Thompson v. Tracor Flight Systems, Inc.

Facts

The Fair Employment and Housing Act (FEHA) makes it unlawful for an employer to retaliate against an employee for opposing practices forbidden by the Act. Rosie M. Thompson sued under that statute, alleging she was constructively discharged “in retaliation for her assertion of the fair employment rights of others as prohibited by Government Code section 12940, subdivision (f).” (Thompson v. Tracor Flight Systems, Inc. (2001) 86 Cal.App.4th 1156, 1165.) Because the case reached the Court of Appeal on a defense challenge to the sufficiency of the evidence, the court “view[ed] the evidence in the light most favorable to the party who prevailed in the trial court, resolving in that party’s favor all issues of credibility and all inferences from the evidence presented.” (Id. at p. 1159.)

In 1992, Thompson was the director of human resources for Tracor Flight Systems’ Mojave facility, “responsible for implementing personnel decisions at the facility.” (Thompson, supra, 86 Cal.App.4th at p. 1159.) She hired, disciplined, and terminated employees as directed, maintained personnel records, and was “the person primarily responsible for the Mojave facility’s compliance with appellant’s equal opportunity requirements,” serving as Tracor’s primary contact for a 1992 United States Department of Labor employment-practices audit. (Id. at pp. 1159–1160.) She reported either to the local general manager or to a corporate official in Austin, Texas, and had authority to consult directly with the parent company’s human resources staff. (Id. at p. 1160.)

In mid-1994, Donald Sullivan became general manager at Mojave. Sullivan “‘yelled and screamed’ at respondent and other employees” and had “a blunt, no-nonsense management style”; he was “known to have grabbed a male manager by the shirt in an effort to remove him from a staff meeting.” (Thompson, supra, 86 Cal.App.4th at p. 1160.) Even before becoming general manager, Sullivan had complained that Thompson was “‘stirring the pot’ by reporting unnecessary information to Austin.” (Ibid.)

Thompson testified to five instances in which she believed Sullivan’s directives risked employment-law liability and reported them to corporate headquarters: a wage-and-hour concern about her sister working uncompensated hours; a possible retaliation against her sister for taking maternity leave; a directive to discipline two female employees for conduct that male employees had committed without discipline, raising gender-discrimination concerns; Sullivan’s statement, when she raised handicap accessibility, “‘that we just wouldn’t hire any goddamn handicaps’”; and a directive to fire a department head “‘in his fifties’” who was to be replaced by a younger employee, prompting Thompson’s written warning of “potential age discrimination dangers.” (Thompson, supra, 86 Cal.App.4th at pp. 1160–1162.)

The relationship deteriorated into what the jury could find a sustained campaign. Thompson testified Sullivan “‘seemed to be agitated all the time with me,’” and her Austin supervisor had “the impression … that Sullivan was ‘picking on’ respondent and ‘going out of his way to make her life difficult.’” (Thompson, supra, 86 Cal.App.4th at p. 1162.) Sullivan assigned Thompson to cover the office switchboard during the operator’s breaks — a duty no other manager performed (ibid.); after she contacted Austin he “‘started yelling and screaming’” in her office (ibid.); her business diary went missing from her office after Sullivan had been in it, and he denied knowledge of it (ibid.); and he told her, in front of other managers, that she was not a “‘team player,’” threatening to transfer her job to Austin and suggesting “perhaps respondent’s husband would prefer that she not work at all.” (Id. at pp. 1162–1163.) By that summer Thompson “began to suffer continuous headaches,” along with “stomach problems, nose bleeds and insomnia.” (Id. at p. 1163.)

The final confrontation came on September 9, 1994. When Thompson explained that Department of Labor audit requirements obliged her to post a job opening for two weeks before hiring, Sullivan called the rule “a ‘stupid-ass rule,’” said he would call the auditor, and was “‘shouting and screaming and cursing … shouting at the top of his lungs.’” (Thompson, supra, 86 Cal.App.4th at p. 1163.) Earlier he had asked whether she knew a “‘wetback’” they could hire immediately; Thompson, who is Hispanic, “concluded Sullivan made this comment specifically to irritate her.” (Ibid.) During a speakerphone conference call with two Austin executives, Sullivan was “shouting and yelling, trembling and red-faced,” ordered her back when she tried to leave, and became “so agitated” that, standing beside him, “she believed Sullivan might strike her.” (Id. at pp. 1163–1164.) Thompson “backed away, said ‘I quit,’” and added that “‘it was not going to end here.’” (Id. at p. 1164.)

