Blog: The California Workplace Advisor

Number 23: After-Acquired Evidence 

“You did what?  If I Hadn’t Already Fired You, I’d Fire You Now!”

What if?  This is the question that has followed Title VII since its inception: how do you apply this revolutionary (yet seemingly straightforward) prohibition on workplace discrimination to an ever-changing series of facts and circumstances?  What if, for example, an employer found out, during the course of defending itself against claims of employment discrimination, that the plaintiff-employee had engaged in misconduct that would have warranted immediate termination–had the employer known of such misconduct during the employee’s employment?  Should the employer’s legitimate concerns about misconduct trump any claim of employment discrimination, or vice-versa?  Or is there, perhaps, a third path?  These were the questions addressed by the United States Supreme Court in 1995 in the case of McKennon v. Nashville Banner Publishing Company (513 U.S. 352).  The Court responded with a resounding “It depends.” 

The plaintiff, Christine McKennon, had worked in various positions for The Banner, a longtime Nashville evening newspaper, continually for 30 years.  In 1990 she was terminated as part of a wider layoff as the Banner (like many newspapers at that time and since) struggled with declining circulation. In 1991, McKennon, who was then 62 years old, filed suit under the ADEA, alleging that she was terminated on the basis of her age.  During her deposition in 1991, McKennon, whose final position with the Banner was as secretary to the Comptroller, admitted that she had copied numerous documents regarding the Banner’s financial condition as “job protection.”  The Banner subsequently wrote a letter to McKennon, informing her that such copying violated its policies, confirmed her termination, and stated that it would have terminated her at the time of such copying had it been then discovered.  The Banner moved for and was granted summary judgment on the basis that McKennon’s violation of company policy made her ineligible for any relief under the ADEA.

The Supreme Court reversed, basically on the basis that the employee’s very real and serious violation of company policy had to be balanced against the intent behind the ADEA (and by extension, Title VII).  The Court first noted that the substantive, antidiscrimination provisions of the ADEA were modeled upon those of Title VII, and that Congress designed the remedial measures in both statutes to serve as a “spur or catalyst” to cause employers “to self-examine and to self-evaluate their employment practices and to endeavor to eliminate, so far as possible, the last vestiges” of discrimination.  As such, the Court reasoned, there were two main purposes or remedies behind both the ADEA and Title VII: deterrence of discriminatory conduct, and compensation for the injuries to plaintiffs.  The Court then reasoned that a blanket rule barring recovery for plaintiff-employees who, as in this case, had engaged in later-discovered misconduct, would frustrate these purposes.

The Court did not, however, dismiss such employer concerns: “[t]he employee’s wrongdoing must be taken into account [] lest the employer’s legitimate concerns be ignored.”  The Court reasoned that the ADEA “does not constrain employers from exercising significant other prerogatives and discretions in the course of the hiring, promoting, and discharging of their employees.” In short, the Court reasoned that if an employer discovered misconduct warranting termination—even if such discovery occurs during a lawsuit, and even if such information would otherwise have been undiscovered—“we cannot require the employer to ignore the information.”

The Court did not, however, set a bright line rule as to how to balance these interests.  Instead, it provided factors that are still the basis for weighing the after-acquired evidence defense.  The Court reasoned that “the beginning point” in coming up with a remedy would be awarding backpay to the plaintiff-employee, but only from the date of termination to the date that the illicit conduct is discovered.  In other words, the after-acquired evidence defense would usually not bar all recovery, but, under the right circumstances, it would restrict recovery to backpay while barring recovery of front pay, or future employment losses, as well as reinstatement.

The Court also set forth an “it depends” factor in such cases; that is, “in determining the appropriate order for relief, the court can consider taking into further account extraordinary equitable circumstances that affect the legitimate interests of either party.”  In short, although backpay is a starting point, the Court could not rule out circumstances where an absolute bar to recover was appropriate, and it likewise could not rule out circumstances where relief beyond backpay might be appropriate.  The Court also set a requirement that the alleged misconduct be material.  The alleged wrongdoing needs to be “of such severity that the employee in fact would have been terminated on those grounds alone if the employer had known of it at the time of the discharge.”

Clearly, McKennon does not answer all questions regarding the after-acquired evidence defense.  For one thing, the Court did not expressly state that this decision applied to Title VII as well as ADEA cases.  Given the common history of both statutes, however, courts have generally assumed that application to Title VII (and state law versions of Title VII and the ADEA) is appropriate.  On a practical level, because the Court’s decision in McKennon provides more guidelines than it does rules, state and federal courts have generally considered after-acquired evidence defenses on a case by case basis.  California Courts of Appeal, for instance, have demonstrated an independent streak by holding that, under the proper circumstances, the after-acquired evidence defense can operate to bar all recovery under the California version of Title VII (the California Fair Employment and Housing Act).  See Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App. 4th 620.  Generally, however, employers and employees can expect that application of the defense will turn on a case-by-case, fact intensive analysis.

On an historical footnote, the Banner’s financial straits appear genuine, in retrospect.  After more than 120 years of continuous publication, and just three years after the Supreme Court issued this decision, the Banner published its last issue in February 1998 and closed its doors for good.