Opinion
No. C8-01-259.
Filed October 16, 2001.
Appeal from the District Court Minneapolis Commission on Civil Rights File No. 97089-EM-11.
Jeffrey A. Carson, Anna Krause Crabb (for respondent Mary Humbeutel)
Richard A. Ross, Anne M. Radolinski (for relator)
Minneapolis Commission on Civil Rights (respondent)
Considered and decided by Kalitowski, Presiding Judge, Klaphake, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Relator fired respondent on April 8, 1996, ostensibly for violating the company's nonsmoking policy. Approximately one year after her termination, respondent filed a charge of age discrimination against relator with the Minneapolis Human Rights Department. Two and one-half years later, the department issued a finding of probable cause. A public hearing was held in September-October 2000, 11 months after the probable-cause determination. The commissioner issued findings of fact, conclusions of law, and order on January 12, 2001, ruling in favor of respondent.
On appeal, relator contends that respondent's claims are barred by the doctrine of laches because of the delay in the probable-cause determination. Relator also challenges the decision, contending that the findings are not supported by substantial evidence and are arbitrary and capricious. Finally, relator challenges the determination of damages. Because there is sufficient evidence in the record to support the department's findings, we affirm. But because the department failed to make findings to support an award of punitive damages, we reverse on that issue.
FACTS
Respondent Mary Humbeutel, then 64 years old, was hired by relator Private Sector Systems, Inc. (d/b/a Suburban Taxi) on October 28, 1993, as an order taker. The position title was later changed to customer-service representative (CSR).
In February 1995, Private Sector installed a new computer system to improve the company's dispatching service. Around the same time, Private Sector also instituted a nonsmoking policy that allowed smoking in the breakroom only. No terminations or discipline for policy violations occurred.
In the fall of 1995, Humbeutel learned that she was first or second on the seniority list. When a dispatcher position came open in September 1995, she first expressed her interest in being promoted. Humbeutel later learned that she was passed over for a promotion to dispatcher, and, instead, Private Sector promoted an employee who was significantly younger and had less seniority. Humbeutel complained to Tom Cesario, a supervisor, but he responded that he placed little weight on seniority in promotion decisions. Humbeutel learned that several other employees with less seniority had been promoted to dispatcher after she initially expressed her interest in the position.
On March 3, 1996, a new, more stringent nonsmoking policy went into effect, banning smoking throughout the building. The posting of the new policy stated that "[a]nyone found smoking in the building will have to be let go."
On April 4, 1996, Humbeutel contacted Alex Santarelli, CSR manager, about being promoted to a dispatcher position after two dispatchers resigned. Santarelli told Humbeutel that she "deserved" a promotion, and Humbeutel began training on the dispatching computer system. After training for approximately two hours, Humbeutel was asked to return to her work as an order taker because the phones were very active. Over the next two days, Humbeutel observed two younger, less senior employees begin dispatcher training. Humbeutel attempted to meet with the general manager on Friday, April 5, 1996, but was told that he was unavailable until April 10, 1996.
On April 8, 1996, Private Sector terminated Humbeutel for violation of the nonsmoking policy after a female employee reported seeing her smoking in the bathroom. Humbeutel denied the claim and stated that she had lent her cigarette lighter to a co-worker earlier that day. Private Sector asked Humbeutel to sign a disciplinary-termination form, but she refused. Humbeutel tried to contact her former manager after her termination based on his statement that the matter would be investigated further, but was unsuccessful.
Humbeutel filled out an employment-discrimination claim with the Minneapolis Department of Civil Rights ("the department") on April 12, 1996, but never filed it.
On April 19, 1996, Humbeutel went to Private Sector's office to return her keys and pick up her last paycheck. Private Sector required her to sign a form in order to be issued the paycheck; Humbeutel later learned that she had unknowingly signed a voluntary-resignation form.
On April 2, 1997, Humbeutel filled out and filed an employment-discrimination claim with the department. In her claim, she stated that Private Sector had discriminated against her because of her age because younger individuals had been promoted ahead of her. The department did not complete its investigation until October 25, 1999. During the two and one-half years of investigation, the department had three different investigators assigned to the complaint. On October 25, 1999, the commissioner notified Humbeutel that probable cause existed solely on the issue of whether she was terminated because of her age.
