After-acquired evidence in defending employment discrimination claims.

• Author: Lype, Bob E.

ONE EVOLVING element in the employer's defense to claims of employment-related discrimination is the potential effect of after-acquired evidence of the employee's wrongdoing. As employers and defense counsel have realized the potential impact of "digging up a little dirt" with regard to a disgruntled former employee who has asserted a claim of improper treatment against the employer, courts are grappling with questions of how such evidence might be used by the employer and its impact upon the employee's claims.

In the past six years, various courts have taken widely differing views with regard to these questions, without the benefit of guidance from the U.S. Supreme Court.(1) Employers and defense counsel have begun not only to challenge the courts with new theories as to the meaning and effect of after-acquired evidence, but also to develop creative and sometimes intrusive methods of doing so.

The effect of after-acquired evidence in this context typically comes into play when, during the course of investigating an employee's claims of employment-related discrimination, the employer learns that the employee falsified the employment application or violated a company rule or policy during employment, unbeknownst to the employer until long after the fact. The employer then asserts that it would have fired or never hired the employee had it only known of the misconduct. If the employee secured the job under false pretenses, the employer argues, or concealed transgressions committed during employment, how can the claim to have suffered any injury by reason of the alleged discriminatory acts of the employer?

How has the after-acquired evidence doctrine developed and how will it play out.?

SURVEY OF CASE LAW

1. Rule Announced

   In 1988 the 10th Circuit decided what has become the most frequently cited case on the impact of after-acquired evidence in this context. In Summers v. State Farm Mutual Automobile Insurance Co.,(2) frequently referred to as the "seminal case" in this area,(3) the court considered a suit brought by an employee against his employer under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act (ADEA). The employee alleged that he was terminated because of age and religious discrimination. During his employment as an insurance claims representative, he had been reprimanded and placed on probation for falsifying a number of insurance claims. Although he returned to work, he was fired approximately six months later. The employer admitted that the employee was not fired because of the falsifications but rather because of his poor attitude and inability to get along with co-workers and customers. Four years later, while the employer was preparing for trial, it discovered an additional 150 falsifications of insurance claims.

   In considering whether the discovery of the additional falsifications should have any effect on the appropriate remedy available to the employee, the court first determined that it did not consider the "defense" raised by the employer based on after-acquired evidence of the employee's misconduct as a negation of the employee's prima facie case under the criteria of McDonnell Douglas Corp. v. Green.(4) The court noted that it was not concerned with the reasons for discharge given by the employer, but rather with the significance of the employer's discovery of additional falsifications some four years after the discharge. In fact, the court assumed that the employer was motivated by the employee's age and religion in firing him. It held that the after-acquired evidence did not relate to the employer's reason for firing the employee but rather to the employee's claim of "injury."

   The court relied primarily on the reasoning of an earlier Supreme Court case, Mt. Healthy City School District Board of Education v. Doyle.(5) A teacher was not rehired because he had informed a local disk jockey about a possible dress code for teachers, which the disk jockey announced on the air, and because the teacher made certain obscene gestures. The lower courts ruled that the teacher's call to the radio station was protected by the First Amendment, and they ordered that he be reinstated.

   The Supreme Court, however, held that if the school district could have dismissed the teacher for the obscene gestures and would have done so even if the radio incident had not come to its attention, then it did not matter that the protected First Amendment conduct played a substantial part in the decision not to rehire.

   The basic rationale of Mt. Healthy is that the employee could have and would have been fired in any event; therefore, he was not entitled to a remedy. Applying this rational, the 10th Circuit in Summers concluded that if the employee was not "injured" by the employer's actions, then no remedies should be available to him. In effect, the court barred all remedies, but it did so by finding the absence of any "injury."

   The various courts that have analyzed and applied the Summers rationale have brought to light a number of relevant factors not addressed by the Summers court. Some courts, even while reaching the same result, have taken a vastly different approach to the question of the effect of after-acquired evidence. Still, Summers provides the starting point.

2. Rule after Summers?

   The questions unanswered in Summers have caused quite a divergence of opinion. For example, does the rule in Summers address the issue of the employer's liability, or does it simply impose a limitation on remedies available to the employee? Summers clearly held that the employee was entitled to no remedy at law, but the rationale was rounded in the employee's lack of an "injury." The court noted that after-acquired evidence was relevant to the claim of "injury" and did itself preclude the grant of any present "relief or remedy." Several courts have held that, to the extent after-acquired evidence is relevant at all, Summers should apply only to preclude certain remedies and not to preclude the imposition of liability altogether.

   Another unanswered question is the context in which the after-acquired evidence doctrine is to be applied. In Summers, the employee had committed serious misconduct during employment. But what rule applies if the employee's misconduct is less serious? And what if rather than engaging in misconduct during employment, the employee lied to the employer on the employment application or during the interview? Summers does not address these questions.

   In addition, Summers does not specifically address what the employer must prove, and by what standard, in order to be entitled to use the after-acquired evidence. Must the employer prove that it would have fired the employee on learning of the misconduct? In cases of fraud in the employment application, must the employer prove that it would never have hired in the first place? And how might the employer prove these facts?

   Finally, are there any limitations on when and how the employer can obtain this evidence? Can the employer waive its right to rely on the evidence, such as by giving the employee good performance evaluations

   These and other questions have been debated in numerous cases since Summers. Some courts have adopted Summers in toto; some have adopted it with limitations; some have rejected it altogether; some have not yet reached the question. There is little doubt that Summers opened the door to a new line of defense for employers in employment discrimination actions. What is not always clear is when and how the doctrine may be applied.

3. Applied, Questioned, Revised

   In the first four years after Summers, several courts applied the announced rule, and some "tinkered with" or imposed their own interpretations on it. Since the middle of 1992, the diverging interpretations have continued, leaving somewhat of a mixed bag of rules, quasirules, caveats and exceptions.

   1. 1989-mid 1992--Tinkering

      In Smith v. General Scanning Inc.(6) the Seventh Circuit considered a case in which the employee had falsified his resume with regard to his education, then subsequently brought an ADEA claim. Although the court affirmed a summary judgment for the employer, it did so on the basis that the employee could not rebut the employer's articulation of a legitimate, non-discriminatory reason for its action. The court specifically noted that the employee's resume fraud "had nothing to do with" the lawfulness of his termination, since it surfaced only after the employee was terminated. Although the court stated that the employee's resume fraud was "irrelevant" for purposes of determining the legality of the employer's actions, it also stated that the resume fraud might be "highly relevant" in determining whether the employee would be entitled to the remedies of reinstatement and back pay in the event the employer were found to have violated the ADEA.

      In Mathis v. Boeing Military Airplane Co.(7) the federal district court in Kansas applied the Summers rule and granted summary judgment to the employer. The employee had omitted from her job application a previous felony conviction and the fact that she had been discharged for cause from her three most recent jobs. While applying Summers under the facts of that case, the court cautioned that "in some cases a strict application of Summers may lead to extreme results."

      In 1990 and 199 1, three reported cases were decided by district courts in the 10th Circuit.

      First, in O'Driscoll v. Hercules Inc.(8) the employee charged violations, among others, of Title VII and the ADEA. During preparation for trial, the employer discovered that the employee had misrepresented her age on numerous documents, including a pre-employment examination and an employment application. The district court adopted the rationale of Summers and granted summary judgment to the employer, reading Summers as requiring the employer to show that the employee's misconduct was so serious that the employee "would have been...