Employers must tread very carefully when dealing with known or suspected medical conditions or disabilities. In particular, employers must consider whether absenteeism policies have an adverse impact on individuals with disabilities and whether employees are properly trained in appropriately handling issues arising from disabilities or medical conditions. In a recent decision, Roby v. McKesson, the Supreme Court reversed the Court of Appeal’s decision and ruled in favor of the plaintiff for damages in the amount of $1,905,000 for wrongful discharge, harassment and discrimination in addition to punitive damages in the amount of $1,900,000.

Factual Background

Ms. Roby worked for defendant McKesson Corporation (“McKesson”) from 1975 until 2000 as a customer service liaison. In 1997, she began to experience panic attacks that restricted her ability to perform her job as such attacks caused heart palpitations, shortness of breath, dizziness, trembling and excessive sweating. Thereafter, McKesson instituted a complex attendance policy that penalized employees for absences, including for illnesses without advance notice. That policy operated to the disadvantage of employees who had disabilities or medical conditions that might require several unexpected absences in close succession.

The trial court found that supervisors were aware that Roby suffered from the unpredictable panic attacks and that many of her absences would be without notice as a result of this condition. To compound Roby's issues, her medication caused her body to produce an unpleasant odor and she developed a nervous disorder that resulted in open sores in connection with her panic attacks. Roby alleged that one of her supervisors, Schoener, ignored her at staff meetings, overlooked her for gifts, excluded her from office parties by forcing her to work, reprimanded her in front of co-workers and spoke to her in a demeaning manner in front of co-workers. Her supervisor also commented that her body odor and open sores were disgusting.

Ultimately as a result of absences related to the panic attacks, Roby was told she had violated the company’s attendance policy and was subject to termination. Roby requested these absences be retroactively classified as protected medical leave under the Family Medical Leave Act. Unfortunately, the documentation in her personnel file related to her absences did not describe the panic disorder or connect her absences to the panic disorder. After an investigation to confirm that the number of Roby’s absences had been calculated correctly and that the doctor’s notes did not specifically excuse these absences, Roby’s termination was finalized. The Court found that after the termination, because she had no income, Roby had to forgo necessary medical treatment, developed agoraphobia and became suicidal. The Social Security Administration ultimately found Roby to be completely disabled.

The Trial, Appeal and Supreme Court’s Holding

At trial, the jury considered Roby’s claim for wrongful termination in violation of public policy, harassment and discrimination because of disability and failure to accommodate. The jury found in favor of Roby on all causes of action and awarded compensatory damages of $3,511,000 against McKesson and $500,000 against the supervisor, Schoener. The jury also awarded punitive damages: $15,000,000 against McKesson and $3,000 against Schoener. The trial court reduced the compensatory damages against McKesson to $2,805,000 because some of the damage awards overlapped.

On appeal, the Court of Appeals found the evidence against the supervisor was insufficient to support the jury’s harassment verdict focusing on the holding of Reno v. Baird, where “common necessary personnel management activities…do not come in the meaning of harassment.” The Court of Appeals disregarded every act of the supervisor’s that could be characterized as personnel management and found the remaining evidence insufficient to support the jury’s harassment finding. The court reduced the compensatory damage award. The appellate court also found the punitive damages must be reduced from $15 million to 2 million, and then affirmed the judgment as so modified. The Supreme Court granted application for review.

The Court analyzed how to handle the conflicting awards for non-economic damages: $800,000 for failure to accommodate; $500,000 for wrongful termination; and $300,000 for discrimination, and whether these awards were duplicative. The Court indicated it would have remanded this issue for a new trial as the jury’s verdict was hopelessly ambiguous, but Roby agreed to withdraw her challenge to this portion of the decision. As a result, the Court did not reach this issue.

The California Supreme Court decided the important issues whether personnel actions undertaken by a supervisor can be used as evidence of harassment and whether the punitive damages awarded against McKesson was excessive. As to the first issue, the Supreme Court reversed the Court of Appeal holding that there was insufficient evidence of Roby’s harassment claim. Rather, the Supreme Court held that biased personnel actions can be used as evidence of harassment because they can contribute to harassment by communicating hostility and evidence the discriminatory animus of the person taking the personnel action. These actions included demeaning comments about her body odor, arm sores, and the demeaning manner in which her supervisor acted towards her, including refusing to respond to greetings, failing to give gifts and other less favorable treatment. The Court found that none of these events was fairly characterized as official employment actions or personnel actions, and thus, could not be conduct that fell within the supervisor’s business and management duties. Thus, it reinstated the jury’s verdict finding for Roby on the discrimination claim. The Court also found there was sufficient evidence for the jury to infer the supervisor discriminated against Roby based on her medical condition, and that the constant hostility was also based on medical conditions, constituting harassment and in violation of applicable laws.

As to the punitive damage award, the Supreme Court found that McKesson’s implementation of its attendance policy was not an act with intentional but “managerial malfeasance.” Thus, although punitive damages were appropriate in that Roby was financially vulnerable, the conduct affected her physical and mental well being and McKesson’s conduct showed a reckless disregard for the health and safety of others, it reduced the punitive damage award to the amount of the compensatory damages, $1,905,000.

Lessons Learned

Employers must tread very carefully when dealing with known or suspected medical conditions or disabilities. Employers should review its policies to ensure none of them unfairly impacts individuals with disabilities or medical conditions, as well as train all levels of managers to recognize potential disability issues and appropriately handle all such situations. (Shoener supervised only 4 of McKesson’s 20,000 employees. Human Resources must evaluate whether absenteeism policies have an adverse impact on person’s with disabilities.)