In one of the most awaited decisions of the Term, the Supreme Court considered the standard for awarding punitive damages in Title VII actions. The Civil Rights Act of 1991 authorizes punitive damages whenever a defendant is found to have engaged in intentional discrimination with "malice or reckless indifference to [the plaintiff’s] federally protected rights." 28 U.S.C. § 1981a.
The Court 6/22/99 rejected the requirement suggested by the D.C. Circuit in the decision below that there be egregious misconduct. Finding the common-law basis for this requirement uncertain, the Supreme Court held that a culpable mental state is the only special requirement for imposing punitive damages under Title VII in cases where intentional discrimination is found.
The majority went out of its way, however, to stress that the culpable mental state of even high-level employees will not always be imputable to their employers, who alone are suable under Title VII. Instead, the Court held that for purposes of punitive damages the mental state of employees may only be imputed to their employers under the relatively restrictive common-law agency principles. Furthermore, noting Title VII’s policy in favor of promoting voluntary compliance programs and polices, the Court interpreted the common-law rule to protect employers that make good-faith efforts to comply with Title VII.
As a consequence, even though the Court’s opinion in Kolstad rejected the egregious conduct requirement, it provides ample protection against punitive damages for employers who act in good faith, especially when they adopt bona fide compliance programs and policies.