This is a story about a vanishing jury award. It is a cautionary tale for employees who believe that they have been discriminated against at work and employers who would prefer to avoid Section 1981 claims of the Civil Rights Act of 1866 and/or Title VII of the Civil Rights Act of 1964.

In February 2024, in the case of Harris v. FedEx, the Fifth Circuit Court reduced Jennifer Harris’ jury award of $366,160,000 to $248,619.57 – less than 0.1 percent of the original amount. There are four factors at play here:

• Section 1981 claims;
• the damages cap applicable to Title VII claims;
• a punitive damages award; and
• a limitation provision in Harris’s employment contract that required her to bring any claims against FedEx, her employer, “within the time prescribed by law or 6 months from the date of the event forming the basis of [her] lawsuit, whichever expires first.”

The result the court reached about Title VII damages and punitive damages factors was relatively predictable. Their decision on the limitation provision is news.

Workplace Discrimination and Retaliation Claims

FedEx hired Harris, an African American woman, as an Account Executive in 2007. Her employment contract contained the limitation provision described above. At first, she was successful at her job, and FedEx promoted her to District Sales Manager in 2017. Her new supervisor was Michelle Lamb, a white woman. A year later, Harris received an award that recognized her success in her new role.

However, according to FedEx, her performance declined thereafter. Harris and Lamb met several times to discuss improvement strategies, allegedly without success. In early March 2019, Lamb suggested that Harris step down as a District Sales Manager. Harris claimed to have been blindsided, and shortly thereafter complained of race discrimination. Her claims were investigated and dismissed as unsubstantiated.

Lamb continued to cite Harris for unacceptable performance and an insubordinate attitude. Harris filed several more complaints through HR channels, which FedEx investigated. Harris filed an EEOC complaint. The supervisory slugfest continued for ten more rounds. FedEx fired Harris on January 8, 2020.

Harris filed a lawsuit in May 2021, sixteen months after her termination. Her lawsuit alleged race discrimination and retaliation claims under Section 1981. FedEx claimed that Harris’s claims were time-barred by the six-month limitation provision in her contract. Harris was permitted to amend her complaint to add claims for race discrimination and retaliation under Title VII. The case proceeded to a jury trial in the Southern District of Texas.

In 2023, the Southern District Court ordered FedEx to pay $366 million in damages. This included $120,000 in past compensatory damages, $1,060,000 in future compensatory damages, $365 million in punitive damages and 4.69 percent post-judgment interest. That sum, the jury reasoned, was justified by the company’s decision to fire her for complaining both internally and to the EEOC that she was being treated worse than white colleagues. FedEx appealed to the Fifth Circuit.

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Picking Apart the Fifth Circuit’s Opinion

Section 1981 does not contain a statutory limitations period, so courts typically apply the most analogous state statute of limitations. In Texas, that is generally either two or four years, depending on the type of claim alleged. Filed sixteen months after her firing, the Harris lawsuit would have fallen within either of the aforementioned limits but for the six-month contractual limitation. The District Court refused to enforce the limitations provision, finding that it violated public policy.

The Fifth Circuit Court disagreed and concluded (for reasons discussed below) that the contractual limitations period was valid and enforceable as to the Section 1981 claims. That left Harris able to collect only Title VII damages. Since 1991, Title VII damages have been capped at $300,000 for companies with more than 500 employees. That cap is not indexed for inflation. But if it were, it would now be over $670,000. The Fifth Circuit Court’s reduction of the District Court jury’s award thus began with that $300,000 amount.

A Title VII plaintiff may ordinarily recover punitive damages only on proof that the defendant acted with malice or reckless indifference to that individual’s federally protected rights. Even if individual employees acted with the requisite bad intent, an employer may avoid vicarious punitive damages liability if it can show that it made good faith efforts to comply with Title VII.

Punitive Damages Awarded by District Court Slashed on Appeal

By far the largest portion of the District Court jury’s award to Harris was the punitive damages element. Relying on FedEx’s in-depth investigation of each of Harris’s discrimination and retaliation claims and the company’s refusal to discipline her for alleged insubordination while the process continued, the Fifth Circuit Court found that FedEx’s actions did not meet the malice or reckless indifference threshold. It consequently vacated that entire portion of the jury’s $365 million punitive damages award.

The Six-month Contractual Limitation of Section 1981 Claims

The Fifth Circuit Court found that the limitation period was reasonable and enforceable for three reasons:

• First, the court rejected Harris’s argument that she had not knowingly and voluntarily accepted the provision, holding that “parties to a contract have an obligation to protect themselves by reading what they sign. and, absent a showing of fraud, cannot excuse themselves from the consequences of failing to meet that obligation.”
• Second, since Congress did not specify a statute of limitations in Section 1981, it was implicitly willing to live with a wide range of limitations periods. Further, since Section 1981 claimants are not required to pursue administrative remedies before filing a lawsuit, a six-month limit is adequate.
• Finally, the Fifth Circuit Court rejected Harris’s argument that the limitations provision was rendered void by Section 16.070 of the Texas Civil Practice & Remedies Code. That section prohibits contractual provisions “that purport[] to limit the time in which to bring suit on the stipulation, contract, or agreement to a period shorter than two years.” The Fifth Circuit Court held that Harris had waived this argument by neither raising it at trial nor citing authority to support its application to a statutory, rather than a breach of contract claim.

The Fifth Circuit Court’s decision may be open to challenge, but for the moment, it is reasonable to assume that it has had the last word on the subject. Employers and employees must now think about how to go forward.

Suggested Strategies for Employers and Employees

If they have not done so already, employers may want to consider adding language to employment contracts that mirrors the limitation period contained in Harris’ contract. Even where negotiation is not a realistic option, employees should always make sure that they read and understand the contracts they sign. Consult with an experienced employment lawyer promptly when disputes arise so that statutory and contractual limits do not foreclose the option of filing a lawsuit.

Kilgore & Kilgore Can Help you with Your Employment Contract and Employer-Employee Disputes

Consult with an experienced employment lawyer when disputes arise so that statutory and contractual limits do not foreclose the option of filing a lawsuit. Experience counts as laws evolve. Our Texas employment lawyers have experience with workplace claims under a variety of state and federal laws. Contact us if you believe that you have been the victim of discrimination, harassment, retaliation, wrongful termination, or other workplace issues. Click here to get the conversation started contact Kilgore & Kilgore.