Takeaway: This ruling clarifies that the employee-headcount damages cap under Title VII is an affirmative defense that an employer must plead in its initial answer as well as in pretrial stipulations or else risk waiving the $50,000 total damages cap for small employers provided by the Civil Rights Act of 1964. This decision also highlights the need for carefully crafting proposed jury instructions. A jury’s failure to allocate damages between federal and state statutes with differing damages caps may result in a much greater award than would otherwise be possible.
The $50,000 damages cap for small employers under Title VII of the Civil Rights Act of 1964 is a waivable affirmative defense that Title VII defendants must explicitly raise in order to benefit from the cap, the 11th U.S. Circuit Court of Appeals decided. The appeals court reversed a federal district court’s ruling that applied the statutory damages cap to a sexual harassment claim.
A young woman sued a car dealership for sex discrimination under Title VII and the Florida Civil Rights Act. The 18-year-old alleged that, during her four months of employment at the dealership, she had been harassed nearly constantly by her manager and colleagues. The harassment allegedly escalated from verbal abuse to unwanted physical actions including massaging her shoulders, grabbing and kissing her in the parking lot, and touching her backside. She quit and sued the dealership for sex discrimination.
Prior to trial, the parties submitted a joint pretrial stipulation, which included the issues of fact remaining to be litigated, as well as proposed jury instructions. None of the issues of fact related to an affirmative defense, nor did the jury instructions include instructions as to apportioning the award of damages between federal and state law claims.
A jury awarded the former employee $81,028 in compensatory damages and $750,000 in punitive damages for a total award of $831,028.
The dealership sought to reduce the damages awarded, arguing that Title VII capped the plaintiff's damages at $50,000 for small employers, such as the dealership, that had 15 to 100 employees. The defendant also contended that state law capped punitive damages at $100,000, meaning that at most the plaintiff could recover $181,028 — her full mental anguish and lost benefit damages plus $100,000 in punitive damages under the Florida Civil Rights Act. Further, the manager sought to amend the judgment against him because Title VII doesn’t allow for individual liability.
The district court referred the parties for mediation, which ultimately failed to produce an agreement.
The district court vacated its initial ruling and entered an amended judgment eliminating the manager's personal liability for the sex discrimination claims. The court also agreed that the total damages under Title VII were capped at $50,000 for small employers. The court awarded the plaintiff damages under the state law instead, reasoning that she was entitled to recover the larger of the two caps available under the federal and state statutes since she had prevailed under both. Thus, the court’s second amended judgment awarded her $181,028 because the Florida Civil Rights Act doesn't limit compensatory damages but does limit punitive damages to $100,000.
On appeal to the 11th Circuit, the plaintiff argued that the initial judgment had become final when the dealership failed to appeal within the 30-day window for doing so, leaving the 11th Circuit with no jurisdiction for review. The appeals court found, however, that the window to appeal the initial judgment didn't begin running until the outcome of the mediation was clear. In addition, the district court had corrected a legal error — imposing personal liability on the manager — and that action functioned as a new final judgment, starting a new appeal period.
Having established jurisdiction, the appellate court turned to the question of the reduction of damages. The court emphasized that no federal court may award damages above the maximums set by Title VII and the Florida Civil Rights Act. However, the maximums set by the statutes apply only to damages awarded “under those sections,” the court added. “[A]bsent some additional statutory limitation, the Title VII maximum doesn’t limit the damages available under [the Florida Civil Rights Act], and [the Florida Civil Rights Act] doesn't limit the damages available under Title VII.”
When a plaintiff sues under both federal and state statutes, and the jury fails to allocate the award between the two statutes, the maximum award is limited only by the combined effect of the state and federal law limits on damages, the court ruled. “In that circumstance, ‘if Title VII cannot remedy the full extent of [a plaintiff's] injury because of its damage cap, then the remaining portion of her injury should be remedied as much as possible under [the Florida Civil Rights Act], and vice versa.’”
The court found that the plaintiff is entitled to a maximum award of $481,028 — the combined maximum available through both statutes after the jury’s verdict. Because the jury failed to allocate the award between the two statutes, the court held that she didn’t need to use any part of her Title VII apportionment to recover her compensatory damages and could recover all $81,028 under the Florida law, which doesn’t cap compensatory awards. Her punitive damages are limited to $400,000 — $100,000 under the Florida law and $300,000 under Title VII’s upper limit (for large employers) — the court found, deciding that any award of damages exceeding $481,028 would be unlawful.
In response to the dealership’s argument that the punitive damages award should be reduced even further because of Title VII’s $50,000 damage cap for small employers, the court held that the employee-headcount damages cap is a waivable affirmative defense. “Because the dealership didn't plead the $50,000 cap in its answer — or list its employee headcount in the pretrial stipulation as a fact issue to be decided by the jury, or propose jury instructions on its employee headcount — it waived the benefit of the cap,” the court stated. Further, when a party fails to timely object to an instruction or the failure to give an instruction, it waives not only its right to have a trial on that issue, but also its right to raise the issue on appeal, the court said.
The appeals court concluded that the district court had erred in applying Title VII’s $50,000 damages cap. The amended judgment was reversed and remanded for the district court to enter judgment for the plaintiff in the amount of $481,028 — the maximum allowed by the jury’s unallocated verdict under Title VII and Florida law.
Khatabi v. Car Auto Holdings LLC, 11th Cir., No. 24-12573 (May 28, 2026), petition for rehearing denied and petition for rehearing en banc denied (July 27, 2026).
Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.
Was this resource helpful?
Validate your HR expertise
Earning your SHRM-CP credential makes you a recognized expert and leader in the HR field.
Related Content
Transform HR with mobile technology to streamline workflows, enhance communication, and boost employee engagement across distributed teams.
A new study found that talent development practitioners believe performance-based assessments are more effective at measuring employee learning outcomes than knowledge tests.
As AI makes deeper inroads into organizations, employee concerns about the technology continue to grow. Here's how HR leaders can address the fear of AI among their own staff, as well as in the wider organization.