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In Kolstad v. American Dental Association, the U.S. Supreme Court defined the circumstances under which punitive damages can be awarded against employers for unlawful intentional discrimination under Title VII.1 An employee claimed that she was passed over for promotion due to intentional discrimination based on her sex. The lower courts found that intentional discrimination occurred. They granted the employee back wages, but did not award punitive damages against the employer.
The U.S. Supreme Court held that an employer may not be held liable for punitive damages for the discriminatory employment decisions of managerial agents if those decisions are contrary to the employer's good-faith efforts to prevent discrimination. You might demonstrate good-faith efforts by implementing employer and employee anti-discrimination education programs, instituting an open- door policy for employees to report discrimination, and conducting effective discrimination investigations.
1. Kolstad v. American Dental Association, 527 U.S. 526 (1999)