On July 26, 2000, Humbeutel obtained legal counsel, moved to amend her complaint, and made initial discovery requests. Private Sector opposed the motion to amend, and the department ordered Humbeutel to detail what relief she was requesting and prohibited her from adding any additional charges of discrimination. The department stated that it had only issued a probable-cause statement on whether Private Sector terminated Humbeutel because of her age. On August 22, 2000, Humbeutel sent a letter to the department to clarify that she would be seeking damages for Private Sector's failure to promote as well as for her termination. She sought compensatory damages of $143,325 (three times her actual damages), punitive damages, attorney fees, and damages for mental anguish.
Private Sector brought a motion to dismiss, contending that the department's delay had prejudiced Private Sector's ability to find witnesses. Private Sector also claimed that it had thrown away many documents "from 1996 and prior to that." The department denied the motion. Additionally, the department sanctioned Private Sector for failing to disclose the documents sought by Humbeutel and ordered Private Sector to pay her attorney fees relating to the discovery motions.
The department held a hearing on September 26-27 and October 4, 2000. Humbeutel presented two witnesses, CSR Carol Hodroff and dispatch supervisor Lisa Schmitz. Hodroff testified that it was her understanding that Private Sector tried to promote from within and used seniority as part of promotion decisions. Schmitz testified that Private Sector did consider seniority when making promotions. Private Sector argued that what Schmitz meant was that Private Sector considered an employee's experience in promotion decisions, not necessarily length of service. Humbeutel testified that when she complained about being passed over for a promotion, the hiring supervisor Tom Cesario told her, "I know about seniority, but with me it doesn't cut it."
Private Sector called William Holderness, a former dispatcher and communications-room manager. Holderness testified that Humbeutel was "a good order taker" but that she had a "hard time adjusting" to the new computer system. He also testified that there was no seniority system except for purposes of determining which employee should get time off if more than one employee requested vacation on the same day.
Private Sector also called general manager Michael Waldmann, who testified that Private Sector did not maintain an official seniority system. Like Holderness, Waldmann testified that Private Sector only used seniority for vacation selection; seniority was not used for promotions. On cross-examination, Waldmann could not recall if Private Sector had hired anyone over 40 years old after terminating Humbeutel.
Waldmann also testified about the alleged smoking incident. He could not remember the name of the female employee who saw Humbeutel smoking in the women's bathroom. When he confronted Humbeutel, Waldmann testified that she expressed hostility toward the new nonsmoking policy. Rather than get into a confrontation with Humbeutel, Waldmann testified that he reported her to her supervisor, Alex Santarelli. Waldmann stated that the penalty for violating the nonsmoking policy was always termination, but he conceded that he was unaware of any other employee who had been fired for violating the policy.
Following the hearing, Humbeutel withdrew her claim based on failure to promote, citing statute-of-limitations concerns and a desire to expedite the proceedings. The department determined that Private Sector had discriminated against Humbeutel. The department found that Private Sector allowed "employees to continue smoking in the main hallway around the dispatch station and in the bathrooms" without being punished. Moreover, the department concluded that Humbeutel did not smoke in the restroom on the day she was terminated. The department also found that Private Sector did maintain a seniority system, and Humbeutel should have been "either number one or number two on the seniority list as of August 1995." Finally, the department held that Humbeutel's testimony was credible, she had met her prima facie burden of proof, and Private Sector failed to offer a credible nondiscriminatory reason for its employment decisions. The department then awarded Humbeutel $48,562.50 in actual damages, $8,500 in punitive damages, and attorney fees. This appeal follows.
DECISION I.
Private Sector challenges numerous factual findings, arguing they are not supported by substantial evidence and are, therefore, arbitrary and capricious. The findings that Private Sector challenges basically relate to two specific issues: (1) whether Private Sector had a seniority system in place for promotions and (2) whether Private Sector acted pursuant to its own policies when it terminated Humbeutel for smoking.
