IOWA CITY - Courts cannot award punitive damages to victims of workplace sexual harassment and gender discrimination under the Iowa Civil Rights Act, the state Supreme Court ruled Friday in a victory for employers.
The court said lawmakers did not intend for punitive damages - awarded to punish and deter wrongdoing - to be available when they passed the law decades ago. Courts can award only "actual damages" to compensate for harm employees suffered, such as lost wages and emotional distress.
The ruling came in response to lawsuits filed by three former female employees of Manley Toy Direct and Toy Network in Indianola, subsidiaries of a Hong Kong-based companies. It was the all-male court's first interpretation of the Iowa Civil Rights Act since it ruled in December that women can legally be fired if their bosses believe they are too attractive, which generated some outrage.
The women's lawsuits alleged a male supervisor and co-worker repeatedly groped them and made vulgar and harassing comments, calling them derogatory names, talking about the women's body parts and sharing explicit details of sexual encounters. They worked in the company's call center, fielding complaints about products. Filed in 2010, the lawsuits allege sexual harassment, discrimination and retaliation and seek damages, including punitive damages.
A judge agreed with the company's request to strike punitive damages, saying they were not available under the law. Attorneys for the women appealed, urging the Iowa Supreme Court to clarify or overturn rulings dating to 1986 that suggested punitive damages could not be awarded. The Iowa Association for Justice, a trial lawyers' group, backed up the plaintiffs, while business groups asked the court to affirm its earlier decisions.
Chief Justice Mark Cady said the court saw no reason to reach a different conclusion now. He said state lawmakers have not sought to change the law and the lack of punitive damages has become "ingrained in our legal culture."
"We did our job twenty-seven years ago and will leave it for the legislature to take any different approach," he said.
The Association of Business and Industry, which represents Iowa businesses, argued that the lack of punitive damages gives Iowa a more business-friendly legal climate. Punitive damage awards can threaten businesses with insolvency, and the costs are passed on to consumers and shareholders, the group warned.
Its counsel, Russell Samson, said he wasn't surprised by the 7-0 ruling.
"It affirms what businesses have thought all along in terms of how Iowa's law has been construed," he said. "I'm happy, I'm sure my client is happy, and the law is today what the law was yesterday and what it has been since the Iowa Civil Rights Act was passed."
In practice, though, some trial judges had been allowing punitive damages in civil rights cases, said employment attorney Paige Fiedler. One of her clients was awarded $1.7 million in punitive damages in 2011. She said the 1986 ruling only specified that punitive damages could not be awarded by a state agency and was silent on what judges could do.
More discrimination cases might now be tried in federal court, which allows punitive damages but is generally "more hostile" to claims, she said.
Des Moines attorney Jill Zwagerman, who is representing the plaintiffs, said her clients were the victims of "horrific sexual harassment and retaliation" but have been unable to receive any legal redress. She said the Hong Kong-based parent companies are refusing to be served with the lawsuit, while their Iowa-based subsidiaries claim they were not the women's employers.
She said a major problem was that the harassment was carried out by a supervisor who dismissed the women's complaints. The women claim they were fired or quit after enduring almost hourly sexual comments, touching, name-calling, gestures and drawings.
Without punitive damages, unethical companies don't have an incentive to prevent workplace harassment, Zwagerman said. Her clients earned $9 per hour, and paying them back wages will not be that expensive.