Last month, the Second Circuit Court of Appeals, which has jurisdiction over Connecticut, New York and Vermont, ruled that a company’s failure to investigate a complaint of alleged employment discrimination cannot be considered retaliation for the filing of that same complaint.

The plaintiff, Ms. Cynthia Fincher, worked as a senior auditor for the Depository Trust and Clearing Corporation (DTCC) from 2004 until she resigned in June, 2006. Ms. Fincher received several poor performance appraisals, and in March, 2006, she complained to a senior member of the Employee Relations department that “black people were set up to fail” in the auditing department because they were not given the same training opportunities as white employees. Ms. Fincher alleged that when she asked this member of management if he planned to respond to her complaint, he responded that he did not plan to do so. Ms. Fincher subsequently resigned.

Ms. Fincher eventually sued DTCC, alleging, among other things, race discrimination and retaliation under the federal equal rights act (42 U.S.C. §1981). DTCC successfully moved for summary judgment (dismissing the matter in its entirety) and Ms. Fincher appealed. One of her arguments on appeal was that the DTCC’s failure to investigate her discrimination complaint constituted retaliation in and of itself.

In its decision, which was rendered on May 14, 2010 (Fincher v. Depository Trust & Clearing Corp., No. 08-5013-cv (2nd Cir. May 14, 2010)), the Court held that an employer’s failure to investigate a complaint of workplace discrimination in and of itself does not constitute an adverse employment action, which is necessary to sustain a claim of retaliation. The Court also held that a company’s failure to investigate a complaint of workplace discrimination did not constitute a hostile work environment.

In rendering its decision, the Court reasoned that an employee whose complaint is not investigated is no worse off than she would have been if she had not complained, or if the employer investigated the complaint and denied it.

The Court further noted that efforts to punish a complaining employee are at the heart of a retaliation claim, and that an employee whose complaint was not investigated cannot be said to have thereby suffered a punishment for bringing that same complaint.

Practical Note: For employers, this decision does not mean that it is okay to fail to investigate claims of discrimination/harassment.  Not doing so is one of the worst things you can do as an employer, for a number of reasons.  First, it is important to eradicate discrimination/harassment in the workplace, if for no other reason (and there are a number of other reasons) than for the sake of employee productivity and company morale.  Second, failure to investigate legitimate claims of discrimination could lead to the discrimination/harassment becoming worse, and thus actionable in a court of law.  Third, failure to abide by your anti-discrimination/anti-harassment policy(ies) could lead to that policy being deemed null and void, and your company may lose the protection of that policy as a defense in any future lawsuit.