EEOC NOTICE
Number 915.002
Date 12-14-95
1. SUBJECT. Enforcement Guidance on after-acquired evidence
and McKennon v. Nashville Banner Publishing Co., 115 S.Ct. 879,
65 EPD Par. 43,368 (1995).
2. PURPOSE. This enforcement guidance analyzes the impact of
the McKennon decision on EEOC charge processing (including
federal employee complaints). The Court held in McKennon that a
respondent is liable for its discriminatory actions even where it
subsequently discovers evidence that would have led to the
adverse action on lawful and legitimate grounds.
3. EFFECTIVE DATE. Upon issuance.
4. EXPIRATION DATE. As an exception to EEOC Order 205.001,
Appendix B, Attachment 4, § a(5), this Notice will remain in
effect until rescinded or superseded.
5. ORIGINATOR. ADEA/Title VII Divisions, Office of Legal
Counsel.
6. INSTRUCTIONS. File after Section 604 of Volume II of the
Compliance Manual, Theories of Discrimination.
7. SUBJECT MATTER.
I. Introduction
The Supreme Court has held that an employee discharged in
violation of the Age Discrimination in Employment Act of 1967
(ADEA), as amended, 29 U.S.C. §621 et seq., is entitled to
relief even if the employer subsequently discovers evidence of
wrongdoing that would have led to the employee's termination on
legitimate grounds. McKennon v. Nashville Banner Publishing Co.,
115 S.Ct. 879, 65 EPD Par. 43,368 (1995).1 Noting that the ADEA,
Title VII, the EPA and the ADA reflect "a societal
condemnation of invidious bias" and that "[t]he private litigant
who seeks redress for his or her injuries vindicates both the
deterrence and the compensation objectives of the [statutes],"
the Court concluded that an employer must be held liable when it
is found to have engaged in unlawful discrimination, despite any
later discovered evidence of any employee misdeeds. 115 S.Ct. at
884.
At the same time, the Court ruled that it was necessary to
account for the legitimate business concerns of the employer
"where an employer . . . establish[es] that the wrongdoing was of
such severity that the employee in fact would have been [subject
to adverse action] on those grounds alone if the employer had
known of it at the time of the [adverse action]." 115 S.Ct. at
886-87. Accordingly, the "proper boundaries of remedial relief in
[after-acquired evidence cases] . . . will vary from case to
case, . . . [but] as a general rule . . ., neither reinstatement
nor front pay is an appropriate remedy in such instances." 115
S.Ct. at 886.
Acknowledging that the proper measure of backpay is more
difficult, the Court asserted that "[t]he beginning point" should
be to calculate backpay "from the date of the unlawful discharge
to the date the new information was discovered." 115 S.Ct. 886.
"[E]xtraordinary equitable circumstances that affect the
legitimate interests of either party" may also be considered in
formulating the appropriate remedy. 115 S.Ct. at 886.
II. Background and Opinion
McKennon had been employed by the Nashville Banner
Publishing Company (Banner) for nearly 30 years when she was
terminated at the age of 62. According to the Banner, she was
discharged as part of a work force reduction plan that was
implemented to reduce costs. McKennon filed an ADEA action that
alleged that her termination was due to her age. During a
deposition, McKennon testified that during her employment she had
copied and removed from the Banner's headquarters several
confidential financial documents out of concern for [her] job
security and for her "insurance" and "protection." 115 S.Ct. at
883. Thereafter, the Banner sent McKennon a letter informing her
that the removal and copying of the records was in violation of
her job responsibilities and "advising her (again) that she was
terminated." Id. The Banner also notified McKennon that had it
known of this earlier misconduct it would have discharged her
immediately.
For purposes of summary judgment, the Banner conceded its
discrimination against McKennon, but argued that no relief was
warranted because of McKennon's misconduct. The District Court
agreed and granted the Banner's motion for summary judgment,
holding that the earlier misconduct was grounds for her
termination and that neither backpay nor any other remedy was
available to McKennon under the ADEA. See 797 F. Supp. 604 (M.D.
