Denial of “Discretionary” Bonus Can Still Be An “Adverse Employment Action”

In Davis v. New York City Dep’t of Educ., 804 F.3d 231 (2d Cir. 2015), the Second Circuit squarely rejected the argument that “the denial or reduction of a discretionary bonus is categorically insufficient to constitute an adverse employment action.”

In this case, plaintiff (a substitute teacher) took a four-month leave of absence from work after she was injured in a car accident. After receiving a bonus of $1,000, she alleged that the reduction of her bonus to $1,000 was due to discrimination because of her disability caused by injuries she sustained during her car accident. The DOE justified the bonus reduction by plaintiff’s excessive absence and that another substitute teacher deserved to share in the bonus.

The district court granted summary judgment to defendant, on the grounds that (1) “the reduction of Davis’s bonus could not be an adverse employment action because under the terms of the CBA the employer had discretion over whether to pay her a bonus and, if so, how large, so that she had no legal entitlement to a $3,000 bonus”, and (2) plaintiff failed to meet her burden to show discriminatory motivation. The Second Circuit affirmed summary judgment, but only on the second ground.

In order to make out a claim for disability discrimination under the Americans with Disabilities Act (ADA), a plaintiff must establish the following elements:

(1) the employer is subject to the ADA; (2) the plaintiff is disabled within the meaning of the ADA or perceived to be so by her employer; (3) she was otherwise qualified to perform the essential functions of the job with or without reasonable accommodation; (4) she suffered an adverse employment action; and (5) the adverse action was imposed because of her disability[, i.e.,] the adverse employment action took place under circumstances giving rise to an inference of discrimination.

After summarizing the discrimination analysis/framework and the principles governing whether an employer’s action toward the plaintiff qualifies as an actionable “adverse employment action”, the court explained why the discretionary nature of a bonus does not remove it, as a matter of law, from the class of “adverse employment actions.”

It explained:

The fact that the employer has discretion whether to grant bonuses or raises does not support the conclusion that an employer may freely allocate them on the basis of racial or religious bias, or disability discrimination. We do not agree that an employer’s discretion to withhold or reduce a bonus entitles the employer to allocate the bonus on the basis of prohibited discrimination. It seems unlikely, to say the least, that employers covered by the discrimination statutes could freely decide to award substantial discretionary bonuses to all employees except those of a disfavored race, religion, national origin or disability. As most employees work “at will,” most aspects of their conditions of employment are within the employer’s discretion. Deciding which applicant to hire, which employee-at-will to promote, which one should receive additional responsibilities or which one should be fired—all these, being the traditional fare of discrimination suits—are within the employer’s discretion. Rarely does the employee who sues for illegal employment discrimination have a legal right to the benefit she claims (apart from the law of unlawful discrimination). (Indeed, if such an entitlement were required, the discrimination statutes would be unneeded and superfluous, as the plaintiff would have a valid claim based on contract or some other statute.)

The district court erred in ruling that denial or reduction of a bonus could not constitute an adverse employment action solely because the employer had discretion whether to pay a bonus. The fact that the employer had the right to allocate a bonus on any ground that does not violate the law does not mean that the employer had the right to allocate it on a ground that did violate the law. (Bold emphasis added; italic emphasis in original.)

This, of course, is good law for discrimination plaintiffs generally. Unfortunately, despite this ruling, the plaintiff in this case still loses, because she “failed to adduce evidence sufficient to show that prohibited discrimination played a role in the DOE’s decision to divide the $3,000 available as a bonus between Davis and the teacher who substituted for her during her absence.”

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