Are Employers Liable When Employees Are Accused of Racism? [e283]

Full Podcast Transcript

NASIR: Welcome to Legally Sound Smart Business.
My name is Nasir Pasha.

MATT: And I’m Matt Staub, and we’re two attorneys with Pasha Law, with offices in California, Texas, New York, and Illinois.

NASIR: Welcome to the podcast. This is where we cover business in the news with a legal twist.
Today, we’re trying to answer the question, “Who calls whom when you get disconnected on the line?”
You always get in that awkward situation. No, we’re not talking about that.

MATT: We’ll have our opinion of that at the end. I have a couple of thoughts.

NASIR: You have a couple of thoughts?

MATT: Yeah.

NASIR: Okay. Because, yeah, you’re driving along and, all of a sudden, you get disconnected and then you call each other and then they both go to voicemail. It drives you crazy.
Anyway, today, we’re actually discussing what to do when a customer or client accuses your employees – or worst, you, your business – for being racist.

MATT: Right. this all kind of stemmed about from an incident – by the time people listen to this – last week.
Last week, in Alabama, a woman was caught shoplifting at a Victoria’s Secret which, in a vacuum, wouldn’t really be a story we’d cover on this show. But, in this case, the situation was escalated because what we had was a black woman who was caught stealing and the response by the store’s manager was to kick out every other black female in the store.

NASIR: Whoops.

MATT: This is where we meet the individual named Kimberly Houzah. The reason we found out about this was she went on Facebook Live and did an 11-minute thing about her experience. She got even emotional. I think she ran the full gamut of emotions from kind of laughing almost to disbelief to angry to upset and why she was forced out of the store eventually and that video or that Facebook Live went viral. You kind of alluded to the “oops!” Big mistake on this store manager’s part.

NASIR: Yeah, I mean, her reaction is probably very similar to how anyone else would react but, at the same time, it’s like, what do you do in that situation? I mean, it’s very awkward. At the same time, you want to stand up for your rights and file a complaint but, at the same time, you also don’t want to be, all of a sudden, the center of a story on a podcast.

MATT: Yeah.

NASIR: I always find it strange, whenever these people that go through these situations, I’m sure this always goes through their mind, right? On one hand, I was just thinking about, remember that one coffee at McDonald’s? Everyone knows this story. Coffee gets spilled on a woman and she sues McDonald’s and she actually won a judgment and ended up settling later. Of course, the narrative is that she sued McDonald’s for millions of dollars and she knew the coffee was hot and so forth. But the reality is there’s a lot more to that story and I’m not going to talk about that but the bottom line is that that woman – who ended up being a kind of an elderly woman – was in the passenger’s seat and she gets pretty severe burns on here. What do you do? She had to go through months without medical bills being paid about tens of thousands of dollars. McDonald’s was offering her some kind of nominal amount and it’s not like she wanted to sue but you get to a point where it’s like, “Okay, I have to raise this issue.”

MATT: Were you the one that turned me on to that documentary? You probably were.

NASIR: I don’t know. I don’t even know what documentary. This is the second time I talked about this today. Logan was saying something about some documentary. I didn’t even know there was one.

MATT: The other one was to a cashier at McDonald’s as you were talking to her.

NASIR: Yeah, exactly. I was explaining to her why – because this coffee is not hot enough and the origin of it all.

MATT: You make a good point. I mean, the sort of couple of different responses that we, you now, we’re talking about here, one of which, like you were saying, was the response of the actual customer. I think she was more upset – I guess even more in shock at the beginning. I think she eventually comes around and, due to the response of Victoria’s Secret, their corporate, you know, she is going to still be a customer – just not necessarily of that individual store that she was at.
But, yeah, from a customer’s standpoint, at least in this case, there’s no real damages to her individually but this isn’t like the coffee example but let’s shift it to the focus of the employer’s perspective since that’s hopefully what we’re used to dealing with, I guess, but being more important, for sure.
Like I said, Victoria’s Secret corporate did issue an apology. “What happened in our store should not have happened. It does not represent who we are and what we stand for. The store associated involved in this matter is no longer employed with the company. Victoria’s Secret is adamant that all customers, regardless of race, be treated with dignity and respect at all times.” Exactly what you would expect.