In an appeal from a decision of a municipal agency, we apply the same standard of review that we would apply to a decision by a state agency. City of Minneapolis v. Moe, 450 N.W.2d 367, 369 (Minn.App. 1990); see also Minn. Stat. § 14.69 (2000) (Administrative Procedure Act). We will reverse the department's findings if they are unsupported by substantial evidence on the record, are arbitrary and capricious, or affected by other errors of law. See Minn. Stat. § 14.69. Substantial evidence is defined as:
1. Such relevant evidence as a reasonable mind might accept as adequate to support a conclusion;
2. More than a scintilla of evidence;
3. More than some evidence;
4. More than any evidence; and
5. Evidence considered in its entirety.
Hazelton v. Dep't of Human Servs., 612 N.W.2d 468, 471 (Minn.App. 2000).
Private Sector argues that the department's findings are unsupported because they conflict with Private Sector's witnesses' testimony. Private Sector's witnesses contradicted Humbeutel's witnesses on whether the company used a seniority system for promotions. But the record indicates that, even if seniority was not the sole basis for promoting an employee, it was a factor in the decision. Schmitz stated in an investigative interview that Private Sector preferred experienced senior employees because they understood the routing system and were familiar with the local geography.
As Humbeutel points out, Private Sector is challenging the department's credibility determinations. Because the department had the opportunity to view witnesses and assess their demeanor, we will defer to its determination that Humbeutel's testimony was more credible. See State by Cooper v. Moorhead State Univ., 455 N.W.2d 79, 83 (Minn.App. 1990).
We also note that much of the record is incomplete because Private Sector failed to put certain documents into evidence. For example, Private Sector introduced no evidence to rebut Humbeutel's testimony regarding the seniority system. Private Sector introduced a 1996 employee handbook that was missing approximately one-half of its pages. The portion admitted did not address Private Sector's policies on harassment, personnel files, performance reviews, discipline, termination, and benefits. Similarly, in regard to the smoking policy, the handbook only stated that "[s]moking is prohibited throughout the workplace." Again, the portion of the handbook dealing with disciplinary actions and termination was missing. Although a poster advising employees of the March 1996 smoking ban was in evidence, there is nothing in the record about how this and previous smoking policies were enforced or how violators were treated. Because the department found Humbeutel's testimony credible, there is substantial evidence in the record to support the findings.
II.
Private Sector argues that the department erred in finding that Humbeutel established a prima facie case of age discrimination. Alternatively, Private Sector argues that the department erred in applying the McDonnell-Douglas test, a three-step burden-shifting test for evaluating disparate-treatment claims. See Moorhead State Univ., 455 N.W.2d at 82 (noting that Minnesota has adopted the reasoning of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817 (1973)). The plaintiff first must establish a prima facie case of disparate treatment based upon a statutorily prohibited discriminatory factor. Anderson v. Hunter, Keith, Marshall Co., Inc., 417 N.W.2d 619, 623 (Minn. 1988). If the plaintiff successfully establishes a prima facie case, "a presumption then arises that the defendant unlawfully discriminated against the claimant." Id. The defendant then has the burden of producing evidence to articulate a "legitimate, nondiscriminatory reason for the plaintiff's treatment." Id. If the defendant produces sufficient evidence to raise a genuine issue of fact that its stated motive for treating the plaintiff as it did arose from legitimate, nondiscriminatory reasons, the burden shifts back to the plaintiff to demonstrate that the defendant's asserted reasons were pretextual. Id. at 623-24; see also Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 143, 120 S.Ct. 2097, 2106 (2000) ("[T]he plaintiff may attempt to establish that he was the victim of intentional discrimination by showing that the employer's proffered explanation is unworthy of credence." (quotation omitted)). The plaintiff has the ultimate burden of proving by a preponderance of the evidence that the alleged discrimination occurred. Anderson, 417 N.W.2d at 627.
Respondent withdrew her failure-to-promote claim based on a statute-of-limitations concern. Bougie v. Sibley Manor, Inc., 504 N.W.2d 493, 497 (Minn.App. 1993) ("Mere continuity of employment * * * does not extend a cause of action for discrimination; rather, the actual violation must continue.").
To establish a prima facie case for discriminatory termination, the plaintiff must show:
(1) he [or she] is a member of a protected class;
(2) he [or she] was qualified for the job from which he was discharged;
(3) he [or she] was discharged; and
(4) the employer assigned a nonmember of the protected class to do the same work.
State by Cooper, 455 N.W.2d at 83 (alterations in original).
