Van Meter Indus. v. Mason City

• Decision Date: 25 February 2004
• Docket Number: No. 02-1161.,02-1161.
• Citation: 675 N.W.2d 503
• Parties: VAN METER INDUSTRIAL, Appellant, v. MASON CITY HUMAN RIGHTS COMMISSION and Jane Sires, Appellees.
• Court: Iowa Supreme Court

675 N.W.2d 503

VAN METER INDUSTRIAL, Appellant, v. MASON CITY HUMAN RIGHTS COMMISSION and Jane Sires, Appellees.

No. 02-1161.

Supreme Court of Iowa.

February 25, 2004.

Mark L. Zaiger and Jennifer E. Rinden of Shuttleworth & Ingersoll, P.L.C., Cedar Rapids, for appellant.

David A. O'Brien of Willey, O'Brien, Mullin, Laverty & Hanrahan, L.C., Cedar Rapids, for appellee Sires.

TERNUS, Justice.

The Mason City Human Rights Commission ruled that appellant, Van Meter Industrial (VMI), had discriminated against the appellee, Jane Sires, on the basis of her gender and had constructively discharged Sires from her job with VMI in violation of Iowa Code section 216.6 (1997). The Commission awarded back pay, front pay, and damages for emotional distress, denied punitive damages, and entered a remedial order requiring the company to develop job descriptions and policies to govern promotion decisions. On judicial review, the district court reversed the finding of constructive discharge but otherwise affirmed the Commission, including the damage awards. The court of appeals affirmed the district court with the exception of increasing the amount of front pay and back pay recoverable by Sires. We granted further review.

Upon our review of the record and the applicable legal principles, we hold there was substantial evidence to support the Commission's finding that Sires was constructively discharged from her employment at VMI. While we agree with the court of appeals that the Commission erred in calculating front pay and back pay, we conclude the amounts computed by the court of appeals must be increased due to our affirmance of the Commission's finding of constructive discharge. Finally, we concur in the district court's ruling that the Commission did not have authority to award punitive damages. In view of these conclusions, we vacate the decision of the court of appeals, affirm in part and reverse in part the judgment of the district court, and remand the case with directions.

I. Scope of Review.

Review of this agency decision is governed by the Iowa Administrative Procedure Act, Iowa Code chapter 17A.¹ See Farmland Foods, Inc. v. Dubuque Human Rights Comm'n, 672 N.W.2d 733, 740 (Iowa 2003)

. The errors asserted by the parties rest on two well-known grounds for reversal under section 17A.19(8): (1) the agency's factual findings are not supported by substantial evidence in the record as a whole; and (2) the agency relied on incorrect legal principles in making its decision. See Iowa Code § 17A.19(8)(e), (f).

In considering the claimed errors, we rely on well-established principles governing our review. "Evidence is substantial if a reasonable person would find it adequate to reach a given conclusion." Civil Serv. Comm'n v. Iowa Civil Rights Comm'n, 522 N.W.2d 82, 85 (Iowa 1994). That one may draw a contrary inference from the evidence does not mean the evidence in support of the agency's factual findings is insubstantial. Hy-Vee Food Stores, Inc. v. Iowa Civil Rights Comm'n, 453 N.W.2d 512, 515-16 (Iowa 1990). If we conclude the agency has committed a legal error, it is our obligation to correct it. See Henkel Corp. v. Iowa Civil Rights Comm'n, 471 N.W.2d 806, 809 (Iowa 1991)

. We turn now to a review of the evidence.

II. Evidence in the Record.

VMI is a wholesale distributor of electrical products, primarily in the industrial market. It has fifteen locations in Iowa, employs over 250 individuals, and has annual sales of approximately $100,000,000.

Jane Sires began her employment with VMI in 1988 as a part-time receptionist in the company's Waterloo location. She testified she soon realized there were two tracks for advancement within the company: the male track and the female track. Men, depending on their educational background and experience, generally started in the warehouse, moved up through counter sales, inside sales, and outside sales, with the possibility of eventually obtaining a branch manager position or more.² Women, on the other hand, started with clerical work and could advance to an "operations manager" or other support position, such as human resources or marketing. It was undisputed the ultimate key to advancement in the company was in sales. At the time Sires made her claim of discrimination, there were only one or two women in outside sales and they were both "lighting specialists," a narrow and less technical area of sales.