Tenn. 1992). The Sixth Circuit affirmed the district court's
ruling under the same rationale. 9 F.3d 539 (1993). The Supreme
Court granted certiorari to resolve conflicting views among the
Courts of Appeal. See 115 S.Ct. at 883 and cases cited therein.
In a unanimous decision, the Supreme Court held that "after-
acquired" evidence does not defeat an employer's liability for
violating the ADEA. The Court found that even if the employee's
later discovered misconduct could be considered grounds for
termination, the ADEA violation that actually prompted the
dismissal cannot be ignored. The employee's wrongdoing does not
bar relief "'where a private suit serves important public
purposes.'" 115 S.Ct. at 885 (citation omitted). The remedial
provisions of the Act were designed to compensate an employee for
injuries caused by the illegal discrimination and to deter
employers from engaging in such discrimination. Litigants who
seek redress for injuries vindicate both the deterrence and
compensation objectives of the ADEA and the important
congressional policy against discriminatory employment practices.
Ignoring an employer's illegal conduct because of after-acquired
evidence, the Court said, would not be in accord with the
deterrent, remedial scheme of the ADEA.
However, the Court also said that where it is clear that an
employee would have been terminated upon discovery of wrongdoing,
the employer's legitimate interests must be considered. The
"after-acquired" evidence of the employee's wrongdoing "[is]
relevant not to punish the employee, or out of concern 'for the
relative moral worth of the parties,'. . . but to take due
account of the lawful prerogatives of the employer in the usual
course of business . . . ." 115 S.Ct at 886. (citation omitted).
"In giving effect to the ADEA, we must recognize the duality
between the legitimate interests of the employer and the
important claims of the employee who invokes the national
employment policy mandated by the Act." 115 S.Ct. at 886.
The Court then considered how after-acquired evidence of
wrongdoing bears upon the remedy.2 It concluded that the proper
boundaries of remedial relief must be addressed on a case-by-case
basis. If an employer seeks to rely upon after-acquired evidence
of an employee's wrongdoing, it "must first establish that the
wrongdoing was 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."3 115 S.Ct. at 886-87.
Assuming that such showing is made, "as a general rule . . .,
neither reinstatement nor front pay is an appropriate remedy
[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." 115 S.Ct.
at 886.
Noting that balancing the need to compensate victims and
deter violations of the ADEA with the employer's lawful
prerogatives cannot be done with precision in after-acquired
evidence cases, the Court provided general guidelines in
assessing the appropriate award of backpay in such cases. The
Court flatly rejected an absolute bar on backpay, and held that
backpay should be the "beginning point" in the formulation of a
remedy and should run "from the date of the unlawful discharge to
the date the new information was discovered." 115 S.Ct. at 886.
The Court further recognized that in formulating an appropriate
order for relief, the trial court may take "into account
extraordinary equitable circumstances that affect the legitimate
interests of either party." 115 S.Ct. at 886.
III. Charge Processing Instructions
A. Backpay Available under the ADEA, Title VII, EPA and the
ADA
Even where the employer proves that it would have taken the
same or more harsh adverse action had it known of employee
misconduct, a Charging Party will still be entitled to relief
under the laws enforced by the EEOC, but that relief may be
subject to some limitations. If an employer fails to prove that
it would have taken a similar action on the basis of subsequently
discovered misconduct, the Charging Party's relief may not be
limited by the after-acquired evidence. See Ricky v. Mapco, Inc.,
50 F.3d 874, 876 (10th Cir. 1995) (employer "must demonstrate . .
. that the misconduct . . . alleged was serious enough to justify
discharge and that [the employer] would have discharged [the
employee] if it had known about the [alleged misconduct]"). To
resolve the issue, the investigator should consider whether there
have been incidents of like misconduct by other employees.
Specifically, the investigator should analyze whether other
applicants were rejected or other employees were dismissed,
reprimanded, suspended or forgiven for similar behavior.
