“Mistakes happen. Including in the context of employment decisions. But not every mistake amounts to actionable employment discrimination.” Smith v. Towne Properties Management Co., Inc. (6th Cir. 3-4-2020).
So stated the Sixth Circuit in affirming the grant of summary judgment to the employer in a FMLA and disability discrimination lawsuit. The plaintiff, Robyn Smith, was the manager of an apartment complex for a property management company. Smith was diagnosed with pseudotumor cerebri, a condition caused by spinal fluid pressure on the brain. The symptoms of the condition mimic a brain tumor, including migraines, blurred vision, vertigo, and short-term memory loss. This condition sometimes made it difficult for Smith to perform her job, and she took several FMLA covered absences.
Part of Smith’s compensation included free rent at the complex she managed. Sometime after the diagnosis and use of FMLA leave, another company employee alleged to its management that Smith was also charging her gas, electric, and water bills to the apartment complex. The company investigated, learned the allegations were true, and fired Smith. The company learned after the termination that the prior owners of the complex, Jack and Cynthia Brauer, for whom Smith worked before the company acquired the property, provided her free utilities in addition to rent. Despite learning this information, the company did not reconsider its decision to terminate Smith.
The issue on summary judgment was whether the company’s stated reason for the termination, that Smith engaged in theft by charging her utilities to the complex, was pretext for disability and FMLA discrimination. In ruling for the employer, the Court relied upon the so-called “honest belief” defense. That means, if the decision maker honestly holds a belief and acts on it in good faith, it does not matter whether the facts upon which the belief is based are true. Incorrect facts honestly believed are not evidence of pretext.
The evidence showed the company investigated multiple sources to confirm the truth of the theft allegation. A supervisor reviewed the utility bills to confirm they were charged to the complex and not to Smith personally. When the company called Mr. Brauer to ask whether utilities were included in Smith’s compensation when she worked for them, he was “very surprised,” and said he had “no idea” Smith was not paying utilities. The company looked for documentation showing Smith was authorized to received free utilities and found nothing. But it did find a letter itemizing Smith’s compensation, which listed an apartment allowance, but did not mention utilities.
Smith objected that the honest belief defense requires the employer to make a reasonably informed and considered decision, and should not apply if the factual error was “too obvious to be unintentional.” In other words, the employer can’t hide behind an honest belief in facts that were uncovered during a shoddy or incomplete investigation. For example, Smith pointed out that Mr. Brauer had Alzheimer’s, and therefore did not remember that utilities were included as part of her compensation package. The company found out the truth from Mrs. Brauer after the termination. The Court rejected Smith’s argument however, because at the time the decision was made, the company did not know Mr. Brauer had Alzheimer’s and thus did not know its facts were wrong.
The honest belief defense is an important tool in the defense lawyer’s toolbox. It can be very effective to win on summary judgment, so long as the employer has evidence it relied in good faith on facts reasonably available to it at the time. To take advantage of the defense, employers should endeavor to do the following:
- The investigation of the employee’s offense should be reasonably thorough, examining if possible multiple potential sources of evidence;
- The evidence relied upon to support the honest belief should be objective (e.g. documents, e-mails, statements that are corroborated by others);
- While it is not essential to interview the employee to get her side of the story (the company did not interview Smith), it is nonetheless recommended so you have the employee’s version of the fact;
- If the employee requests her job back or reapplies after you know you were mistaken, you should seriously consider the request, even if you don’t grant it. The Smith Court implied that if Smith had asked for her job back, there may have been a different result.