NASIR: You expect nothing less from an organization like that and I can just imagine some maturity or even I’m sure the store manager or the regional manager is watching the video of their store. It was Facebook Live, right?

MATT: Yeah.

NASIR: And so, picture this for a second. You’re watching this video and you have this customer saying – and I quote, she is referring to the manager – “She can’t tell us why but we’re kicked out of the store and because another black female gets caught stealing, me and the other black female here have to be affiliated so we’re all put out.”
In the video, the manager can be heard telling the black customers, “I just need y’all to go,” in response to her complaints and so forth.

MATT: Yeah, pretty outrageous, obviously. I mean, I was going to say we don’t know the full circumstances but, quite frankly, we don’t really need to know what they are. No matter what the situation was, it was a bad call by the store manager.
One thing too we should think about is – because it was in a shopping mall – what about the mall security as well?

NASIR: Yeah, there’s implications there, too. You know, it says there, the mall is conducting its own investigation because, if the mall was kind of acting at the direction of Victoria’s Secret, because they’re saying, okay, these people are security risks and so the mall security kind of complies. But then, if they realize, “Wait a minute, why are they security risks? Just because you say they are because they happen to be all the same race?” then there could be some implications in the mall. But, of course, it’s a little attenuated to the origin of it all, right?

MATT: Yeah. In this situation, I would assume the mall security – this all happened so quickly – the mall security probably didn’t even know what was going on or have time to react – unless they were standing right outside the store. You can distinguish that from a situation that happened at an Apple Store.

NASIR: This was in Australia, actually, by the way.

MATT: This was in Australia, okay.

NASIR: The Apple Store one, yeah.

MATT: Maybe the security there is backwards of what it is here, I think, right? Is that how it works?

NASIR: That’s correct.

MATT: You got what I was saying.

NASIR: Yeah, I’m just saying.

MATT: So, yeah, an Apple Store employee and a security guard stopped a group of Middle Eastern and black students from entering an Apple Store. Of course, there was another video. Basically, anything bad that happens is going to be on video these days which that’s how it works.

NASIR: Especially the teens – not to stereotype but, yeah, they’re constantly videotaping something with their phones.

MATT: The employee can be heard telling the teens, “These guys – meaning security – are just a bit worried about your presence in our store. They’re just worried you might steal something.”

NASIR: “You might steal something.” Gosh.

MATT: Yeah, guilty until proven innocent.
One of the teen’s responds, “Why would we steal something?” and they just said, “End of discussion. I need to ask you to leave our store.”
First of all, I don’t know if Apple Stores in Australia are like they actually are the reverse of what they are here but I don’t think you can even steal stuff at the Apple Store – the way it’s all kind of structured. They’re all kind of cabled in.

NASIR: They’re cabled in. That’s the thing. These teens are probably in there, kind of playing around with the phones, just like what you’re supposed to do in an Apple Store because that’s what they have you do to come in. I mean, we’ve all been in one. I don’t even have an iPhone but I’ve gone in there before and played with iPads and stuff like that just because I’m walking around the mall. They’re made to do that and, of course, if I was maybe with a bunch of other kids who are the same color, maybe this would have happened to me. I got scared all of a sudden.

MATT: I mean, it’s so outrageous. In this case, I mean, this is even worse, I’d say, just because we don’t even have somebody even stealing something. This was a precautionary thing based solely on race is what it looks like. I mean, we do have a response from Apple.

NASIR: Yeah, of course, and they gave a formal apology, too, of course.

MATT: They invited the students back for a formal apology. I guess, if that happens, I hope the mall security doesn’t prevent them from entering the store. We’ll have to keep tabs on that one.
From a business owner’s standpoint, this is a pretty tough situation. Assuming you’re the store manager or even the corporate, assuming you’re not the one who is kicking these people out, you’ve been put in a pretty tough situation.