If no comparable past incidents are discovered, other
criteria may be used in ascertaining whether the misconduct would
have prompted the employer to take the adverse action. Such
inquiries may include whether: 1) the misconduct is criminal in
nature, (e.g., embezzlement, fraud, assault or theft); 2) the
employee's behavior compromised the integrity of the employer's
business (divulgence of trade secrets, security, or confidential
information); or 3) the nature of the employee's misconduct was
such that the adverse action appears reasonable and justifiable.4
Where an employee's misconduct is so severe that an employer
would have taken the same or harsher adverse action even absent
the discrimination, backpay may generally be limited to the
period from the date of the unlawful employment action to the
date that the misconduct was discovered. Therefore, when
processing charges or complaints where after-acquired evidence is
presented by an employer, investigators should evaluate the
severity of the misconduct and the employer's response to similar
misconduct.
Example- Charging Party (CP) is a 55 year old claims adjustor for
Respondent (R), an insurance company. CP is discharged from his
position after being told by R that the company wishes to project
a younger image. CP files a charge with the Commission alleging
that he was discharged because of his age. During the course of
the investigation R learns that CP had on several occasions
submitted false reimbursement claims for business trips that
resulted in a loss of $2,600 to R. R seeks to have CP's charge
dismissed on the basis of this newly acquired evidence. R also
presents evidence that two former adjustors were terminated
during the last fiscal year for padding their expense accounts in
the amounts of $500 and $1200, respectively.
The Commission concludes that R violated the Act. However, given
that R had dismissed two other adjustors in the past year for the
submission of fraudulent expense account reimbursements, CP's
newly discovered past behavior would be deemed to be sufficiently
severe to warrant discharging CP and limit the amount of backpay
available. The Commission would seek backpay from the date of
CP's discharge until the date that R learned of CP's misconduct.
Example - Same facts as above except that it is revealed during
the course of investigation that instead of submitting false
reimbursement claims, CP forgot to reimburse $50 to the petty
cash fund three years ago. One week after the oversight, a co-
worker brought the matter to his attention and restitution was
made by CP.
In this instance CP's past behavior would not rise to a level of
severity required to limit the award of backpay, unless R can
demonstrate that it would have terminated other employees for
similar behavior.
As the examples illustrate, the primary issue is whether the
employer would have taken the same adverse employment action
against the Charging Party had it known of the Charging Party's
misconduct. The McKennon Court recognized that its guideline for
backpay calculation marked only the beginning point in the
analysis, as other extraordinary equitable circumstances may also
be considered in formulating the appropriate remedy.
Retaliation is one example of an extraordinary equitable
circumstance that may warrant additional relief. Evidence of
employee wrongdoing may not cut off backpay if the evidence was
unearthed during a retaliatory investigation, i.e., one initiated
in response to a complaint of discrimination in an attempt to
uncover derogatory information about the complaining party or
discourage other charges or opposition. In such instances,
relief may extend beyond the date R discovered the wrongdoing to
the date that the charge or complaint is resolved.
Example - CP files a charge alleging that he was discriminatorily
denied a promotion. R launches an extensive background
investigation of CP and learns that he falsified his application.
Accordingly, R fires CP. The Commission investigation reveals
that R does terminate employees who have falsified their
applications. It also shows that the failure to promote was not
discriminatory. R contends that CP suffered no loss until the
termination, that the termination was for legitimate reasons and
that R is not, therefore, liable to CP.
However, the Commission finds that R did not simply discover the
information in the course of investigating the charge, but
purposefully sought derogatory information about CP in
retaliation for his challenging the failure to promote.
