Third Circuit Issues Employer-Friendly Ruling in Discrimination and Retaliation Case

August 20, 2015 | By Ivo J. Becica

On August 12, 2015, the Third Circuit Court of Appeals issued a precedential opinion in Jones v. SEPTA, a discrimination and retaliation claim brought by a former employee of the Philadelphia-area transit agency. The Third Circuit affirmed the dismissal of the employee’s claims, and addressed two key legal issues: (1) whether suspensions with pay are considered adverse employment actions under Title VII; and (2) whether an initial report made by an allegedly biased supervisor can lead to liability under the “Cat’s Paw” theory (for an overview of “Cat’s Paw,” see my post on HR Legalist earlier this year). Fortunately for employers within the Third Circuit (including Pennsylvania, New Jersey and Delaware), the court ruled in SEPTA’s favor on both issues.

The Facts

Plaintiff, Michelle Jones, was an administrative assistant for SEPTA. In December 2010, Plaintiff’s supervisor, Alfred Outlaw, suspended her with pay after he discovered that some of her timesheets were fraudulent. Jones then complained to SEPTA’s EEO office that Outlaw had sexually harassed her and retaliated against her. While that complaint was pending, Outlaw referred the timesheet fraud allegations to SEPTA’s Office of the Inspector General (“OIG”). After an investigation, OIG concluded that Plaintiff submitted fraudulent timesheets. Based on the results of the investigation, Jones was terminated.

After her termination, Plaintiff brought suit against SEPTA and Outlaw, asserting various claims including gender discrimination and retaliation under Title VII of the Civil Rights Act of 1964. Jones claimed that both her suspension with pay and her ultimate termination were discriminatory and retaliatory.

The Ruling

  • A Suspension With Pay is Not an Adverse Action

Generally, in order to prove a discrimination claim, an employee must prove that he or she suffered an adverse employment action that altered his or her compensation, terms, conditions, or privileges of employment. Prior to the ruling in Jones, the Third Circuit had not addressed this issue; however, several other Circuit Courts of Appeals had ruled that a suspension with pay was not an adverse employment action. In Jones, the Third Circuit agreed, reasoning that the terms and conditions of employment usually include the possibility that the employee will be subject to the employer’s disciplinary policies, including a paid suspension pending an investigation.

  • Supervisor’s Initial Report of Fraud Does not Lead to Liability

After addressing the issue of Plaintiff’s suspension with pay, the court addressed several other issues, including whether Plaintiff could prove the elements of her retaliation claim. Jones relied in part of a “cat’s paw” argument – she claimed that Outlaw wanted to retaliate against her because she had complained that he was sexually harassing her, and that he reported the fraud allegations to OIG to get revenge.

In a typical “Cat’s Paw” case, a biased supervisor has some type of influence on a decision to discipline or terminate an employee. However, in Jones, Outlaw’s involvement was limited – he conducted an initial investigation into the timesheet fraud, and reported the suspected fraud to OIG. After gathering forensic evidence and documentation, OIG concluded that Jones’s timesheets were fraudulent without relying on any information provided by Outlaw. Therefore, the court concluded that the cat’s paw theory did not apply, and Jones could not show that her termination was retaliatory. In other words, it was not enough for Outlaw simply to “get the ball rolling” with his initial report.

The Takeaway

Jones addresses a challenging situation for employers – what to do when a poorly performing employee claims discrimination or harassment? Worse yet, what if that same employee is suspected of a serious violation of policy, but the supervisor reporting the violation is also the alleged harasser?

Fortunately, Jones confirms that employees do not gain carte blanche for their own wrongdoing when they complain of discrimination, harassment, or retaliation. Employers can and should suspend employees with pay when they suspect a serious violation. An independent investigation should be conducted to corroborate the wrongdoing, focusing on objective evidence such as time records, e-mail, security footage, and admissions from the employee whenever possible. If this evidence is available, it is much less likely that the employee can successfully claim that the investigation was tainted by bias. Employers should also work with employment counsel to develop policies and procedures for employee suspensions and investigations that address the needs of their organizations and reduce litigation risk.

About the Authors

Ivo Becica

Ivo J. Becica


Ivo is a partner in Obermayer’s Labor Relations & Employment Law Department. He focuses his practice on representing employers, including advising companies on how to handle employee issues, and defending employee claims...

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