NASIR: Definitely. See, this is different. We covered a topic almost a year ago and we talked about it in the past again – that club in Houston where they were charging for cover different fees for black guys versus white guys. The difference there, for example, that seemed to be some kind of institutional policy because, even when the bouncers seemed to change, they were still noticing this and, of course, one of the things that you don’t do to respond to these kinds of discrimination suits is to say that they have the right to refuse service to anybody, right? We’ve all read those signs but you know what? That’s not true. That’s why Victoria’s Secret – I was going to say Victorian Apple – Victoria’s Secret and Apple, they were very quick to apologize – because they know that these kinds of lawsuits are very, very difficult – not just to defend but because there is some challenges in bringing these types of claims, but the reputation that can come from or the reputation damage that can come from these lawsuits is just very hard to unwind.

MATT: Yeah, you mentioned “we have the right to refuse service to anyone.” My sign business that I started, I’ve sold quite a few signs, underneath it says, “…and you also have the right to be sued by anyone,” because that’s probably what will happen.
Let’s kind of run through this and we kind of went through what these two companies did but in terms of a plan of attack for if this were to happen to you or happen to your business, I kind of laid some different steps out.
First step for me – I’m kind of just throwing this on you, I didn’t even share this with you so you can give your own steps or your own opinion.

NASIR: How many steps do you have? I have seventeen.

MATT: Seventeen-part plan.

NASIR: Yeah. No, I’m just joking. Go ahead.

MATT: First thing I say is do an impartial assessment of the situation. I say “impartial” meaning even in the situation for Victoria’s Secret, don’t necessarily assume that anyone is necessarily wrong or right.

NASIR: That goes both ways. Sometimes, we can have overly cautious and assume the customer is right, too. And so, we’re saying truly impartial is a balanced approach.

MATT: Right. I think that’s step one – get a nice landscape of the situation.
Next for me is to, as much as you can, meet with each individual separately. If this was a situation where it was two employees and there was an issue of racist comments, that’s obviously when you really need to meet with people separately. I say separately because I don’t think you’re necessarily going to meet with the employee, this manager, and then also meet with the customer. Maybe you can but… Regardless of who, take all of the different employees of the store, meet with them separately just so you can get a clear view of what happened and get various opinions because, when you get people together, you know, oftentimes, you have one person that kind of speaks up and everyone else falls in line, especially when one person is a supervisor and everyone else is the level below. That’s my step two.

NASIR: Step three – close your store.

MATT: Two and three kind of go together. The next step is take a nice detailed log of the situation. Just really write down basically everything. It’s almost a mind – not a mind dump but everything that’s said – dates, times, et cetera – just write down as much detail as possible.
Step four for me is – I guess this is a potential one – terminate the employee because that’s probably what you’re going to have to do, depending on the severity.

NASIR: Yeah, you have to evaluate some kind of remedial measure, especially if you find some wrongdoing from the employee. I mean, termination may be the best option. It just kind of depends upon how severe it is. Obviously, if that’s probably the worst-case scenario.

MATT: I should have said the last step is really discipline up to termination but I say termination, I wanted to make it a little bit more dramatic.

NASIR: Yeah, Trump-style, right?

MATT: Yeah. Yeah, and then close the store – step five.

NASIR: Yeah, step five – go out of business.

MATT: From an employer’s perspective, the liability that they would face in a situation like this…

NASIR: That’s interesting.

MATT: Let’s say Kimberly or one of these teens – well, I don’t know Australian law – we’ll stick with Kimberly even though I don’t know Alabama law but we’ll just assume it’s fine.

NASIR: Well, it’s better law. They can use federal law.

MATT: It’s reverse. In Australia, the defendant sues the plaintiff, I think.
So, let’s say she wanted to bring a lawsuit, in terms of the liability for the employer, generally speaking, employers are going to be – I say “generally speaking” so don’t take this verbatim but employers will be liable for the actions of their employees. Obviously, there’s exceptions to that but, you know, in situations where there is harassment, she could put forward a credible argument, I say.

