Allegedly Falsified Records Lead to Trial on Race Bias Claim

October 5, 2016

The U.S. 7th Circuit Court of Appeals (whose rulings apply to all Wisconsin employers) recently reversed a district court’s decision involving the termination of an employee of Mexican descent. The employee claimed he was subjected to egregious racial harassment during his employment and improperly terminated because of his ethnicity. The case is particularly interesting because the 7th Circuit clarified how lower courts should treat evidence presented in discrimination cases.

Facts

Henry Ortiz worked as a freight broker for Werner Enterprises, Inc., for seven years until his discharge in 2012. Werner says it fired Ortiz for falsifying business records. Ortiz says Werner subjected him to a hostile work environment and fired him because of his Mexican ethnicity.

In the spring of 2012, Ortiz was assigned to Werner’s west region, apparently not a lucrative assignment when high demand for transporting produce drives carriers’ rates up. During the first week of June 2012, Michael Krikava, the branch’s assistant manager, directed another broker to book six unprofitable loads in Ortiz’s name. There was some variation in how Ortiz’s name wound up on each load. Krikava booked several loads in his own name and swapped Ortiz’s name after the loads had been picked up, but other loads were booked early in the morning when Ortiz may have been out of the office. By the time Ortiz realized that he had been given responsibility for the loads, it was too late for him to search for a cheaper carrier. Ortiz later changed the records to reflect that he had not booked the loads or to list lower rates he thought the carriers had agreed to charge.

Ortiz then left for a planned vacation. On his return, Werner fired him. Ortiz contended that brokers and managers always notified each other when they booked an unprofitable load in someone else’s name and that it was atypical for someone to book so many unprofitable loads in another person’s name without so much as a courtesy e-mail or phone call. He claimed Krikava assigned him unusually large losses. Ortiz repeatedly questioned Krikava about the unprofitable loads, but he refused to answer until asking, “Why won’t you just quit already?”

Ortiz maintained that he updated three records to show that he had spoken to the carriers, which agreed to accept a lower rate because they had not picked up the goods on time. He claimed that he often tried to negotiate a lower rate after a late delivery and that carriers would sometimes oblige. According to Ortiz, negotiating lower rates was standard practice in the industry, and other brokers offered similar testimony. Ortiz justified the removal of his name from three loads by offering evidence that branch managers permitted brokers to delete their names from unprofitable loads. That practice allowed Werner to satisfy the needs of all its customers without saddling brokers with undue losses, thus protecting brokers’ commissions. Removing a broker’s name from a loss also moved the loss off the branch’s books and increased the branch’s profits and the managers’ bonuses, which were tied to branch performance.

Ortiz thought it was permissible for him to remove his name from money-losing loads. On his first day back from vacation, Ortiz met with Kip Lass, the branch manager. Lass told Ortiz that he was being fired for falsifying records. Ortiz argued that he had not falsified records but had corrected them to reflect the rate the tardy carriers had agreed to charge, and he offered to call the carriers to provide proof. Lass showed no interest in verifying Ortiz’s claims. He stated, “What’s done is done” and discharged Ortiz without further investigation.

Ortiz claimed that Krikava and Lass subjected him to a barrage of ethnic slurs while he worked for Werner. According to Ortiz, they frequently used epithets such as “beaner,” “taco eater,” “fucking beaner,” “taco,” “bean eater,” “dumb Mexican,” “stupid Puerto Rican,” “dumb Puerto Rican,” “fucking Puerto Rican,” “Puerto Rican,” and “dumb Jew” when referring to him. Ortiz contends that he encountered slurs throughout his tenure at Werner and that they increased in frequency and intensity in the months leading up to his discharge. Werner denied that Lass and Krikava made derogatory remarks to Ortiz. Ortiz sued.

