updated 1/17/2008 12:12:39 PM ET 2008-01-17T17:12:39

An appeals court overturned a $1.5 million verdict awarded to a woman who was spanked in front of co-workers in what her employer called a camaraderie-building exercise.

A jury in 2006 had ruled that Janet Orlando had suffered sexual harassment and sexual battery when she was paddled at home security company Alarm One Inc. The jury punished the company with a $1 million punitive damage award.

But on Monday, a three-judge panel of the state Court of Appeal overturned that verdict, ruling that the jury had been given improper instructions. In particular, the jury wasn't instructed that one vital element of proving that sexual harassment occurred is showing the action was directed at a woman because of her gender.

Lawyers for Alarm One, an Anaheim-based, 300-employee company, said that the spankings were not discriminatory because they were given to both male and female workers and that Orlando and others willingly took part.

Orlando's attorney, Nicholas "Butch" Wagner, vowed to take the case to trial again.

"We may get more this time," Wagner said.

But K. Poncho Baker, the attorney who defended the company at trial in 2006, said that because the company has since gone into bankruptcy and its insurance was exhausted battling Orlando's claim and settling with three other co-workers, there may be little left to recover.

"Good luck retrying this one," Baker said.

Orlando quit the company in 2004, less than a year after she was hired at the Fresno office, saying she was humiliated during the company's team-building practices.

Employees were paddled with rival companies' yard signs as part of a contest that pitted sales teams against one another. The winners poked fun at the losers, throwing pies at them, feeding them baby food, making them wear diapers and swatting their buttocks.

The company has since abandoned the practice.

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