In 1991, Sires took a position as office coordinator at a newly opened branch in Mason City. This position did not involve sales. Because Sires realized she would need sales experience to advance in the company, she asked the branch manager, John Skow, to involve her in counter sales and inside sales. She told Skow her goal was to run her own branch. Skow accommodated Sires' request and noted in an evaluation of Sires' job performance that he would be hiring another individual to take over Sires' clerical duties so Sires could "transition into counter and inside sales." In her effort to advance in the sales arena, Sires completed the technical training available to inside salespersons and attended sales seminars offered by VMI.

In 1995 Pat Freilinger became the new branch manager in Mason City and promoted Sires to operations manager. Although Sires' duties were focused on overseeing all aspects of the daily operation of the branch, she continued to spend approximately forty percent of her time on inside sales. During this period, and throughout her employment with VMI, Sires received very favorable employee reviews.

In 1996 the company decided to restructure its branch organization. Freilinger was a key participant in the strategic planning process and was gone from the Mason City office for significant periods of time. Sires took on much of Freilinger's responsibilities during his absence, including business decision making. Her evaluations reflected that she performed these added duties with competence. Her reviews in 1996 and 1997 included the following assessments by Freilinger: (1) Jane has "taken on a lot of responsibilities and duties from me."; (2) Jane "understands the big picture of running a branch."; (3) Jane "does very well at making business decisions when I am out of the office."; (4) "Jane has done a great job at keeping the branch on track and holding things together."; and (5) "Jane has taken on more responsibility in the branch and done well with it. She really is the glue that holds things together on a day to day basis."

Under the new organizational structure, the position of branch manager was to be eliminated and a new position, "local leader," was created for each branch. The person in this role would be "a lead sales person with the sales knowledge and experience necessary to serve as the local `figurehead' for clients." In addition, operations management was to be moved from the branch level to the regional level. As part of the reorganization, Freilinger was immediately moved to a new position, leaving vacant the Mason City branch manager position and the future local leader position.

At a January 1998 presentation on the new company organization held in Mason City, the regional general manager, Mark Schon, announced that anyone interested in the local leader job should speak to him. Sires was not present when this announcement was made because she had attended the same presentation earlier in Des Moines. In any event, no one, including Sires, contacted Schon about the local leader position. Schon did not post or advertise the position because he already had someone in mind for the job: Bill Meyers, an outside salesperson in the Mason City branch. Freilinger had hired Meyers, an electrician, in early 1997 with the idea that Myers would be the type of person who could take over for Freilinger should the opportunity arise for Freilinger to move up in the company.

When Schon was in Mason City for the reorganization presentation, he spoke with Sires about her responsibilities during Freilinger's transition to his new position. He informed Sires her salary and commission would stay the same, but she would have the potential to earn another $3000 based on new sales goals. Schon told Sires she "would be the go-to person for any sales decisions and business decisions and operations" when Meyers was out of the office, which was most of the time.

Sires was confident she would be promoted to branch manager upon Freilinger's departure and eventually local leader. Her confidence was buoyed by a memo prepared by an executive vice president of the company stating "the industry considers inside sales support as more important than outside sales." Sires' experience was in inside sales, whereas Meyers had no experience in inside sales, only in outside sales, and that experience was in a non-supervisory capacity.

Schon returned to Mason City on February 6, 1998, and announced that Meyers, who had one year of company experience in outside sales, was the new local leader. Sires was devastated. Her administrative assistant asked Sires if she thought it was because she was a woman. Sires was so upset and tearful over the weekend that her husband became concerned she might need medical attention.

Nonetheless, Sires returned to work on Monday, February 9, and talked with Freilinger about her confusion and distress at not getting the local leader position. Freilinger said she was not considered for this job because she did not have enough sales experience. Sires pointed out, however, that men with less sales experience than she had had been promoted to branch manager.

The next day Sires spoke with Mary Beth Standerski, the director of human resources for VMI. She again expressed her disappointment and confusion and wondered whether there was any place left for her in the company. Standerski advised Sires to contact Schon, who had made the decision to put Meyers in the local leader position. Standerski also asked Sires if she thought the decision had been...