Ninth Circuit Clarification Highlights the Importance of Workplace Investigations

In  Lui v. DeJoy, (Feb.26, 2025) the Ninth Circuit revived the Title VII discrimination claims of an Asian woman who was demoted from her job as Postmaster and replaced by a white man.  The Court’s decision both clarifies standards for discrimination cases and serves as a cautionary tale for employers about the importance of thorough and impartial workplace investigations.

Factual Background

Dawn Lui,  a Chinese woman, worked for the US Post Office for nearly 30 years, eventually becoming the Postmaster of the Shelton, Washington Post Office. Employees at Shelton complained about Lui’s conduct, alleging angry and/or abusive behavior and violating USPS rules about allowing non-employees in staff areas.

Lui made complaints that following her promotion, she had been harassed, targeted, and the subject of false complaints based on her race, national origin, and sex.

USPS’ Investigation and Lui’s Demotion

Lui’s direct supervisor (Roberts) shared Lui’s concerns and expressed them to the HR Manager investigating the complaints against Lui. The HR Manager did not investigate these concerns.

Roberts requested a meeting with his direct supervisor to express concerns about the investigation. However, without Roberts’ knowledge, the HR Manager was also invited to the meeting, where Roberts was told he was expected to support disciplinary action against Lui.

Roberts refused to sign a disciplinary action transferring Lui to another location with a lower salary (a demotion). He was then transferred to another position and his replacement signed the disciplinary action.

Lui was demoted and replaced by a white male.

Lui’s Internal Complaint

Lui made an internal complaint through USPS’ EEO system to appeal the demotion and complain about discrimination and a hostile environment based on her race, national original, sex and age.  The Postmaster reviewing the appeal (Bacon), despite being aware of Lui’s and Roberts’ concerns, affirmed the demotion based on documentary review only.

Lui’s Lawsuit and the Lower Court Ruling

Lui filed a formal complaint with the EEOC and then a lawsuit against USPS, including a claim for disparate treatment discrimination based on race, national origin, and sex in violation of Title VII.

The lower court granted summary judgment to USPS, concluding that Lui had not made an adequate initial (“prima facia”) showing of discrimination. The court also concluded that, even if Lui had made an adequate initial showing, Bacon’s documentary review was sufficient to articulate a legitimate non-discriminatory reason for Lui’s demotion.

The Ninth Circuit Disagrees

The Ninth Circuit overruled the lower court, reversing the summary judgment in favor of USPS and sending Lui’s discrimination claim back to court.

The Ninth Circuit concluded that Lui made an adequate initial case by showing that she was:

• Qualified for the position,
• Demoted, and
• Replaced by someone outside her protected class.

The burden then shifted to USPS to articulate a legitimate, non-discriminatory reason for demoting her. The Ninth Circuit held that Bacon’s investigation did not establish a legitimate non-discriminatory reason for Lui’s demotion because there were questions about whether the investigation was actually independent and/or influenced by the bias of subordinates involved in the initial investigation.

The problem with Bacon’s investigation was she made her decision based on documentary review only, giving credibility to the complaining employees without ever interviewing or even meeting them, despite knowing of Roberts’ concerns about their bias against Lui.

What Does This Case Mean for Employers?

By rejecting USPS’ argument that Lui’s initial case had to show more than being qualified for the job and being replaced by a person outside her protected class, the Ninth Circuit’s decision emphasizes the importance of clearly documenting the reasons for employment actions such as demotions or terminations.

Equally important, the decision highlights the importance of conducting impartial and thorough investigations of employee discrimination and harassment complaints. Failure to address Lui’s and Roberts’ concerns during the initial investigation and the subsequent internal appeal of the demotion decision were costly mistakes.

California law requires employers to conduct fair, timely, and thorough investigations of employee discrimination and harassment complaints. Employers can learn more about California investigation requirements here and with our Investigations In the Workplace Toolkit, which is exclusively for CEA members.