Hear No Evil; See No Evil: The General Corporate Knowledge Presumption

In a previous post, we discussed the importance of Kwan v. The Andalex Group LLC, – F.3d – (2d Cir. 2013) as it related to the likelihood of obtaining summary judgment on Title VII retaliation claims in the aftermath of the U.S. Supreme Court’s Nassar decision, which seemingly raised the employee’s standard of proof of retaliation.  Kwan also discusses another principle that is problematic for employers: the doctrine of general corporate knowledge.

As you may remember, Ms. Kwan worked as Vice President of Acquisitions for a family-owned real estate management firm for several years and was terminated three weeks after verbally complaining to the company’s COO about the pay disparity between herself and her male colleagues. But to make a retaliation claim, the employee must at least show that the employer’s decision-maker was aware of the conduct supposedly being retaliated against.  In granting summary judgment for her employer, the district court held that Kwan could not satisfy the second prong of her prima facie case, that the employer had knowledge of her complaint of gender discrimination at the time it terminated her, because she could not show that the senior management official who made the termination decision was told of her conversation with the COO.

According to the Second Circuit, in addition to the district court’s flawed “but-for” analysis, the district court also erred by holding that Kwan could not prove the employer’s knowledge of her complaint.  The Court ruled that for purposes of establishing a prima facie case, a plaintiff may rely on “general corporate knowledge” of her protected activity.  In other words, the fact that the company’s COO allegedly knew of plaintiff’s complaint is sufficient to impute his knowledge to the entire company’s management.  The Court reasoned that imputing a manager’s knowledge to the entire company at the prima facie stage was necessary because otherwise an employer’s simple denial of knowledge will render plaintiff’s case dead-on-arrival.

So, what does this mean? The doctrine of “general corporate knowledge” tips the scale in favor of the employee in a “he said v. she said” scenario.  Employers can prevent this doctrine from being used against them by having policies in their handbooks, requiring that all complaints be in writing.  Mid-level and upper-level management should be well-versed in these policies so if an employee does make a verbal complaint to them, they can direct the employee to the handbook and request that it be in writing. Having such policies in place and proof that they are routinely followed may rebut the knowledge presumption that the “general corporate knowledge” doctrine creates.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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