Over the following days Thompson sought intervention from a corporate ombudsman and asked that Sullivan be sent to “‘management school,’” but the company decided to accept her resignation. (Thompson, supra, 86 Cal.App.4th at pp. 1164–1165.) On leaving, she took home copies of documents from her own personnel file, from the Department of Labor audit file, and other personnel records she had worked on. (Id. at p. 1165.) She “anticipated using these materials if corporate officials called her at home,” feared the records “might ‘disappear’” like the missing diary, and “never returned to the company any of the copies she took home.” (Id. at pp. 1164–1165, 1173–1174.) That document-removal would become the basis of Tracor’s after-acquired-evidence defense.

Procedural history

After exhausting her administrative remedies, Thompson sued Tracor on May 17, 1996, for wrongful termination, alleging constructive discharge through discrimination on the bases of sex, race, and ancestry under the FEHA, and constructive discharge in retaliation for asserting the fair-employment rights of others under Government Code section 12940, subdivision (f). (Thompson, supra, 86 Cal.App.4th at p. 1165.) She sought lost wages and general and punitive damages. (Ibid.)

Trial began March 4, 1998. On March 24, 1998, the jury returned a special verdict that was mixed but decisive. It found Thompson “was not subjected to a hostile working environment based on her sex or national origin” — defeating her discrimination theory — but “unanimously concluded respondent ‘was subjected to adverse employment action because of engaging in protected activities such as opposing any practices forbidden under the Fair Employment & Housing Act.’” (Thompson, supra, 86 Cal.App.4th at p. 1165.) The jury “unanimously found respondent had been constructively discharged” and, critically for the second issue, “that she had not engaged in ‘wrongdoing prior to or at the time of her resignation which would have given defendant grounds to terminate her had it known of her misconduct at the time of her resignation.’” (Ibid.) It awarded $340,000 in lost-earnings damages, $60,000 in general damages, and, in a later phase, $200,000 in punitive damages. (Ibid.)

Judgment was entered March 30, 1998. Tracor’s motions for new trial and for judgment notwithstanding the verdict were denied, and it filed two notices of appeal, which the Court of Appeal consolidated. (Thompson, supra, 86 Cal.App.4th at pp. 1165–1166.) On appeal Tracor raised two issues: that the record contained “insufficient evidence to support the jury’s determination that respondent was constructively discharged,” and that the trial court “abused its equitable discretion in rejecting appellant’s defense based on ‘after-acquired evidence’ of employment-related misconduct by respondent.” (Id. at pp. 1165–1166.) The Court of Appeal, in an opinion by Acting Presiding Justice Vartabedian joined by Justices Harris and Wiseman, affirmed the judgment in full and awarded Thompson her costs on appeal. (Id. at pp. 1156, 1174.)

Issue

The appeal presented two distinct questions. First, on the liability side: whether substantial evidence supported the jury’s finding that Thompson was constructively discharged — that is, whether the evidence permitted a reasonable jury to conclude Sullivan “either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of plaintiff’s resignation that a reasonable employer would realize that a reasonable person in plaintiff’s position would be compelled to resign.” (Thompson, supra, 86 Cal.App.4th at p. 1168.) Second, on the remedies side: whether the trial court abused its equitable discretion in declining to bar or reduce Thompson’s damages under the after-acquired-evidence doctrine, given the jury’s finding that her end-of-employment conduct would not have led to her termination. (Id. at pp. 1166, 1172–1173.) The court framed the appellate task on the first issue narrowly: Tracor’s no-constructive-discharge contention “calls for our determining whether substantial evidence supported the jury’s verdict for respondent.” (Id. at p. 1166.)

Holding

Reasoning

The substantial-evidence standard framed and largely decided the first issue. The court began from the bedrock principle that “the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, to support the findings below,” requiring it to “view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor.” (Thompson, supra, 86 Cal.App.4th at p. 1166.) That posture did most of the analytic work: Tracor’s burden was not to show a contrary reading was available but that no reasonable jury could find as this one had.

The court restated the Turner constructive-discharge framework. Drawing on Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, the court explained that an employer constructively discharges an employee when “the employer’s conduct effectively forces an employee to resign,” severing the relationship “involuntarily by the employer’s acts, against the employee’s will,” such that it is “legally regarded as a firing rather than a resignation.” (Thompson, supra, 86 Cal.App.4th at p. 1166.) Turner requires two things: “intolerable working conditions,” and that the employer “either intentionally create[] or knowingly permit[]” them. (Id. at pp. 1166–1167.) The conditions must be “so unusually adverse that a reasonable employee … ‘would have felt compelled to resign,’” and “sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent, and reasonable employee to remain on the job.” (Id. at p. 1167.) Notably, Turner teaches that “a poor performance rating or a demotion, even when accompanied by reduction in pay, does not by itself trigger a constructive discharge.” (Ibid.) These standards were given to the jury through BAJI No. 10.02 at Tracor’s own request. (Id. at pp. 1167–1168.)

