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February 10, 2011
Company Claimed Former Employee Owed Money for Relocation

An African-American mechanic apprentice complained to his employer more than once that white employees were being unfairly promoted over blacks. After he was fired for insubordination, he sued for race discrimination and retaliation. The employer countersued, claiming the former employee owed money for relocation costs.

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What happened. “Vernon” worked for Starcon International at an oil refinery in St. Paul, Minnesota. In July 2006, he entered into a relocation agreement with Starcon and received $12,000 for relocation expenses. The agreement provided that Vernon would have to repay the $12,000 if he did not remain with Starcon for at least 2 years. He would not have to pay it back, however, if he was discharged as part of a reduction in force or if he quit because the pay for his position was cut.

The first foreman Vernon had while at St. Paul allegedly made three offensive racial comments, including an insinuation that African-Americans did not receive promotions at Starcon. In October 2006, Vernon complained to HR and a company VP that he was being discriminated against and passed over for raises in favor of white co-workers. An HR manager met with Vernon and said he would look into the matter, but Vernon never heard back. Vernon made a second complaint to a superintendent that December, after a white mechanic received a promotion.

The foreman who had made the offensive remarks resigned in August 2007. The new foreman was unable to work for one week in January 2008. Vernon’s supervisor, “Davis,” temporarily promoted a recent hire, “Smith,” who was white, to fill in. Vernon became upset and confronted Davis in front of other employees in a “very aggressive” manner. Davis suspended Vernon for one day without pay and warned him that future violations of Starcon policies would result in “disciplinary action up to and including termination of employment.”

Within a few weeks, Davis permanently promoted Smith to the foreman position. Davis said he chose Smith in light of his military leadership experience and recent performance as a temporary replacement. In April 2008, Vernon had a dispute by radio with a different foreman at the facility, during which both men raised their voices. Shortly thereafter, Vernon was fired.

Vernon sued Starcon for race discrimination (in its failure to promote him and by firing him), retaliation, and a hostile work environment under the Minnesota Human Rights Act. A district court found for Starcon, and also found that Vernon owed Starcon the money it had given him for relocation expenses. Vernon appealed to the 8th Circuit, which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

What the court said. The appeals court first explained that Starcon had articulated a legitimate, non-discriminatory reason for promoting Smith in favor of Vernon—Smith’s managerial experience and his good performance in his temporary assignment as foreman. While Vernon “had more experience at the job site” than Smith “the evidence does not suggest that [Smith] was not a reasonable candidate for the promotion,” the court wrote. Moreover, Vernon had no evidence Davis’ decision to promote Smith was based on race. As for his termination, Vernon could not point to any employee who was a member outside of his protected class had not been fired for taking the same actions he took—that is, engaging in altercations with their supervisors in front of other employees in the manner he had.

The court also found that Vernon lacked evidence that his discharge on the grounds of insubordination was related to his complaints of race discrimination, so his retaliation claim failed. And, while Vernon pointed to his first foreman’s racially-offensive remark as evidence of a hostile environment, the court found that they had been “made briefly by an individual employed for only a portion of” Vernon’s tenure and “were never repeated.”

Finally, the court turned to the $12,000 advance for Vernon’s relocation: Did he owe that to his former employer? Vernon said that the contract shouldn’t have been enforced because he’d been “terminated in retaliation for complaining about law violations.” But the court pointed out that since the court rejected Vernon’s interpretation of his termination, and accepted the employer’s reason (insubordination), that it was clear that he was liable to return the money as per the relocation agreement. Colenburg v Starcon International, Inc., U.S. Court of Appeals for the 8th Circuit, No. 09-2544, (2010)

Point to remember: In order to guard against employer loss of relocation payments due to employee termination within a few months of relocation, employers might require employees to repay some of the relocating expenses if they voluntarily leave within a set period of time. Repayment may be based on a prorated schedule over some period of time set by the employer and (obviously) agreed to by the employee. Such pro rata payment would be calculated according to the amount of time worked versus the amount of time remaining in the agreement.

The employer in this case appears to have had a strict agreement under which the employee had to pay costs back in full, regardless of when he or she separated within the 2 year window, unless the separation occurred under specific circumstances.

For information on current business travel and relocation benefits practices, see the results of BLR's 2011 Business Travel and Relocation Benefits Survey Results (Summary).

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