As in McKennon, reinstatement would be inappropriate because
the employer does terminate those known to have engaged in
similar misconduct. However, because the evidence of wrongdoing
was not simply unearthed during an investigation of CP's
complaint, but was deliberately sought to retaliate against CP
and to discourage similar charges, the Court's "starting point"
for backpay cannot be the ending point. Instead this is the kind
of "extraordinary equitable circumstance" that warrants extending
backpay to the date the complaint is resolved. 5 An employer who
chooses to wage a retaliatory investigation must lose the
advantage of equities that would, absent the retaliation, favor
that employer, especially since retaliation is an independent
violation of the federal employment discrimination laws. 6
B. Post-McKennon Title VII/ADA Remedies under the Civil
Rights Act of 1991
The availability of compensatory and punitive damages in
after-acquired evidence cases was not before the Court in
McKennon and not discussed in the opinion. As noted above,
however, the McKennon Court did indicate that the principles
articulated in the decision are applicable to Title VII and the
ADA as well as to the ADEA. 115 S.Ct. at 884. Thus, the
question is how the McKennon rationale applies to damage awards.
Key to answering that question is recognizing that McKennon
essentially endorsed the Commission's longstanding position that
a respondent will be held liable for its unlawfully
discriminatory acts whether or not the employer subsequently
discovers that the affected employee or applicant engaged in
misdeeds.
1. Compensatory Damages
The purpose of compensatory damages is to compensate an
individual for injuries or losses sustained as a result of
discrimination. Victims may suffer an injury from discrimination
regardless of whether a legitimate reason for an adverse action
is subsequently discovered.
The McKennon Court's analysis of backpay provides a
framework for apportioning compensatory damages. The proper
boundaries of relief in after-acquired evidence cases will vary
case by case. 115 S.Ct. at 886. "The object of compensation is
to restore the employee to the position he or she would have been
in absent the discrimination." 115 S.Ct. at 886. In determining
appropriate remedial action, "the employee's wrongdoing becomes
relevant . . . to take due account of the lawful prerogatives of
the employer in the usual course of its business. Id.
Accordingly, when calculating out-of-pocket losses analogous
to backpay, i.e., those that the complaining party would incur
regardless of whether the adverse action was taken on legal or
discriminatory grounds, losses incurred after the date that the
evidence of wrongdoing is discovered will typically be excluded.
For example, pecuniary damages such as job search expenses and
moving expenses would generally end on the date the evidence of
misconduct is discovered, unless the employee's wrongdoing was
uncovered during the course of a retaliatory investigation waged
by R.
Nothing in McKennon suggests that compensatory damages for
emotional harm should be time limited. The Court limited the
remedies of frontpay, reinstatement and backpay only to the
extent necessary to protect the employer's legitimate interest in
severing the employment relationship with an unsatisfactory
employee. As noted above, the "after-acquired" evidence of the
employee's wrongdoing "[is] relevant not to punish the employee,
or out of concern 'for the relative moral worth of the parties,'
but to take due account of the lawful prerogatives of the
employer in the usual course of its business . . . ." 115 S.Ct
at 886 (citation omitted). In contrast, no legitimate business
prerogatives are served by exonerating a proven discriminator
from paying the full cost of the emotional damage caused by the
discrimination. To the extent that the complaining party's
emotional harm or other losses were caused by discrimination and
would not have occurred if the adverse action had occurred for
legitimate reasons, the discriminating employer should fully
compensate those losses.7
Example - Charging Party was subjected to egregious racial
harassment, including having racially derogatory cartoons put on
her desk and being called racially derogatory names. She
complained to management and was discharged. CP filed a charge
and her psychiatrist testified that solely as a result of this
discrimination, CP suffers from traumatic stress disorder and
severe depression and will not fully recover for several years.8
During the course of the investigation, the respondent discovers
that CP falsified her resume and does not meet the valid minimum
educational requirements for the position. These are offenses
for which the employer routinely terminates employees.
CP seeks compensatory damages for emotional harm and for future
psychiatric and job search expenses. She also seeks punitive
damages. CP may recover for the future effects of the emotional
harm and future medical expenses since they were caused by
discrimination. Job search expenses may be recovered if they
were incurred before the misconduct was discovered. Damages for
future job search expenses will normally not be allowed since CP
would incur these expenses once the employer exercised its lawful
prerogative to discharge CP for legitimate reasons.