Here, there is no dispute that Humbeutel has satisfied the first three elements. Private Sector argues that Humbeutel failed to satisfy the fourth element because Private Sector claims that it hired individuals in the same age range as Humbeutel. Based on Private Sector's employee records and Waldmann's testimony that he could not recall hiring anyone over 40, the department found that Private Sector "hired individuals as [customer-service representatives] and dispatchers who were younger than" Humbeutel. Thus, Humbeutel satisfied all the elements of her prima facie case.
Second, Private Sector contends that Humbeutel failed to rebut its nondiscriminatory rationale — violating the nonsmoking policy for terminating her, and thus the department erred. A defendant's nondiscriminatory explanation for a termination only needs to be one that, "taken as true, would permit the conclusion that there was a nondiscriminatory reason for the adverse action." Ward v. Employee Dev. Corp., 516 N.W.2d 198, 202 (Minn.App. 1994) (emphasis omitted) (quoting St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 509, 113 S.Ct. 2742, 2748 (1993)). As the plaintiff, Humbeutel has "the final burden of demonstration that the proffered reason was not the true reason for the employer's actions." Hasnudeen v. Onan Corp., 552 N.W.2d 555, 557 (Minn. 1996). The plaintiff may sustain this burden by persuading the court with direct evidence that the defendant was likely motivated by a discriminatory reason or by showing through indirect, circumstantial evidence that "the employer's proffered explanation is unworthy of credence." Sigurdson v. Isanti County, 386 N.W.2d 715, 720 (Minn. 1986) (quotation omitted); see also Reeves, 530 U.S. at 147, 120 S.Ct. at 2109 ("Proof that the defendant's explanation is unworthy of credence is simply one form of circumstantial evidence that is probative of intentional discrimination [and] may be quite persuasive." (citation omitted)). Once the burden shifts back to the plaintiff for the third prong, "the sole question is whether or not the court is persuaded that the employee has been the victim of intentional discrimination." Doan v. Medtronic, Inc., 560 N.W.2d 100, 105 (Minn.App. 1997) (quotation omitted).
The department held that Humbeutel rebutted Private Sector's nondiscriminatory reason for the termination. Humbeutel put forward evidence that if anyone violated the nonsmoking policy, he or she was told to go outside to smoke. No other employee had ever been terminated for smoking. Private Sector failed to put into evidence any information on employee discipline and termination to rebut this evidence. Finally, Humbeutel testified that she did not smoke in the women's restroom, and the department found her testimony and explanation to be credible. Although Private Sector asserted that no one else could have smoked in that restroom, the company did not investigate Humbeutel's claims of innocence to determine if another person was responsible. Therefore, the department did not err by finding that Humbeutel rebutted Private Sector's nondiscriminatory reason for the termination.
III.
Private Sector argues that the department erred by failing to dismiss Humbeutel's claim on the ground that it was barred by the doctrine of laches. Humbeutel contends that her actions were not unreasonable and cannot be attributable to the delay. We agree that Humbeutel is not at fault, but the question presented is whether the department caused the delay, and, if so, whether Private Sector was unfairly prejudiced. While we agree that the department failed to act promptly, we agree with Humbeutel that Private Sector was partially responsible for the delay.
The Minneapolis Civil Rights Ordinance provides that
[p]romptly upon the filing of any complaint, the director shall make such investigation as the director may deem appropriate to determine whether there is probable cause to believe that the allegations of discrimination are well founded.
Minneapolis, Minn., Code of Ordinances § 141.50 (2000).
Private Sector urges us to construe the term "promptly" like the Minnesota Supreme Court did in State by Beaulieu v. RSJ, Inc., 552 N.W.2d 695 (Minn. 1996). In Beaulieu, the court considered whether the Minnesota Department of Human Rights (MDHR) issued a probable-cause determination "promptly" based on the fact that 31 months had passed from the initial complaint. Id. at 702; see also Minn. Stat. § 363.06, subd. 4 (2000) (providing that "the commissioner shall promptly inquire into the truth of the allegations of the charge"). The court noted that the MDHR was required to make such a determination within 12 months of a filing of a discrimination complaint, but that failure to do so did not create a jurisdictional bar to further proceedings. Beaulieu, 552 N.W.2d at 702. Rather, failing to make such a determination "raise[d] equitable defenses to be resolved by the ALJ." Id. The Beaulieu court concluded that as a matter of law, * * * probable cause determinations made 31 or more months after a charge is filed are per se prejudicial to the respondent and require dismissal of the complaint.