NASIR: What’s interesting about a lawsuit in particular is that the damages are always going to be the tough one because you can actually bring a civil rights claim and how these often shake up is when you bring a civil rights lawsuit, a civil lawsuit, you’ll usually be asking for attorney’s fees. There’s a statutory provision that allows you to recover attorney’s fees. Then, you’re going to be damages in connection with punitive damages or some kind of non-tangible damages because, usually, there’s not going to be a lot of what are called “compensatory damages” – like, actual damages – in the sense that, in this case, it’s hard to articulate what the actual damage is. And so, that’s why a lot of times, these lawsuits, how they end up really shaking up are through the attorney general or the Department of Justice and, for any kind of civil rights violation.
For example, that Houston club that we talked about – I think it was called the Gaslamp. I don’t know why I forgot that because of San Diego Gaslamp. It was called the Gaslamp and they actually changed their name, by the way, to 360 Midtown – I assume because of the bad publicity.
So, what happened in that case, they sued, under the Civil Rights Act, the actual individuals that were making the allegation. But then, they dismissed that part of the lawsuit and that allowed the Department of Justice to actually file their own lawsuits for Civil Rights violations and that happened just a few months ago. This case has been going on for a while. Usually, the Department of Justice, they have their own independent investigations so they found some issues too worth it to pursue and we’ll see what happens – if they actually found any kind of liability. But the point is, from a plaintiff’s perspective, there’s always some difficulty in actually pursuing it, but that’s why I think the bigger damage here is reputation. That’s my concern because, financially, yeah, you’re going to have to defend a lawsuit and if it’s one instance of one occasion then so-called things happen but you have a real big problem if there’s something institutional or fundamental in your policies that create these situations.

MATT: You’re exactly right. I know we didn’t talk about this but it reminds me – it’s been a month or so now, less than that – after Trump was elected, one of the – I forget the store already but it was – the CEO of this company sent a memo out to all of its employees basically saying, “If you’re a Trump supporter, you might as well quit.” Something to that effect.

NASIR: Yeah, something like that.

MATT: Which, you know, that’s obviously going to be worse. That’s the CEO of the company doing this. You know, I had a good connection to that but I kind of just forgot it. It’s always, when there’s something like this happens, you have to kind of think larger scale – big picture items. You know, there is the potential for a lawsuit that could surface. I think the key is to do as much good and good PR as you can and get ahead of it – get ahead of the media as much as possible, too. I mean, I actually looked more for the first story I saw on this was on the Washington Post and I looked for more stories. Usually, we’ll see a story spring up and a bunch of them will kind of grow off like a family tree and it just keeps expanding. In this case, there wasn’t a whole bunch more than what was already the original Washington Post story. I mean, more of it was just kind of regurgitating that first story. There wasn’t “think” pieces on this or other things. It seems like Victoria’s Secret did do a good job – at least in kind of stifling that potential PR disaster.

NASIR: You chalk it up as, okay, you have one bad apple, it doesn’t represent everybody and so forth. But, especially for small businesses, what you really have to look out for – and I think we’ve all experienced this where there may be a coworker or an employee that, on occasion, they may make an off-colored joke or comment and maybe those comments in themselves aren’t really substantial enough to warrant any kind of conversation or any kind of action. But the point is, if those types of people are starting to encounter with customers or even other employees, then it should be a warning sign to management and to coworkers that, hey, if this employee is put in a situation like this Victoria’s Secret employee, they may make the same mistake. And so, these are ways to kind of counteract or prevent these things. I’m literally thinking of, like, individuals that I’ve come across with my clients that, you know what, if you put this person at the front desk, then I’d rethink about how you would have them interact with customers and clients that come in.

MATT: Yeah, and you said the front desk. In your example, particularly if it’s someone in some sort of supervisor role or manager that oversee the place, it’s going to be even worse. One thing I just kind of thought of too that can kind of get ahead of this, you mentioned a little bit but just training. I mean, there’s proper trainings that go around and go for employers. You know, Victoria’s Secret probably does have some sort of training, I’m sure the training isn’t “hey, if one black customer steals something, don’t kick out every other black customer,” but maybe, for a situation that’s not as ludicrous as this, maybe there is going to be something valuable in there that the employee is going to think back on when something kind of happens, because all this stuff happens. If you have a theft situation, it’s all spur of the moment and you have to kind of test how quickly people can think on their feet. The more you can kind of put it in their head beforehand as something they haven’t encountered and now they have, then it might be helpful.