2. Punitive Damages
After-acquired evidence does not bar punitive damages when
the employer's motivation for the adverse action is found to be
discriminatory and the employer acted with malice or reckless
indifference to the complaining party's rights. Punitive damages
are not affected by after-acquired evidence because the employer
did not know of the legitimate reason for the adverse action at
the time of the action. It is the employer's motivation at the
time of the discriminatory conduct that is relevant in
determining the propriety of punitive damages. Moreover,
punitive damages are virtually always appropriate where
retaliation has been established. See Enforcement Guidance:
Compensatory and Punitive Damages, dated July 14, 1992, at 17-18.
3. Liquidated Damages
The McKennon rationale similarly dictates that liquidated
damages are awardable under the Equal Pay Act (see Wallace v.
Dunn Construction Co., 62 F.3d 374, 380 (11th Cir. 1995) (en
banc), and the ADEA despite the existence of any after-acquired
evidence of employee wrongdoing.
C. Summary
The Court in McKennon held that after-acquired evidence of
employee misconduct does not bar an employer's liability for
having engaged in unlawfully discriminatory conduct. Thus, where
discrimination is established the respondent must provide
appropriate relief. Where the employer alleges alternative
grounds for the adverse action, the investigation should focus
not only on the allegations of discrimination but also on whether
the employee's misconduct would warrant the adverse action taken.
See discussion at pp. 4-6.
1. Backpay, Frontpay, and Reinstatement
* Backpay continues until date of settlement,
conciliation or judgment unless the employer proves that it would
have taken the same or harsher adverse action based on the after-
acquired evidence. If the employer makes that showing, backpay
is generally calculated from the date of the unlawful adverse
action to the date that the new information is discovered.
However, unusual equitable circumstances that affect the
legitimate interests of either party may alter the calculation in
particular cases. Launching a retaliatory investigation of a
CP's background in response to a charge or complaint of
discrimination is one such equitable circumstance.
* As a general rule, frontpay, reinstatement, and
instatement are not available where there is evidence of employee
wrongdoing that would warrant the adverse action.
2. Compensatory Damages
* Generally, out of pocket costs associated with
job loss, that charging party would have incurred regardless of
whether the adverse action is taken on legal or discriminatory
grounds, are available from the date of the unlawful adverse
action to the date that the new information is discovered.
However, consider whether equitable circumstances exist that
would affect the legitimate interests of either party and, hence,
alter the calculation. As with backpay, it is appropriate to
extend past pecuniary damages to the date the case is resolved
(i.e., the date of settlement, judgment, etc.) where the
wrongdoing was discovered in the course of an investigation waged
for the purpose of finding derogatory information about CP in
retaliation for complaining.
* Damages for emotional harm are normally available
for the harm caused by the Respondent's discriminatory actions.
If the complaining party can show that the discriminatory conduct
caused the emotional harm and that the resulting emotional harm
continued after a legitimate reason for the adverse action is
discovered, (s)he may receive compensatory damages for the
emotional harm and medical treatment for such harm.
3. Punitive Damages
* After-acquired evidence does not bar punitive
damages when the employer took the adverse action for
discriminatory reasons and acted with malice or reckless
indifference to the complaining party's rights. Proof of
retaliation warrants punitive damages.
4. Liquidated Damages
* After-acquired evidence does not preclude an
award of liquidated damages in an Equal Pay Act or ADEA case.
DATE: 12/14/95 APPROVED: Gilbert F. Casellas
Chairman
1. The principles applied by the McKennon Court are
applicable to charges brought under Title VII of the Civil Rights
Act of 1964, 42 U.S.C. § 2000e et seq., as amended, (see
Wallace v. Dunn Construction Corp., 62 F.3d 374, 378 (11th Cir.
