Sexual harassment cases: when the door opens for punitive damages

The highest court in Massachusetts decided a sexual harassment case yesterday of some importance. I will review the case focusing on what opened the door to punitive damages here.

In Gyulakian v. Lexus of Watertown, Inc., after a trial, a jury concluded that that the defendants -- Lexus of Watertown, Inc., and Post Motors, Inc. -- were liable for $40,000 in compensatory damages for emotional distress and $500,000 in punitive damages for acting intentionally or with reckless disregard as to Gyulakian's right to be free from a sexually hostile or offensive work environment, in violation of M.G. L. c. 151B, § 4.

What happened at Lexus? Why did the jury conclude there was a sexually hostile work environment?

Gyulakian worked at Lexus from 2003 through early January 2012, at which point she was fired because her relationships with her coworkers had gone bad. During the meeting in which she was fired, Gyulakian reported that her direct supervisor, Emmanuel Ferreira, had been sexually harassing her. She also reported it later that day to HR. Gyulakian had previously reported numerous incidents of sexual harassment to Ferreira's supervisor on multiple occasions over the prior eighteen months.

Lexus had a sexual harassment policy in place, as is required in Massachusetts. The policy provided two names of managers who were specifically appointed to take sexual harassment complaints. But it further noted that "[i]f an employee prefers not to discuss the matter with these individuals, (s)he may go directly to any other member of management." The policy stated that "[a]ll complaints will be promptly and thoroughly investigated."

The jury heard evidence that Ferreira's supervisor failed to make any remedial efforts after Gyulakian's complaints to him over the eighteen months -- no investigation. Nothing. After the meeting in which Gyulakian was terminated and she disclosed the sexual harassment to the members of management present, Lexus testified to the jury they allegedly investigated the issue.

The purported investigation

The investigating manager testified that he interviewed certain employees. One of those employees, however, denied that he had been questioned. The investigating manager himself testified that he didn't believe Gyulakian when she told him, and further, told her that while a job may be available for her at a different dealership it wouldn't be if she took her sexual harassment complaint to HR.

The Supreme Judicial Court, reviewing the evidence heard by the jury, concluded that there was sufficient evidence such that the jury could find that members of Lexus's management failed to conduct an adequate investigation. No members of Gyulakian's department, for example, were interviewed, even though they would have been most likely to observe the harassment. And while numerous employees testified at trial to observing the harassment of either Gyulakian or of sexual comments by Ferreira in general, during Lexus's purported investigation not one witness/employee interviewed reported seeing harassment. This was the case even though Gyulakian testified of sexually charged comments on "an almost daily basis," and further, even where a former office manager had previously circulated a memorandum concerning Ferreira's sexually inappropriate behavior. Additionally, Lexus failed to contact Gyulakian or otherwise allow her to participate in the investigation. And, lastly, the investigating manager himself admitted to holding a bias against Gyulakian.

It was this failure to adequately investigate sexual harassment that the Court noted "opens the door to the potential imposition of punitive damages if the jury conclude that the employer's failure was sufficiently outrageous and egregious."

Thus, four and a half years after Gyulakian was terminated, the Court reinstated the jury's punitive damage award (reversing the trial judge's overturning of it) because the jury could have found based on the evidence at trial that Lexus failed to take adequate remedial measures after being put on notice of a sexually hostile or offensive work environment, and that that failure was outrageous or egregious.

The case is not quite over, however. It has been remanded to a lower court now to decide on Lexus's pending motion to reduce the punitive damages. A Superior Court judge will decide that issue.

Sexual harassment cases can be long and complicated. Further, investigations must be taken seriously; otherwise, the door opens for punitive damages. If you have concerns about sexual harassment in your workplace as either an employee or employer, contact me for an employment law consultation.