The court rejected Tracor’s attempt to atomize the evidence. The court identified “two critical ways” Tracor’s argument failed to respect the standard of review: it “undervalue[d] evidence the jury could and clearly did find credible,” and it “attempt[ed] to slice into separate incidents — and to evaluate individually — evidence from which the jury could and clearly did find a ‘continuous pattern’ of conduct.” (Thompson, supra, 86 Cal.App.4th at p. 1168.) Tracor’s claim that Thompson “only presented evidence of two instances in which Sullivan yelled at her” disregarded her testimony that Sullivan “‘seemed to be agitated all the time,’” her supervisor’s impression that Sullivan was “‘picking on’” her, and the switchboard assignment, the “wetback” comment, the missing diary, and the out-of-state-transfer threat — actions “the jury could have inferred … were all intended by Sullivan to harass respondent.” (Id. at pp. 1168–1169.)

The court rejected an artificial “baseline” limiting the relevant conduct. In a footnote engaging counsel’s oral-argument point, the court agreed that pre-July 1994 conduct “could not be viewed as retaliation for events that had not yet happened,” but held the jury was nonetheless “entitled to consider all of the circumstances of the employment relationship” and “not required to start with an artificial baseline of a ‘normal’ employer-employee relationship on the date of the first protected activity.” (Thompson, supra, 86 Cal.App.4th at p. 1169, fn. 1.) The jury could conclude Sullivan’s “retaliatory actions made what was previously just a bad situation into an intolerable situation.” (Ibid.)

The court refused to read Thompson’s “I enjoyed working at Tracor” testimony as fatal. Tracor seized on Thompson’s admission that she enjoyed the job to argue that only the September 9 incident could matter. The court replaced that quotation in context: Thompson had also testified “‘[i]t was very hard to go to work there,’” that Sullivan “‘was making comments to antagonize me,’” and that the testimony did not “compel a finding, as a matter of law, that respondent’s complaints were trivial.” (Thompson, supra, 86 Cal.App.4th at pp. 1169–1170.) Counsel had argued the case to the jury not on a single-incident theory but on a “continuing and escalating conflict,” corroborated by the company’s own human-resources director, Booth, who agreed Sullivan “was constantly yelling and screaming and making an intimidating environment.” (Id. at p. 1170.)

Lawful acts, continuously aggregated, can become intolerable. Tracor argued that constructive discharge “typically involves” unlawful acts — racial epithets, physical threats, or coerced illegality. The court answered that while such acts “may ‘typically’ be a part of a constructive discharge case, they are not required to be,” citing Sure-Tan, Inc. v. NLRB (1984) 467 U.S. 883, where reporting employees to immigration authorities — “conduct which ordinarily should be encouraged” — became a constructive discharge when done in retaliation. (Thompson, supra, 86 Cal.App.4th at p. 1171.) Although employers may lawfully “unfairly and harshly criticize their employees, … embarrass them in front of other employees, and … threaten to terminate or demote,” a “continuous course of such actions, uncorrected by management, can constitute objectively intolerable working conditions.” (Ibid.) The disjunctive Turner formulation — “unusually ‘aggravated’ or … a ‘continuous pattern’” — meant that “even though individual incidents in a campaign of harassment do not constitute justification for an employee to resign, the overall campaign of harassment can constitute such a justification.” (Id. at pp. 1171–1172.) The court also corrected Tracor’s misreading of its own prior decision, Guthrey v. State of California (1998) 63 Cal.App.4th 1108, whose holding turned on the absence of a gender nexus, not on whether severe verbal abuse could ever support a constructive-discharge finding. (Id. at p. 1172.)

On after-acquired evidence, the court located the doctrine and assigned the burden. Turning to remedies, the court defined the doctrine: it “shields an employer from liability or limits available relief where, after a termination, the employer learns for the first time about employee wrongdoing that would have led to the discharge in any event,” and is “the basis for an equitable defense related to the traditional defense of ‘unclean hands.’” (Thompson, supra, 86 Cal.App.4th at pp. 1172–1173.) Quoting McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352, the court placed the burden on the employer: “‘Where an employer seeks to rely upon after-acquired evidence of 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.’” (Id. at p. 1173.)

The factual record defeated the defense. Thompson testified she kept a file of copies of personnel items she had reported to Austin, took it home anticipating follow-up from the corporate ombudsman, and feared the originals “might ‘disappear’” as her diary had. (Thompson, supra, 86 Cal.App.4th at pp. 1173–1174.) She testified she “was authorized to take files and records home as part of her job and that she did so virtually every day.” (Id. at p. 1174.) Even Tracor’s human-resources witness “acknowledged that if respondent had taken the documents home for a company purpose … her actions would have been fully authorized,” and described a “general policy of ‘progressive discipline.’” (Ibid.) On that record, “a reasonable jury could conclude that respondent acted within the scope of her prior authorization,” or “[a]t the very least” that her conduct “constituted poor judgment and not theft, and would have subjected her to, at most, lesser measures of ‘progressive discipline’ instead of termination.” (Ibid.)