1995)(en banc); Wehr v. Ryan's Family Steak Houses, Inc., 49 F.3d
1150, 1153 (6th Cir. 1995); Russell v. Microdyne Corp., 65 F.3d
1229, 1238 (4th Cir. 1995)), and the Americans with Disabilities
Act of 1990, 42 U.S.C. § 12101 et seq., as amended. The
McKennon Court noted that the ADEA is "part of a wider statutory
scheme," that includes Title VII and the ADA, which "protect[s]
employees in the workplace nationwide," and that the ADEA and
Title VII "share common substantive features and also a common
purpose: 'the elimination of discrimination in the workplace.'"
115
S.Ct. at 884. Further, although the adverse action challenged in
McKennon was termination, the analysis is applicable to any
alleged unlawful adverse action, such as refusal to hire,
demotion or failure to promote.
2. The Court recognized that, to limit their
liability, employers may routinely "undertake extensive discovery
into an employee's background or [job] performance" to find
evidence of employee misconduct. 115 S.Ct. at 887. The Court
concluded, however, that courts could "deter most abuses" by
exercising judicial authority to award attorney's fees pursuant
to § 7(b) of the ADEA, and "in appropriate cases" to invoke
sanctions against an employer under Rule 11 of the Federal Rules
of Civil Procedure. 115 S.Ct. at 887.
3. In Shattuck v. Kinetic Concepts, Inc., 49 F.3d
1106, 1108, 66 EPD Par. 43,496 (5th Cir. 1995), a post-McKennon
case involving discriminatory discharge and after-acquired
evidence of resume falsification, the Fifth Circuit stated that
the
"pertinent inquiry, except in refusal-to-hire cases, is whether
the employee would have been fired upon the discovery of the
wrongdoing, not whether he would have been hired in the first
place." By the same token, in a case alleging discriminatory
refusal to hire, the pertinent inquiry is whether the employer
would have lawfully rejected the applicant had it been aware of
the after-discovered evidence at the time of hire. See
Washington v. Lake County, 969 F.2d 250, 255-56 & n.5 (7th Cir.
1992)(where after acquired evidence is offered, "the hypothetical
inquiry should correspond to the time of the allegedly
discriminatory employment decision").
4. In addition to injunctive relief and backpay, the
ADEA provides that liquidated damages are available in instances
where the discriminatory act can be shown to have been willful.
The Supreme Court has held, most recently in Hazen Paper Co. v.
Biggins, 113 S.Ct. 1701, 61 EPD Par. 42,186 (1993), that a
willful violation occurs under the ADEA if an employer knew its
conduct was unlawful or showed reckless disregard for whether its
conduct was unlawful. After-acquired evidence does not bar
liquidated damages because it is the employer's motivation at the
time of the discriminatory conduct that is relevant in
determining whether liquidated damages are warranted.
5. The Court in McKennon noted that, in
litigation, courts can circumscribe overbroad discovery requests
through use of attorney's fees and Rule 11 sanctions. Those
constraints, however, are largely inoperative prior to
commencement of litigation. Thus, other constraints are needed
to deter prelitigation overzealousness.
6. To allow retaliation to go unremedied would
frustrate the deterrent goals of the antidiscrimination laws and
the crucial public enforcement role played by private litigants.
See McKennon, 115 S.Ct. at 884-85 (private litigants further
objectives of nondiscrimination laws by "[t]he disclosure through
litigation of incidents or practices which violate national
policies respecting nondiscrimination in the work force. . . The
efficacy of its enforcement mechanisms becomes one measure of the
success of [those laws]").
7. In Russell v. Microdyne, 65 F.3d at 1241, the
court ruled that compensatory and punitive damages were available
despite the after acquired evidence but assumed without
discussion that the date of discovery of the misconduct would
limit the amount of the damages award as well as the backpay
award. For the reasons discussed in the text above, the
Commission rejects the assumption that the discovery of
wrongdoing limits punitive damages or the award for emotional
harm.
8. If CP's emotional suffering were not entirely
attributable to R's discrimination, the amount of compensatory
damages would be affected. See Enforcement Guidance:
Compensatory and Punitive Damages, dated July 14, 1992.
