Last month, a federal district judge in San Diego upheld a $185 million jury verdict in a pregnancy discrimination lawsuit against AutoZone Stores. The verdict is a record for a single-plaintiff employment discrimination claim in the U.S. In addition to the punitive damages, the court affirmed $872,000 in compensatory damages. The plaintiff’s legal fees in the matter, which are payable by the defendant, are over $1 million to date.

The plaintiff alleged that AutoZone had a practice of forcing out its already limited number of female store managers in the San Diego area. She claimed that when she informed her District Manager of her pregnancy, he repeatedly told her that she needed to step down as store manager. When she refused, the plaintiff said that she was demoted and eventually fired for a falsified cash shortage situation.

The punitive damages verdict was based on a California state law that allows juries to add such amounts when the employment discrimination is linked to the employer’s officers, directors or managing agents. In this case, the court concluded that AutoZone’s internal legal department fell within the statute’s definition for corporate ratification of the discriminatory action.

The defendant will clearly appeal not only the jury’s findings, but the size of the punitive damages award. Regardless, this case is an extreme example of the risks posed to employers from even single-plaintiff employment litigation. Even in a circumstance where the termination appears to have been reviewed and approved by the company’s human resources and legal departments, a jury can make its own determination as to the employer’s actual motivation behind the decision.

This case and ones like it also demonstrate the problems involved with business operations in high-risk litigation areas of the U.S. such as California. Employers in these areas should consider use of mandatory arbitration agreements with their employees. Such agreements will not shield the employer from all financial risks associated with poor employee management practices. However, they can be a crucial tool in avoiding jury determinations that appear completely detached from any reasonable estimate of the alleged damage suffered by the employee.