Showing 3 posts in Cat's Paw.

Seventh Circuit: Section 1981 Allows Individual Liability in “Cat’s Paw” Claim

The U.S. Court of Appeals for the Seventh Circuit has determined that employees may be held individually liable under Section 1981 if their discriminatory actions led their employer to terminate another employee. This was a case of first impression involving the so-called “cat’s paw” theory of liability, so-named for a fable involving a monkey that persuades a cat to pull roasting walnuts from a fireplace, only to burn his paw and get no walnuts himself. “Why should the ‘hapless cat’ (or at least his employer) get burned,” the panel asked, “but not the malicious ‘monkey?’” More ›

No “Cat’s Paw” Claim Where Supervisor was Terminated for Violating Policy

A supervisor helped an injured employee obtain from the company nurse a work restriction that limited the number of hours the employee could work. However, the supervisor required the employee to work more hours than the restriction allowed. The supervisor alleged that at an intermediate-supervisor’s direction he denied the employee the breaks that the employee was entitled to. The employer discovered that the supervisor had failed to honor the injured employee’s restriction and terminated the supervisor. The supervisor, in turn, sued under the Iowa Civil Rights Act, claiming that he was retaliated against for seeking accommodation for the disabled subordinate employee. Using the “cat’s paw” theory, the supervisor argued that the intermediate-supervisor, who lacked decision-making power, used a manager as a dupe in a deliberate scheme to get the manager to fire him. The U.S. Court of Appeals for the Eighth Circuit rejected the employee’s claim because the intermediate-supervisor neither reported the supervisor’s violation of the work restriction to the manager nor recommended that the supervisor be disciplined. Nor did the manager rely on anything from the intermediate-supervisor in deciding to fire the supervisor. Instead, the manager fired the supervisor because he had admitted violating company policy by forcing the employee to work in violation of his restriction. This case is significant because of the Court’s recognition that the supervisor was required but failed to prove that the manager’s decision was actually influenced by the intermediate-supervisor. Employers must ensure that decision-makers do not make employment decisions based on their own desire, or the desire of a subordinate, to retaliate against an employee for engaging in any kind of protected activity.

U.S. Supreme Court Reinstates Army Reservist’s “Cat’s Paw” Bias Claim Under USERRA

A group of employees who participated in their employer’s 401(k) plan invested a portion of their account in their employer’s stock. They sued their employer under the Employee Retirement Income and Security Act (ERISA) when the price of their employer’s stock dropped. The employees alleged that their employer had failed to disclose sufficient information about a bad business transaction that the employer had entered into and to monitor the conduct of the plan fiduciaries. Initially, the U.S. Court of Appeals for the Seventh Circuit dismissed a claim of an employee bringing suit who had previously signed a severance agreement with the employer waiving all claims against the employer, including those under ERISA. The employee argued that he could still pursue his claim against under the plan because ERISA prohibited plan fiduciaries from being released from their fiduciary responsibilities. The court held that nothing in ERISA prohibits a fiduciary from obtaining a release for potential claims that had already accrued. It went on to find that the fiduciaries did not violate ERISA in initially selecting their own stock as an investment option under the plan because: (1) the fund was one of many among which the participants could choose; (2) the plan repeatedly warned against the risk of not diversifying their investment choices; and (3) the employer’s stock had never performed badly enough to make it an imprudent investment choice. Additionally, the court held the employer and plan fiduciaries were protected under the “safe harbor” provision of Section 404(c) of ERISA against the employee’s claims that the employer had failed to disclose information about certain business decisions and to monitor plan fiduciaries. The Section 404(c) safe harbor provision provides protection for plan fiduciaries in certain instances where participants direct the investment of their accounts in a 401(k) plan. The purpose of the Section 404(c) safe harbor provision is to relieve the fiduciary of responsibility for choices made by someone beyond its control. The court held that the plan fiduciaries had no duty to provide plan participants with real time updates on business decisions or to review all business decisions of the company. Based on the court’s findings in these cases, employers should ensure they are in compliance with Section 404(c) of ERISA, as it provides protection to 401(k) plan sponsors if their fiduciary decisions are questioned. However, they should be aware that Section 404(c) does not provide protection for the initial fund selection. Additionally, employers should ensure that all severance agreements are well-drafted.

Howell v. Motorola, Inc., Case No. 07-3837 (7th Cir. Jan. 21, 2011)
Lingis v. Dorazil, Case No. 09-2796 (7th Cir. Jan. 21, 2011)