What HR teams need to know about the consequential damages ruling creating a national circuit split
The Fifth Circuit slashed employer liability in wrongful termination cases but reinforced protections for workers who file grievances and union complaints.
A federal appeals court delivered mixed news for employers on February 2, handing down a decision that upholds protections for workers who complain about job conditions while simultaneously limiting how much companies might have to pay when they cross the line.
The ruling in Harvard Maintenance v. National Labor Relations Board will reshape how HR teams in Texas, Louisiana, and Mississippi calculate risk when handling employee grievances and terminations. But the decision also deepens a national split on labor law that may eventually land at the Supreme Court.
At the center of the case was Carina Cruz, who spent 18 years cleaning offices for Harvard Maintenance, a New York City janitorial contractor. In early 2020, Cruz started pushing back on what she saw as contract violations, complaining at meetings and calling supervisors to get names so she could file grievances with her union and the labor board.
Things escalated quickly. After one phone call in January, her supervisor allegedly warned that filing complaints could get Cruz suspended or written up. By March, tensions boiled over during back-to-back confrontations about workplace issues. Cruz was sent home twice in two days, and by June her suspension had turned into a termination.
The company said Cruz was fired for being disruptive and insubordinate. The NLRB said it was retaliation for protected union activity. On appeal, the Fifth Circuit sided with the labor board on that question, finding plenty of evidence that Harvard Maintenance was motivated by Cruz's complaints rather than her conduct.
What caught the court's attention was how differently the company treated Cruz compared to other employees. One worker was warned and suspended for three days for being late and yelling at a supervisor over the phone. Another who yelled when confronted about poor performance just got a warning. Someone else was merely suspended for sexual harassment. Yet Cruz, with a clean record across nearly two decades, was terminated.
The timing didn't help the company's case either. Cruz was sent home within 24 hours of her protected activities in March. The court also noted that Harvard Maintenance barely investigated before pulling the trigger on termination.
But the real headline from the decision involves money. The NLRB had ordered the company to pay Cruz not just back wages and job search costs, but also compensation for any direct or foreseeable financial harm from the firing. That could mean covering late fees on credit cards, penalties from early retirement withdrawals, medical expenses, higher childcare or transportation costs, even losses if Cruz couldn't make her car or mortgage payments.
The appeals court said no. Writing for a three-judge panel, Circuit Judge Jerry Smith ruled that federal labor law only allows the NLRB to order what courts have traditionally called equitable relief: things like reinstatement and back pay. The statute doesn't permit the kind of open-ended consequential damages the Board tried to impose here.
The court pointed to the law's text, which lets the NLRB order companies to stop unfair practices and take affirmative action including rehiring workers with or without back pay. Those are the tools equity courts have always used, the panel said, not the compensatory damages you see in regular lawsuits.
The NLRB's own examples of what it planned to cover under the new remedy didn't help its case. The Board had suggested paying for credit card interest, retirement penalties, lost homes or cars, and medical bills. The court said that list looked like something from a personal injury case, not a labor dispute.
The NLRB continues to apply this remedy, known as the Thryv standard after a 2022 Board decision, but the Fifth Circuit ruled it lacks authority to award such damages. The Ninth Circuit went the other way last year, upholding the remedy. The split means companies operating in multiple states face different outcomes depending on which federal circuit hears their case.
For HR departments, the takeaways are clear even if the legal landscape isn't. Workers still have strong protections to discuss conditions with colleagues and file complaints. Inconsistent discipline remains dangerous. Investigations matter. Timing after protected activity will draw scrutiny. But in some parts of the country, the financial risk just dropped considerably.