The court flagged — but did not need to resolve — a defective instruction that favored the employer. The special verdict had asked whether Thompson’s conduct “‘would have given defendant grounds to terminate her,’” and the court observed that this phrasing “applied a standard impermissibly favoring appellant,” because, quoting McKennon, “‘proving that the same decision would have been justified … is not the same as proving that the same decision would have been made.’” (Thompson, supra, 86 Cal.App.4th at p. 1174.) That the jury rejected the defense even under a standard tilted toward Tracor only reinforced the affirmance: the trial court “did not err in failing to bar recovery or equitably reduce the award.” (Ibid.)

The panel was unanimous. Justices Harris and Wiseman concurred in Acting Presiding Justice Vartabedian’s opinion; there was no separate concurrence or dissent. (Thompson, supra, 86 Cal.App.4th at p. 1174.)

Significance

Thompson is a clean California appellate confirmation of two propositions that recur in employment trials. On liability, it reinforces the post-Turner rule that constructive discharge can rest on an aggregated “continuous pattern” of otherwise-lawful managerial conduct — harsh criticism, public embarrassment, threats of transfer — when that pattern is sustained and uncorrected, and it sharply polices the defense temptation to atomize a harassment campaign into individually defensible incidents. (Thompson, supra, 86 Cal.App.4th at pp. 1168, 1171–1172.) The opinion’s footnote rejecting an “artificial baseline” is a useful tool for plaintiffs: pre-protected-activity friction is not irrelevant context, even though it cannot itself be retaliation. (Id. at p. 1169, fn. 1.)

On remedies, Thompson is among the California decisions integrating McKennon’s after-acquired-evidence framework into FEHA practice. It confirms three things that matter at trial: the doctrine is equitable and does not bar liability, only limits relief; the burden of proof rests on the employer; and the employer must show the employee “in fact would have been terminated,” not merely that termination “would have been justified.” (Thompson, supra, 86 Cal.App.4th at pp. 1173–1174.) Equally important is the procedural lesson: where there are genuine factual conflicts about the employee’s motivation and the likely disciplinary consequence, those questions can be tried to the jury, and the jury’s findings will support the trial court’s equitable exercise of discretion. The decision’s reach is bounded by its standard of review — it affirms a jury’s factual rejection of the defense; it does not hold the defense legally unavailable on these facts, and a different record (clear, unauthorized theft of proprietary material) could yield a different result.

Key quotes

“Implicit in this disjunctive formulation is that even though individual incidents in a campaign of harassment do not constitute justification for an employee to resign, the overall campaign of harassment can constitute such a justification.” (Thompson, supra, 86 Cal.App.4th at p. 1171.)

“The doctrine of after-acquired evidence shields an employer from liability or limits available relief where, after a termination, the employer learns for the first time about employee wrongdoing that would have led to the discharge in any event. … The doctrine is the basis for an equitable defense related to the traditional defense of ‘unclean hands.’” (Id. at pp. 1172–1173.)

“As has been observed, ‘proving that the same decision would have been justified … is not the same as proving that the same decision would have been made.’” (Id. at p. 1174, quoting McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352, 360.)

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Practice pointer

Open questions

The opinion resolved the appeal on substantial-evidence grounds and so left several remedies-side questions for another case. Most pointedly, the court noted that the verdict question — whether the conduct “‘would have given defendant grounds to terminate’” — “applied a standard impermissibly favoring appellant,” yet did not reach what the correct instruction should have said, because the jury rejected the defense even under the tilted standard. (Thompson, supra, 86 Cal.App.4th at p. 1174.) Left open, therefore, is how a properly framed after-acquired-evidence instruction — one asking whether the employer “in fact would have” terminated, in McKennon’s words — should be worded for a California jury, and whether a verdict for the employer obtained under the looser “would have been justified” formulation could survive challenge. (Ibid.)

The opinion also does not address the remedial mechanics that McKennon contemplates where the defense does succeed — namely, the cutoff of back pay and front pay from the date the misconduct would have been discovered. (See McKennon, supra, 513 U.S. at pp. 361–362.) Because Tracor failed to establish the predicate that Thompson would have been terminated, the court never reached how damages should be limited when the predicate is met, leaving the measure-of-relief calculus for a case in which the defense is proven. Finally, because the jury rejected Thompson’s hostile-environment discrimination theory and sustained only the retaliation theory (Thompson, supra, 86 Cal.App.4th at p. 1165), the decision does not test how the same continuous-pattern evidence would fare under a status-based discrimination claim, where the conduct must additionally be tied to a protected characteristic.