NASIR: That’s why, also, training and then also your policies, for example, not policies of nondiscrimination because, of course, every company – even we have in our handbooks policies of nondiscrimination, et cetera, of course, “don’t discriminate” but it’s also the policies that you do implement that can lead to unintended results.
Again, going back to the club example in Houston, if you recall, the bouncer in the front had discretion as to who to charge what. As an example, I don’t know if this is true but, if you give the instruction to the bouncer that, okay, we want to make sure we have a certain “atmosphere” that attracts certain “people,” it’s like innuendos of what they want and you give the bouncer discretion, then they’re going to start implementing those policies. Same way if this Victoria’s Secret manager, you make them ultrasensitive to any kind of theft and going overboard of protecting it, then they may feel like, “Hey! I’m protecting the company! To be overly cautious, I’m going to try to, because these guys look like they’re all together, I’m just going to get rid of them all.”
In other words, I guarantee you – no, I don’t guarantee you – a lot of times, I bet you, you ask that employee, “Are you racist?” and their answer is probably going to be no. It’s like, “I’m protecting the company. I thought that they were together.” Whether that’s true or not doesn’t really matter. The point is that these policies can actually contribute to some of these situations as well.

MATT: It goes back to what I was saying at the beginning. We don’t know the circumstances of how close this woman was to the one who was actually stealing, blah blah blah, but it doesn’t matter. It doesn’t matter at all. I wouldn’t say double-racism but I don’t know, I mean, because once assumed all the black women were together and then kicked all the black women out, and it was only women too, right? I guess that’s what was probably in the store in general.

NASIR: Well, that’s sexist, Matt. Wow. I can’t believe you said that.

MATT: It’s not sexist. I’ve seen the stores before.

NASIR: I’m offended.

MATT: I just think it’s funny because you’ll see, you go to a Victoria’s Secret and look at the guys. There’s usually a handful of guys standing in there because you’ll see them in the corner, on their phone, just waiting for whatever girl they’re with to finish up shopping. It’s pretty amazing. I’ve been in some myself. Go check it out. It’s not a sexist comment. It’s more funny.

NASIR: Okay. I will do that. I’ve got to go to the mall. Matt told me to go the Victoria’s Secret for some reason.

MATT: To study.

NASIR: To study the male occupants.

MATT: Wait. What was your answer to the phone disconnect?

NASIR: Okay. The question is, if I’m on a call and I get disconnected, which person is supposed to call the other? There’s different theories. If I know I got disconnected, then I could be the one to call back because maybe my phone’s messing up. But, sometimes, you don’t know. I think it should be based upon who calls whom in the initial call. If I call you, initially, and I get disconnected, then I have the responsibility of calling you again.

MATT: You don’t follow too much basketball – possession arrow situations. If there’s a jump ball, whoever has the possession.

NASIR: Just keep switching it?

MATT: Yeah, if it happens three times, then you’re going to call back the first and third time and I’m going to do the second time.

NASIR: But then, you need a possession arrow kind of signal. It needs to be an app, right?

MATT: Yeah.

NASIR: It needs to be something to that effect. That’s a good idea. I like that.

MATT: I think the answer is, if you know it’s you, you call back. But, if not, I mean, what I do is I usually wait – depending on who it is – I’ll wait at least ten seconds.

NASIR: Yeah, but you know what happens, of course, because I’ve done that, too. You wait and then, all of a sudden, you call each other again. You know, both people.

MATT: Yeah, I think it’s a situation where there’s just we’re not going to have a universal answer.

NASIR: It definitely does depend on who it is.

MATT: What we need to do is let’s ask, if anyone’s listening in Australia, tell us what you do and we’ll do the opposite.

NASIR: Yes!
All right. Well, thanks for joining, everyone. I hope that was helpful.

MATT: Probably the last episode of the year? I don’t know. Maybe, maybe not.

NASIR: We’ll see.
Happy New Year!

MATT: Not the last episode of the decade so we’ll keep it open.

NASIR: Yeah.

MATT: Keep it sound and keep it smart!