A splintered Iowa Supreme Court reverses $1.4 million employment judgment

by Rox Laird | June 29, 2017

The Iowa Supreme Court on June 23 reversed a $1.4 million sexual harassment jury verdict against a northeast Iowa ethanol plant and ordered a new trial.

While the justices unanimously agreed that the trial judge’s instructions to the jury were flawed, they were divided into three camps about exactly which of the four jury instructions was in error. The seven justices produced three separate opinions – none of them fully commanding a majority – that covered more than 170 pages.

As a result, trial judges, lawyers, and employee relations executives may need a spreadsheet to chart exactly where a majority of the Court landed on the issues in this complex harassment case.

Perhaps the best road map for understanding this decision is Chief Justice Mark Cady’s separate opinion in which he concurred with the plurality opinion on some issues while joining a dissent on others. Thus, in this opinion, Cady cast the deciding vote on several issues raised in this appeal.

Background of the Haskenhoff lawsuit

Tina Haskenhoff, who worked as a laboratory supervisor at Homeland Energy Solutions’ ethanol plant at Lawler, complained of being sexually harassed by coworkers and a supervisor who directed sexually explicit comments at her. After she complained to management, the harassment subsided for a time but after resuming she resigned and filed a civil rights lawsuit against the company.

In its appeal of the verdict, Homeland Energy Solutions argued that the Chickasaw County District Court gave the jury legally flawed instructions. The Supreme Court agreed in part, reversed the judgment and sent the case back to the District Court for a new trial.

The Supreme Court focused on five substantive issues raised by the employer: Direct negligence versus vicarious liability; an element of proof required in a harassment claim; the legal standard for retaliation; retaliatory discharge; and constructive discharge.

An opinion, written by Justice Thomas Waterman joined by Justices Edward Mansfield and Bruce Zager, upheld the lower court on the vicarious liability standard but reversed it on jury instruction challenges.

Chief Justice Cady’s special concurring opinion provided the fourth vote to produce a majority decision on the element of proof required in a harassment claim and on a constructive discharge issue. Justice Brent Appel produced a 92-page dissenting opinion joined by Justices David Wiggins and Daryl Hecht that supported the trial court on the vicarious liability standard and two of four jury instruction questions.

Here’s how the justices broke down:

Direct negligence versus vicarious liability

The employer argued that a claim of harassment by a supervisor requires a vicarious liability theory and an affirmative-defense jury instruction, while a coworker-harassment claim can only be brought under a direct negligence theory. The plaintiff argued the employer may be sued under a direct negligence theory for both supervisor and coworker harassment.

Waterman’s opinion: “We hold that plaintiffs under the [Iowa Civil Rights Act] may proceed against the employer on either a direct negligence or vicarious liability theory for supervisor harassment in a hostile-work-environment case.” For a direct negligence claim, however, the burden of proof remains with the employee on all elements, and the employer cannot assert the affirmative defense that is available for vicarious liability claims.

Cady, Appel, Wiggins, and Hecht concurred.

Jury instruction on an element of proof

The employer argued the instruction to the jury on direct negligence left out an essential element the plaintiff must prove – that the defendant failed to take prompt and appropriate remedial action in response to the harassment complaint. The plaintiff argued that an employer is negligent regardless of being made aware of the harassment or taking corrective action in response.

Waterman’s opinion: The jury instruction should have said the plaintiff was required to prove the defendant failed to take action. “Removing the requirement for the plaintiff to prove the employer neglected to take corrective action,” Waterman wrote, “would impose strict or automatic liability on an employer whenever supervisor harassment occurred without a tangible adverse employment action.”

Cady concurred. Appel, Wiggins, and Hecht disagreed.

Causation standard for retaliation

Under state law, it is illegal for an employer to retaliate against an employee who complains of discrimination. The question in this case is whether the plaintiff’s harassment complaints were a “motivating factor” or a “significant factor” in the employer’s retaliation.

Waterman’s opinion: The jury should have been instructed that the plaintiff had to prove that her complaints were a “significant factor” in the retaliation. The District Court’s jury instruction misstated the legal standard for causation.

Appel, Wiggins, and Hecht dissented, concluding the District Court had properly instructed the jury on the causation standard.

Cady concurred in part with Appel’s opinion on this point. In a claim for retaliatory discharge, Cady wrote, “the employee must show the employee’s engaging in a protected activity was a motivating factor in the employer’s decision to take an adverse employment action.” Cady disagreed with Appel’s opinion, however, that the District Court had properly instructed the jury on the retaliation causation standard.

Adverse employment/retaliatory discharge

The jury instruction listed as examples of adverse action “reprimands or threats of reprimands,” being placed on a “performance improvement plan” or other actions that “adversely affect or undermine the position of the employee.” The employer argued that instruction misstated the law.

Waterman’s opinion: This jury instruction was prejudicial error because it “misstated the law and unduly emphasized certain evidence” by listing “matters that no court in Iowa — or the Iowa Civil Rights Commission or EEOC, for that matter — has concluded constitute an adverse employment action as a matter of law.”

Cady, Appel, Wiggins, and Hecht concurred.

Constructive discharge

The employer alleged three errors on jury instruction regarding constructive discharge, which occurs when an employer “deliberately makes an employee’s working conditions so intolerable that the employee is forced into an involuntary resignation.” First, it argued it was an error to instruct the jury that an employer need not really want the employee to quit; second, it argued the district court wrongly included a subjective standard into the definition of constructive discharge; third, the trial court should have allowed an instruction stating that “conditions will not be considered intolerable unless the employer has been given a reasonable chance to resolve the problem.”

Waterman’s opinion: The opinion rejected the employer’s first objection; on the second objection it agreed that the jury instructions wrongly included a subjective standard into the definition of constructive discharge; on the third objection it agreed that the jury instructions should have included language that an employee must give the employer “a reasonable chance to resolve the problem.”

Cady, Appel, Wiggins, and Hecht joined the Waterman opinion on the first two points but disagreed on the third. Cady joined the Appel opinion on that point, saying, “A constructive discharge may occur if a reasonable employee would find the working conditions intolerable, even if that employee did not give the employer an opportunity to correct the problem.”

The lawyers for the parties

Kevin J. Visser and Lisa A. Stephenson of Simmons Perrine Moyer Bergman PLC, Cedar Rapids, represented the appellant Homeland Energy Solutions in this appeal. Roxanne Barton Conlin of Roxanne Conlin & Associates, P.C., Des Moines, and Brooke Timmer and Paige Fiedler of Fiedler & Timmer, P.L.L.C., Johnston, represented appellee Tina Haskenhoff.




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