Slashed $366 Million Bias Verdict Shows Damage Cap Downsides

A recent decision cutting a former FedEx executive’s massive $366 million jury award to about $249,000 displays in stark terms how plaintiff payouts are hindered by a decades-old damages cap for a major civil rights law as well as contracts limiting when workers can sue.

The US Court of Appeals for the Fifth Circuit this month undid what may be the largest-ever jury verdict won by a worker suing for racial bias, awarded to a Black former executive of FedEx Corporate Services Inc. who sued the company for retaliation under Title VII of the 1964 Civil Rights Act and Section 1981 of the 1866 Civil Rights Act.

The court decided that Jennifer Harris wasn’t entitled to $365 million in punitive damages, as FedEx made a “good faith” effort to comply with the law. But her $1.16 million in compensatory damages were also gutted as the panel said a provision in her employment contract barred a claim under Section 1981, which unlike Title VII, has no damages cap.

The proper proportion of damage awards in bias suits remains a point of debate, but Title VII’s $300,000 limit for large companies should be raised, employment attorneys said. Recently, the cap has also faced pointed criticism from the Equal Employment Opportunity Commission’s top lawyer, Karla Gilbride, a key federal civil rights enforcer.

“Right now for a lot of companies discriminating, it’s just a cost of business,” said Katy Youker, the director for the Economic Justice Project at a nonprofit advocacy organization, Lawyers Committee for Civil Rights under the Law. “They will pay whatever judgment because the damages are relatively low to their net worth, so they’re not really feeling the pain and taking measures to correct the discrimination in the future.”

FedEx in its brief to the Fifth Circuit slammed the “breathtaking and disproportionate punitive-damages awards” in a case that the company said “should never have never reached trial in the first place, as the plaintiff’s core claim is time-barred.”

Capped Out

The Fifth Circuit left Harris with only the potential to collect Title VII damages, as the panel disagreed with a Texas federal court’s determination that her Section 1981 claim was still viable because her contract with FedEx “cut against public policy.”

The agreement required her to file any legal actions against FedEx within six months of an inciting incident, but Harris made her Section 1981 claim 16 months after her firing.

The $300,000 damages cap under Title VII for companies with more than 500 employees was established in 1991 by Congress and hasn’t been increased since. If that amount were adjusted for inflation, it would now be over $670,000.

“The value of $300,000 in 2024 is much less than it was in 1991,” said David Lopez, co-dean of Rutgers School of Law and former EEOC general counsel during the Obama administration. “When I was at the EEOC, I used to actually do the calculations every time we would have one of our cases reduced under the caps. Because it’s a little bit of a pebble in the shoe, to be honest.”

Gilbride, the commission’s current general counsel, spoke out on damages caps on Jan.12, following a Nebraska federal court’s reduction of a $36 million jury verdict for a deaf truck driver to just $335,682. The verdict was cut as the Americans with Disabilities Act of 1990, which prohibits disability discrimination, uses the same limits as Title VII.

“These caps, which were set by Congress decades ago, take away juries’ power to deter large employers from engaging in intentional discrimination against workers,” Gilbride said in a statement. “Juries who have heard the evidence should be able to punish employers who knowingly or recklessly break the nation’s workplace civil rights laws without constraints from outdated caps on damages.”

The Title VII cap also led an Oklahoma federal court in late 2020 to cut an award for a transgender professor, whom a jury found was fired because of her gender identity. Her $1.2 million award of compensatory damages was slashed to only $300,000.

The ability to proceed under Section 1981 is important in large part because the statute lacks a damages cap, according to Deborah Widiss, an employment law professor at the Maurer School of Law at Indiana University Bloomington.

Plaintiffs will often bring these claims in place of or alongside those filed under Title VII.

Depending on which state they are in and whether that state has damages caps, plaintiffs may also have better luck pursuing their employment discrimination claims under state, rather than federal law, according to Lopez. For instance, he said, New Jersey’s civil rights law is “stronger than federal law on several counts and one of those is that you don’t have capped damages.”

Contract Restrictions

Similar to damages caps, contractual limitations on the timing of filing lawsuits, like those found in the FedEx employment agreement, have been met with pushback.

The Fifth Circuit rejected Harris’s counterarguments that she was unaware of the time-barring provision when signing her contract, and that a six-month limitation period on Section 1981 claims is inherently unreasonable.

The Sixth and Seventh circuits, as well as the US District Court for the District of Columbia, have ruled that Section 1981 time limits in contracts are permissible. The Fifth Circuit’s decision cited the DC federal court’s 2016 opinion in Njang v. Whitestone, which said a six-month limitation on claims under Section 1981 is reasonable since “there are no time-consuming procedural prerequisites” like Title VII has.

FedEx in its brief pointed out that Section 1981 contains “no express limitation clause,” meaning a federal four-year “catch-all” statute of limitations may apply. However, it’s “well-established” through case law that a contractual provision can shorten the prescribed period of a general statute of limitations “if the shorter period is itself ‘reasonable,’” the company argued.

“Courts outside of Texas also routinely conclude that contractual limitation agreements of the precise kind Harris signed do not violate law or public policy,” the brief said.

Once filed with the EEOC, it takes roughly 10 months for the agency to investigate a Title VII charge, according to its website. The agency can then bring a suit itself or issue workers a “right to sue” letter .

Widiss said the terms of the FedEx contract set an employee like Harris up to be in a situation where she would need to file a Section 1981 complaint while waiting for a response from the EEOC on a Title VII charge in order to remain compliant with the contract.

“Terms like this take advantage of the fact that there is a bargaining disparity between large companies and job applicants and employees,” said Adam Pulver, a worker-side administrative law attorney at Public Citizen Litigation Group. “These contracts are designed to minimize liability for the company and serve no purpose to help the employees in any way.”

Generally state laws determine whether the terms of an employment contract are enforceable, Pulver said. Harris’s arguments that Texas state law made her contract unenforceable were not taken up by the Fifth Circuit in its decision.

“I think it’s particularly galling with respect to 1981, because 1981 is not just an employment statute. In fact, it’s aimed at preventing discrimination in the formation of contracts,” Adam Herzog, a worker-side attorney at Katz Banks Kumin LLP, said of the court’s decision.

Herzog said he fears that with cases such as Harris’s, “what they’ll actually accomplish is letting companies and employers know that they absolutely should include these [provisions] in their employment agreement language.”

The case is Harris v. FedEx Corp. Servs., Inc., 5th Cir., No. 23-20035, opinion 2/1/24.