Massachusetts Sexual Harassment Verdict Upheld in Gyulakian v. Lexus of Watertown

Sexual harassment claims often involve salacious allegations that can form the basis of a punitive damages award, the purpose of which is not to compensate the victim but to punish the wrongdoer and thus deter similar misconduct in the future. Fox’s payment to Gretchen Carlson of reportedly $20 million to settle sexual harassment allegations against its ousted founder, Roger Ailes, recently brought workplace sexual harassment into the limelight. According to her complaint, among other incidents, Ailes allegedly told Carlson: “I think you and I should have had a sexual relationship a long time ago and then you’d be good and better and I’d be good and better … sometimes problems are easier to solve [that way].” The size of the settlement suggests that Fox may have been concerned about a jury awarding Carlson significant punitive damages.

More recently, the Massachusetts Supreme Judicial Court (SJC) in Gyulakian v. Lexus of Watertown had the opportunity to clarify in what circumstances a jury may award punitive damages in sexual harassment cases under the Fair Employment Practices Act, namely M.G.L. c. 151B, §9. There, the jury returned a verdict in favor of the plaintiff of $40,000 in compensatory damages and $500,000 in punitive damages. In response to the defendants’ Motion for Judgment Notwithstanding the Verdict (JNOV) pursuant to Massachusetts Rule of Civil Procedure 50, the trial judge wiped out the jury’s punitive damages award and upheld the compensatory award. Both parties appealed and the SJC granted direct appellate review.

In its decision, the SJC noted that there was sufficient evidence to support the jury’s finding of liability on the sexual harassment claim:

Considering the evidence in the light most favorable to the plaintiff, the record is rife with evidence from which the jury could have concluded that the behavior to which Gyulakian was subjected was both objectively and subjectively offensive. Ferreira’s unwanted sexual attention came on a daily basis and to such a degree that during her tenure under Ferreira, Gyulakian was forced to implement a “no-touching” rule in order to keep her supervisor at bay.

The SJC next considered whether the evidence supported the jury’s punitive damages award. In doing so, the SJC opined that a jury is justified in awarding punitive damages if: (1) after being placed on notice, an employer failed to take sufficient steps to remedy an employee’s sexual harassment concerns, and (2) the failure was “outrageous or egregious.” Notably, with respect to the first prong, M.G.L. c. 151B, §3A mandates Massachusetts employers to maintain a sexual harassment policy that includes a list of “persons to whom complaints should be made.” In Gyulakian, the SJC stated that a policy’s notification protocol is not a bright line rule. Rather, knowledge of sexual harassment can be imputed to an employer even if such concerns were not reported to the specific officials identified in its policy.

After finding that the plaintiff had placed the company on notice, the SJC continued its analysis of the first prong by considering whether the employer’s investigation was adequate and looked to three precedents for guidance: Haddad v. Walmart, College-Town v. MCAD, and Trinh v. Gentle Communications. The SJC pointed to the following pieces of evidence to support the jury’s finding that the investigation was inadequate:

1. The company failed to interview finance department employees, “who would have been most likely to witness the alleged conduct.”

2. The company failed to interview the plaintiff herself.

3. The person who performed the investigation admitted to having a bias against the plaintiff.

4. The investigation’s conclusion of no corroboration for the plaintiff’s sexual harassment concerns was inconsistent with both: (a) an internal memorandum that documented the manager’s inappropriate behavior, and (b) the testimony of company employees at trial.

With respect to the second prong, the SJC relied upon the factors articulated in the Haddad decision to uphold the jury’s finding that the company’s failure to properly investigate was “outrageous or egregious,” thus warranting punitive damages. Significantly, in footnote 22, the SJC observed that an employer’s “knowing violation” of the Massachusetts Fair Employment Practices Act is, by itself, enough to support a punitive damages award. In doing so, the SJC reasoned that, because Massachusetts law requires companies to adopt an anti-sexual harassment policy, an employer who is aware of such misconduct yet fails to take remedial measures commits a “knowing violation of the statute.”

The Gyulakian decision provides employment lawyers with more guidance as to what evidence needs to be gathered during discovery and presented at trial to warrant a punitive damages award. It also prevents employers from hiding behind technical notice requirements written into a sexual harassment policy: An employer who knows of sexual harassment, even if such misconduct is not directly reported to the individuals named in the policy, must conduct an adequate investigate.

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