Eleventh Circuit: Employer Waived Valuable Title VII Damages Defense by Failing to Raise It

When employers think about sexual harassment litigation, most attention is understandably focused on workplace conduct, training, investigations, and prevention. A recent Eleventh Circuit decision serves as a reminder that litigation strategy can be just as important.

In Khatabi v. Car Auto Holdings, LLC, the court held that an employer lost the benefit of a significant limitation on damages because it failed to properly raise and preserve the issue during the litigation. The result was a dramatic increase in the plaintiff's recovery.

The Underlying Harassment Claim

The case involved a former employee who alleged severe sexual harassment while working for a South Florida automobile dealership. According to the court, the employee presented evidence that managers and coworkers repeatedly subjected her to inappropriate comments, unwanted physical contact, and degrading treatment. A jury ultimately found in her favor on claims brought under both Title VII of the Civil Rights Act of 1964 and the Florida Civil Rights Act.

The jury awarded approximately $81,000 in compensatory damages and $750,000 in punitive damages.

The Damages Cap Issue

Title VII limits compensatory and punitive damages based on the size of the employer. For employers with between 15 and 100 employees, the combined cap is $50,000. Larger employers face higher caps. The dealership argued after trial that it employed only about twenty employees and therefore qualified for the lowest Title VII damages cap. One manager testified at trial that the dealership had approximately twenty to twenty-two employees.

The problem for the employer was not the evidence. The problem was procedure.

The Eleventh Circuit's Decision

The Eleventh Circuit concluded that the employee-headcount limitation operates as an affirmative defense. Because the employer did not plead the defense in its answer, did not identify employee headcount as a disputed issue in the pretrial stipulation, and did not seek jury instructions on the issue, the defense was waived.

The court emphasized that plaintiffs are entitled to notice when an employer intends to rely on a statutory limitation that depends on factual proof. Without advance notice, a plaintiff may have no reason to conduct discovery regarding workforce size or challenge testimony on the issue.

Because the employer waived the defense, the court refused to apply the lower $50,000 Title VII cap. Instead, the Eleventh Circuit held that the plaintiff was entitled to recover the maximum amount available under the combined operation of Title VII and the Florida Civil Rights Act, resulting in a judgment of $481,028.

Lessons for Employers

The decision offers several practical reminders. First, workplace harassment claims continue to present significant financial exposure. Even where statutory caps limit certain categories of damages, jury verdicts can be substantial.

Second, employers should ensure that all available defenses are identified and preserved early in litigation. An otherwise valid defense may provide no protection if it is not properly raised.

Third, pretrial stipulations matter. Courts routinely treat them as defining the issues that will be tried. A defense omitted from those documents may be difficult or impossible to revive later.

Finally, employment litigation requires attention not only to the underlying facts but also to procedural requirements. A missed defense, overlooked deadline, or incomplete pleading can dramatically alter the outcome of a case.

The Eleventh Circuit's decision demonstrates that compliance and litigation strategy often go hand in hand. Employers that invest in both are generally in a much stronger position when workplace disputes arise.