Monday, December 28, 2015

Termination for Non-Performance Upheld

Termination for Non-Performance Upheld

In a recent decision, the Sixth Circuit Court of Appeals upheld the termination of the executive director of a non-profit corporation when she failed, over several years, to balance the budget.  In doing so her assertions that she was terminated on the basis of her sex and that she was held to a stricter standard than was her male successor were rejected.  Gunn v. Senior Services of Northern Kentucky, No. 15-5320 (6th Cir. Dec. 7, 2015).

Gunn was in 2000 hired as the Executive Director of Senior Services of Northern Kentucky (“SSNK”); eventually she as well accumulated the titles of President and CEO.  By 2006 the corporation was operating at a deficit; losses were being covered by a related endowment.  In 2006 the operating deficit was $101,000 and in 2008 it was $81,653. The Board, in June, 2008, directed that management’s goal was “to react to the [funding] cuts and achieve a balanced budget in 2009.”  Slip op. at 2.  Instead, in 2009 the deficit was $93,000, and the estimate for the 2010 budget was estimated to be as high as $150,000.  The Board reiterated its direction that a balanced budget needed to be achieved. In July, 2010 a new Board Chair told Gunn that her number-one priority is a balanced operating budget.  Still, on May 25, 2011 an operating budget deficit of $183,223, along with a projected deficit for the year of $281,417, were reported to the Board.  Gunn submitted a 2012 budget showing a $164,000 deficit, an action “That signaled the end of Gunn’s tenure at SSNK.”  Slip op. at 4. Gunn responded by bringing suit under the Civil Rights Act of 1964 and Kentucky’s similar law, asserting, inter alia that she was terminated on the basis of her sex.  SSNK moved for summary judgment, which was granted by the trial court.  That determination would be upheld by the Court of Appeals.
Claims of discrimination on the basis of sex move through a three stage analysis: first, does the plaintiff make out a prima facia case of discrimination; second, does the defendant offer a legitimate, non-discriminatory basis for the action taken; and third, can the plaintiff demonstrated that the proffered legitimate basis is a pretext?  Slip op. at 6, citing McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

In this case SSNK pointed to the repeated failures to achieve a balanced operating budget as a nondiscriminatory basis for Gunn’s termination.  In response thereto the burden shifted to Gunn to establish pretext, which requires that the plaintiff show:

[T]hat (1) the employers stated reasons for terminating the employee have no basis in fact, (2) the reasons offered for terminating the employee were not the actual reason for the termination, or (3) the reasons offered were insufficient to explain the employers action. Imwalle v. Reliance Med. Products, Inc., 515 F.3d 531, 545 (6th Cir. 2008). “[A] reason cannot be a pretext for discrimination unless it is shown both that the reason was false, and that discrimination was the real reason.” Seeger, 681 F.3d at 285 (alteration omitted) (quoting St. Marys Honor Ctr. v. Hicks, 509 U.S. 502, 515 (1993)). Thus, regardless of which rebuttal method a plaintiff uses, “he always bears the burden of producing sufficient evidence from which the jury could reasonably reject the defendants explanation and infer that the defendant intentionally discriminated against him.” Id. at 285 (alterations omitted).

Gunn attempted to proceed under the second option, namely that “the reasons offered for terminating the employee were not the actual reason for the termination.”    This she was not able to do.  While she profered favorable evaluations, they largely pre-dated the declining economic health of SSNK.  Positive comments on balanced projections did not alter the fact that those projections did not come to pass and the deficits were the reality.  Assertions that she was not afforded enough time to fix the problem were likewise rejected; in fact she had been told for several years that achieving a  balanced budget was her obligation. 

A back-up argument that SSNK failed to follow its own internal discipline procedures failed when it was noted that they did not apply to the executive director. 

As for the claim that her male successor was not treated the same way, while he continued to operate SSNK at a deficit, he reduced the $200,000 deficit of Gunn’s last year to a deficit of $65,000 in his first year and projected only a $14,000 deficit in the next year. 

In closing, the Sixth Circuit observed:

“Time and again we have emphasized that [o]ur role is to prevent unlawful [employment] practices, not to act as a super personnel department that second guesses employersbusiness judgments.” Corell v. CSX Transp., Inc., 378 F. Appx 496, 505 (6th Cir. 2010) (first alteration in original). The evidence cited by plaintiff shows an organization struggling to make ends meet, a Board of Directors looking to their chief executive for answers, and an executive who was ultimately unable to produce tangible results. It does not, however, demonstrate pretext.



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