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In February 2024, the 5th Circuit (covering Texas, Louisiana, and Mississippi) reduced a $366 million jury verdict to $248,619.57. A Texas jury awarded the $366 million after finding that FedEx terminated the Plaintiff in retaliation for alleging discrimination against a supervisor.

In Harris v. FedEx Corporate Service, Inc., the Plaintiff was fired after filing 3 harassment complaints against the same supervisor, all of which were investigated by Human Resources. The trial court entered a judgment against FedEx for violations of 42 U.S.C. § 1981 (discrimination in contract based on race) and Title VII, all based on the jury’s finding that FedEx’s reasons for terminating Plaintiff were a pretext for retaliation.

The reduction in damages resulted from the 5th Circuit’s ruling that (a) Plaintiff’s claims under 42 U.S.C. § 1981 were time-barred by a provision in her employment agreement limiting the Plaintiff’s filing time to 6 months; and (b) Plaintiff could not recover punitive damages under Title VII (capped at $300,000) because FedEx had made good-faith efforts to comply with federal law by thoroughly investigating Plaintiff’s complaints.

Section 1981 provides a federal cause of action for equal rights violations based on race and covers the same discriminatory acts as Title VII. Unlike Title VII, Section 1981 does not cap damages.

In this case, Harris’s employment agreement with FedEx stated that any claim under Section 1981 was time-barred unless filed within 6 months of the alleged wrongful acts. The 5th Circuit disagreed with the district court and found this provision enforceable, dismissing the Section 1981 claim because Plaintiff had not filed her case within the contractual 6-month window.

Without a Section 1981 cause of action, Plaintiff’s recovery was limited to a potential Title VII maximum of $300,000. The Court awarded less than the Title VII statutory maximum because it declined to award punitive damages.

The 5th Circuit ruled: “FedEx’s actions in this case are unlike other cases where this court has found companies vicariously liable for punitive damages because they ignored the plaintiff’s complaints.” FedEx made good-faith efforts to comply with Title VII because “each time [Plaintiff] filed an internal complaint, HR conducted an in-depth investigation: [HR] interviewed multiple witnesses, examined relevant evidence, and provided a detailed analysis of [Plaintiff’s] allegations. Moreover, FedEx policy did not allow [the supervisor] to discipline [Plaintiff] while [HR’s] investigations were ongoing.”

Based on the elimination of Plaintiff’s Section 1981 claim and the finding that FedEx made good faith efforts to comply with Title VII, the Court vacated the punitive damage award and limited Plaintiff’s recovery to $248,619.57.

This decision highlights the importance of drafting employment agreements that limit employees’ ability to file lawsuits against the company – whether it be arbitration provisions, or provisions like the one FedEx used limiting the time for employees to file their claim.

Further, the 5th Circuit’s holding emphasizes that thorough investigations of EEO and other employee complaints may reduce liability, all in addition to the well-known benefits of addressing EEO issues before they become problematic.

Questions about drafting employment agreements or responding to employee complaints? Don’t worry – we’re here to help!