Bad-Mouthing the Company, Quirky Question # 39

Quirky Question # 39:

I am the operations manager for a food distributor.  One of our other managers, a long-term employee, was recently demoted to a position that places him in frequent contact with our customers.  He was unhappy about that demotion and has filed a charge of age discrimination with the EEOC.

One of our customers has now called to complain that this employee is constantly bad-mouthing the company, saying that he has been mistreated by senior management, and talking about the “$10 million lawsuit” he plans to file.  Given the damage this kind of talk can do to customer relations, we fired the employee.

Our ex-employee has now sued our company, not only for age discrimination, but also for retaliating against him for exercising his statutorily-protected rights.  Should we worry about these claims?

Dorsey’s Analysis:

As some of you may have recognized, the basic fact pattern described in Quirky Question # 39 was derived from a recent lawsuit from the Sixth Circuit, James Fox vs. Eagle Distributing Company, No. 07-5203 (December 14, 2007).  In the Eagle Distributing lawsuit, the plaintiff filed a charge of age discrimination with the EEOC and a parallel state agency in Tennessee as a result of a demotion.  Following his demotion, the employee had frequent contact with customers in his role as a beer distributor.  The company received a number of complaints from these customers regarding the employee’s poor job performance.  As a consequence, the employer gave the employee a written notice that he would be discharged if the company received any more customer complaints.

Not long thereafter, the employer received a complaint of a different nature.  Whereas the earlier complaints related to Fox’s job performance, the later complaint related to Fox’s negative comments about his employer.  Fox had stated to at least one customer that he was pursuing a $10 Million lawsuit against the company, that his lawsuit should “get [the company’s] attention,” and that the company was “out to get him.”  The employer perceived this as another “complaint” by a customer and terminated Fox’s employment.  Fox then filed another Charge with the EEOC, now complaining of retaliation under the federal Age Discrimination in Employment Act (ADEA).

The District Court dismissed on summary judgment the plaintiff’s underlying age claims relating to his demotion, as well as his retaliation claims.  The employee did not appeal the dismissal of his federal age discrimination claims but did appeal the dismissal of his retaliation claim.  The central issue on appeal was whether the employee’s negative comments to the company’s customers constituted “protected activity” under the ADEA’s anti-retaliation provision, 29 U.S.C. § 623(d).  The appellate court concluded that the employee’s comments did not constitute “protected activity” and affirmed the summary judgment dismissal of the lawsuit.

As you likely know, the ADEA, as well as the other principal federal and state anti-discrimination statutes, contain broad anti-retaliation provisions.  The ADEA’s provision, for example, prohibits an employer from taking adverse actions against an employee who has “opposed any practice made unlawful by this section,” or because an employee has “made a charge, testified, assisted, or participated in . . . an investigation, proceeding or litigation under this [Act].”  The narrow question, therefore, was whether describing to customers the “$10 Million lawsuit” the employee was pursuing, or stating that his lawsuit would get the company’s attention, or complaining the company was “out to get him,” represented the type of conduct the statutory scheme was designed to protect.  As noted above, the appellate court found that it was not.

The Sixth Circuit decision highlights several practical and legal points.  First, and most importantly, the decision imposes some reasonable limits on the types of conduct the anti-retaliation provisions of the ADEA are designed to protect.  The court did not believe that making disparaging comments about one’s employer fell into the category of protectable conduct.  The court noted that the employee did not specifically reference “age discrimination” in his comments to the customer, or otherwise explain the basis of his lawsuit.  Whether providing that additional detail would have cloaked the comments with additional protections is unclear from the opinion.  In my view, however, making derogatory comments about one’s employer to customers (particularly, conclusory comments that do not set forth factual data) should not be deemed “protected activity” under the statutory scheme.  These types of comments can alienate customers, damage business relationships, and make customers feel uneasy about being “drawn into” litigation.  Moreover, there is no corresponding statutory goal that is advanced by denigrating one’s employer to a customer.

Second, the opinion illustrates the difficulties associated with managing an employee who has filed a Charge of Discrimination.  Once a Charge has been filed with a federal or state agency, employers need to carefully assess how their actions will be perceived by the employee with the pending Charge.  Equally important, employers need to consider how their actions can be “characterized,” even if the employers’ intent is entirely benign.  This observation is not intended to suggest that no disciplinary action (up to and including termination) can be taken against someone who has a pending Charge.  It can, and when appropriate, it should.  But, be cognizant of the fact that disciplinary measures instituted against someone with a pending Charge will likely lead to an additional claim — one of retaliation.  The employer, therefore, needs to be prepared to defend the inevitable additional retaliation claim.

Third, although not discussed in the opinion, the decision illustrates the value of using “last chance” letters.  If there are recurring performance problems that, when repeated, warrant termination, using a “last chance” letter benefits the employee and employer alike.  The employee is informed that the company views the problem very seriously and that even one more incident will jeopardize the employee’s continued employment.  The employer benefits by clearly communicating its expectations to the employee and creating a written record of those expectations.

The bottom line is that employers can terminate employees who have decided to make derogatory comments about their employers to customers, even if those comments touch in some way on litigation relating to discrimination claims.  The employers actions may lead to a separate retaliation claim, but that claim should be defensible.

Dorsey & Whitney

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