answer all affirmative defenses to any claim for compensatory and punitive damages filed in circuit court. Employers who do not expressly list such defenses in the answer to the complaint may lose the ability to make such an argument in circuit court and on appeal.

Tom O' Day, U.W. 2005 cum laude, is a member of the labor and employment practice group at Godfrey & Kahn S.C., Milwaukee, where he advises and represents both public and private employers.

Business attorneys and their clients also should be aware of the following potential consequences of Act 20. The Act grants the DWD the authority to pursue compensatory and punitive damages in circuit court on its own without the consent or cooperation of the complainant. This power is similar to power already exercised by the federal Equal Employment Opportunity Commission (EEOC). If the DWD has the time and resources, it may become more active in pursuing in circuit court claims on behalf of individual complainants or, more likely, classes of allegedly wronged employees.

Finally, Act 20 potentially threatens business owners with greater personal liability for discrimination claims, now including compensatory and punitive damages. Supervisors and individuals employed by the employer – in contrast to business owners – are generally not liable for personal damages under the WFEA.¹ Act 20 does not appear to change that precedent.² Business owners, however, may be subject to personal liability for claims under the WFEA if the reviewing court is willing to pierce the corporate veil and reach the personal wealth of a business owner. Because Act 20 increases the potential damages a complainant may obtain, Act 20 also increases the quantitative risk to business owners’ personal wealth.

Act 20 is not retroactive, and compensatory and punitive damages may be awarded only for acts of discrimination, unfair honesty testing, or unfair genetic testing that occur on or after July 1, 2009. Business attorneys and their clients should be proactive from the start to avoid protracted litigation of WFEA claims under the new provisions added by 2009 Wisconsin Act 20.

Endnotes

¹Generally, by statute and in case law, supervisors and other individuals employed by the employer are not personally liable for damages under the WFEA. See Wis. Stat. § 111.39(4)(c); Burton v. Marketing Techs. Inc., ERD Case No. 9303620 (LIRC, May 10, 1996) (holding supervisor not personally liable under WFEA and refusing to “pierce the corporate veil” to reach personal wealth of former owner). See also Alberte v. Anew Health Care Sys., 2000 WI 7, 232 Wis. 2d 587, 605 N.W.2d 515 (dismissing federal disability claim against individual supervisor who was also part-owner and president of company); Callaway v. Hafeman, 628 F. Supp. 1478, 1483-84 (W.D. Wis. 1986) (dismissing claim against individual supervisor under WFEA).

²See 2009 Wisconsin Act 20, § 5 (creating Wis. Stat.§ 111.397(2)(c)).