Topic: Employee Discrimination / Termination

In September 2021, Lindsay Johnson began working as an accountant for Brown Jones & Williams CPA firm. A year later, when her mom was diagnosed with cancer, she informed the company’s Human Resources (HR) director of the diagnosis and said that she would need to take a leave of absence to care for her mom while she underwent treatment. HR approved her request; however, Johnson alleged that managing partner at the firm, Matt Williams, retaliated against her by giving her a heavier workload and refusing to communicate with her. Johnson said she was a high performer at the company and received a pay increase in October 2022 because of her work performance (the firm claimed that all employees received a raise at that time and that it wasn’t related to her performance). Two weeks later, when Johnson informed Williams that she needed time off on October 22 to attend her mother’s treatment session, Johnson claimed that Williams scheduled a meeting with her that day and made a sarcastic comment about her not being in the office when she joined the meeting remotely. A few days later, the firm involuntarily terminated Johnson’s employment, citing poor work performance that culminated in an act of dishonesty as the basis for her dismissal. Williams stated that after he discovered multiple errors in a tax return that Johnson was responsible for reviewing and submitting, she admitted that she had not reviewed it. Following her termination, Johnson filed a claim against the company with a pre-litigation demand of $980,000 for reasons that included: associational discrimination in violation of the Fair Employment and Housing Act (FEHA), FEHA retaliation, intentional infliction of emotional distress, wrongful termination of employment in violation of public policy, and failure to provide reasonable accommodation.  Instead of proceeding to trial, the case was settled during mediation for $150,000.

Select the answer that is the correct response:

1. What is the biggest factor regarding the claim above?
a. The amount of time off that Johnson (the employee) requested to care for her mother during treatment.
b. Substantial documentation the CPA firm had regarding issues related to Johnson’s work performance before and after she disclosed her mother’s cancer diagnosis to the company.
c. What Williams (partner at the CPA firm) specifically said to Johnson when he made a sarcastic comment during their meeting.

2. What would have been the primary challenge for the CPA firm if the case had proceeded to trial?
a. The number of claims that Johnson was making against the company.
b. The firm’s ability to disprove Johnson’s allegations in court.
c. The amount of money Johnson was demanding along with defense costs that the firm would be required to cover.

Correct Answers:
1. b. The firm had documentation showing its frustration with Johnson’s work performance; however, the documentation came after she disclosed her mother’s cancer diagnosis. And even if the firm had earlier documentation, Johnson wasn’t terminated for poor work performance, she was primarily terminated for dishonesty, which came after she made the firm aware of the diagnosis. Given the lack of documentation of work performance issues before the cancer disclosure (Johnson also received a pay raise right before her termination), the firm would have had a hard time disposing the claim of associational discrimination under FEHA on summary judgment. This case illustrates how proper documentation and timing can significantly impact employee termination and potential litigation.

2. c. Johnson was demanding $980,000 and the CPA firm only had a $250,000 burning limits policy. If the firm chose to fight the case in litigation, most likely the company would have burned through the policy in defense costs and possibly left exposed to an adverse verdict award that the firm would not have been able to cover. Also, it was unlikely that the case would have been disposed before trial due to factual disputes about requests for leave and the proximity of termination in relation to the cancer diagnosis.

The “Claim Chronicles” are drawn from CAMICO claims files and illustrate some of the risks and pitfalls in the accounting profession. All names were changed.