Id. at 703 (footnote omitted). After such a long "unexplained" delay, the court reasoned that it would be very difficult to resolve a discrimination claim. "Evidence and witnesses may disappear, memories may fade, assets may be wasted, and damages may continue to accrue." Id. at 702. The court held that the legislature only intended the 12-month requirement to be an "incentive" for the MDHR "to act expeditiously." Id. Recognizing that a bad actor could easily frustrate a probable-cause investigation, the supreme court cautioned that where the respondent causes or is otherwise responsible for the MDHR's delay in making the probable cause determination, the respondent is not prejudiced by the MDHR's delay.
Id. at 703 n. 8. Like other equitable remedies, laches should not be granted where the party seeking such equitable relief is partially at fault. In re Burns, 538 N.W.2d 162, 165 (Minn.App. 1995) (explaining the equitable doctrine of unclean hands), rev'd on other grounds, 542 N.W.2d 389 (Minn. 1996).
Here, we agree that the department did act inappropriately based on the delayed investigation and probable-cause determination. The department spent 30-some months before it finally determined that probable cause existed. The department assigned three different investigators to this complaint, and it appears that these investigators repeatedly asked for some of the same information. While we are sympathetic to the demands placed on the department, probable-cause determinations are to be made promptly. Minneapolis, Minn., Code of Ordinances § 141.50. Such a long delay is detrimental to all parties and can prevent an efficient and fair administrative proceeding.
Yet we cannot say that Private Sector was without fault. Private Sector obtained new counsel once during the investigation and again before the administrative hearing. Notes from the investigators revealed that the investigation was delayed while the investigators tried to determine which attorney had certain documents and files. Additionally, Private Sector's counsel failed to answer investigators' letters and requests for information. Ultimately, Private Sector concluded that many of these documents had been destroyed or lost. Given Private Sector's inattention or lack of responsiveness to the investigation, the delay was not entirely the department's fault. Therefore, we agree with Humbeutel that the department's delay was not prejudicial per se and we affirm the denial of the motion to dismiss.
IV.
Finally, Private Sector argues that, even if the department's determination is upheld, the department erred by awarding Humbeutel punitive damages. The civil-rights ordinance authorizes the department to award punitive damages to a plaintiff. Minneapolis, Minn., Code of Ordinances § 141.50(m) (2000). Here, the department awarded Humbeutel $8,500, the maximum penalty allowed under the ordinance. See id.
The ordinance specifies that any punitive-damage award must be made pursuant to Minn. Stat. § 549.20 (2000). Minneapolis, Minn., Code of Ordinances § 141.50(m). To receive punitive damages, a plaintiff must show by clear and convincing evidence that the defendant acted with "deliberate disregard for the rights or safety of others." Minn. Stat. § 549.20, subd. 1(a). When determining whether a plaintiff deserves such an award, a court must consider the factors set forth in Minn. Stat. § 549.20, subd. 3. These factors include the seriousness of hazard to the public arising from the defendant's misconduct, the profitability of the misconduct to the defendant, the duration of the misconduct and any concealment of it, the degree of the defendant's awareness of the hazard and of its excessiveness, the attitude and conduct of the defendant upon discovery of the misconduct, the number and level of employees involved in causing or concealing the misconduct, the financial condition of the defendant, and the total effect of other punishment likely to be imposed upon the defendant as a result of the misconduct, including compensatory and punitive damage awards to the plaintiff and other similarly situated persons, and the severity of any criminal penalty to which the defendant may be subject.
Id. Failing to "make findings addressing the factors" is grounds for reversal. Bougie v. Sibley Manor, Inc., 504 N.W.2d 493, 500 (Minn.App. 1993).
Because the department failed to make any findings discussing the statutory factors for punitive damages, we reverse on this issue. Humbeutel urges us to sift through the findings that the department did make in order to support the award. She argues that the department's finding of intentional discrimination in and of itself justifies a punitive award. We disagree. Any successful disparate-treatment case such as this one will involve a finding of intentional discrimination, but that does not automatically warrant punitive damages. Moreover, our role is not to make the factual findings to support such an award. Therefore, the award of punitive damages is reversed.