District Court’s Decision

The district court granted summary judgment (dismissal without a trial) in favor of Werner. The court dismissed Ortiz’s hostile work environment claim because he failed to exhaust his administrative remedies, a ruling he did not contest on appeal. The judge looked at the evidence using the “direct” and “indirect” methods courts often discuss in employment discrimination cases. Admissions of culpability and smoking gun evidence are assigned to the “direct” method (the judge found no such evidence), while suspicious circumstances that might allow for an inference of discrimination are assigned to the “indirect” method.

The district court did not try to aggregate the evidence to find an overall likelihood of discrimination. Instead, the court treated each method as having its own elements and rules. Pursuing two methods instead of a unified inquiry, the court elaborated by saying that Ortiz could prevail only by coming up with “evidence that creates ‘a convincing mosaic of discrimination.’” It concluded that Ortiz failed to present a “convincing mosaic” under the direct method because Lass’ racial slurs did not have anything to do with his discharge. The court also ruled that there was not enough of a “mosaic” under the indirect method because Ortiz fell short of Werner’s expectations by removing his name from the records and changing the rates. Ortiz appealed.

7th Circuit’s decision 

The 7th Circuit held that the district court’s effort to shoehorn all evidence into two “methods” and its insistence that either method be implemented by looking for a “convincing mosaic” detracted from the sole question that mattered: Could a reasonable juror conclude that Ortiz would have kept his job if he had a different ethnicity and everything else had remained the same?

The 7th Circuit found that the use of disparate methods and the search for elusive mosaics have complicated and sidetracked employment discrimination cases. The court held that going forward, any decision by a district court that treats a “convincing mosaic” as a legal requirement is subject to reversal. The 7th Circuit stated that the test is whether the evidence would permit a reasonable fact finder to conclude that the employee’s race, ethnicity, sex, religion, or other protected factor caused the discharge or adverse employment action. The court must consider the evidence as a whole rather than asking whether a particular piece of evidence proves the case by itself—or whether just the “direct” or “indirect” evidence does so.

Relevant evidence must be considered, and irrelevant evidence must be disregarded. However, no evidence should be treated differently because it can be labeled “direct” or “indirect.” Accordingly, district courts must stop separating direct and indirect evidence and stop proceeding as if they were subject to different legal standards.

Turning to this case, the court found that some Werner employees testified that they always provided notice when booking a loss in another broker’s name. Some employees went further and said they expected someone to ask for permission before recording an unprofitable transaction in their name. Several brokers testified that they sometimes removed their names from unprofitable loads. Werner could not identify an express policy that forbade the practice. A former Werner broker with 20 years’ experience submitted a declaration that while working at the company, he sometimes asked tardy carriers to lower their rates and that such action reflected industry practice. Finally, several current and former employees recounted that Lass and Krikava had directed ethnic slurs at Ortiz.

Based on that evidence, a reasonable juror could infer that Lass and Krikava didn’t much like Hispanics (or Jews, although Ortiz is not Jewish) and tried to pin heavy losses on Ortiz to force him out the door. A juror might also infer that Werner’s managers fired Ortiz for using techniques that were tolerated when practiced by other brokers because of his ethnicity. The court noted that a jury might not credit Ortiz’s evidence and could accept Werner’s explanations, but given the conflicts on material issues, a trial is necessary. Ortiz v. Werner Enterprises, Inc., No. 15-2574 (7th Cir., Aug. 19, 2016).

Bottom Line

The 7th Circuit has made clear that courts must consider all evidence—both direct and indirect—when deciding whether there is sufficient evidence to send a discrimination case to a jury. The clear edict may help employees avoid summary judgment and get their allegations to a jury of their peers in close cases. Employers should note that the alleged racial slurs in this case clearly tipped the balance in favor of sending the case to a jury. Further, the lack of a coherent policy on when records could be altered allowed Ortiz to argue that it was race discrimination, not his changing records, that led to his termination. A clear policy, along with a racial-slur-free environment, would have prevented a trial.

For more information about "Allegedly Falsified Records Lead to Trial on Race Bias Claim," contact Saul C. Glazer at sglazer@axley.com or 608.260.2473.