The California Supreme Court refused to decide whether the “honest belief” defense to discrimination and retaliation claims is valid under California law. Instead, in Richey v. Autonation, Inc., the Court punted on the decision and found that an arbitrator’s underlying decision was based on “overwhelming” evidence of an employee’s misconduct and that the arbitrator’s application of the “honest belief” defense was “not prejudicial,” if error at all. While underscoring the importance of well-crafted arbitration agreements, the decision leaves the lower courts free to reach inconsistent holdings on that important issue. Continue reading
After reading the Ted Wells investigation report of the Richie Incognito and Jonathan Martin matter, I had several reactions. Most focused on Incognito’s reprehensible and vile bullying of Martin, primarily aided by his two teammates, Mike Pouncey and John Jerry. After reflecting on the workplace environment that allowed such repeated atrocious conduct to occur, I wondered where were the other players when this was taking place. There must have been “high character” players who heard the conduct and appreciated that it went far over the line of what would be tolerable teasing in the name of bonding. Yet the Wells report does not identify teammates taking affirmative steps to stop the offensive behavior. Some players interviewed were evidently wanting Martin to take action to defend himself. However, for a complex set of reasons, Martin did not do so. Continue reading
As an employment law attorney, I regularly advise employers on personnel issues, including the conduct of internal investigations into employee complaints. Colleagues at my firm have a similar practice. We review investigation summaries and counsel human resources professionals in the conduct of investigations into internal complaints, including those involving discrimination, harassment and retaliation. I thought it would be interesting to take a survey of the attorneys at our firm regarding what issues regularly come up in our review and assistance of our clients with internal investigations. What follows is a list of the most common problems that arise and suggestions for best practices when conducting the investigations.
For the first time since January 2012, the National Labor Relations Board (NLRB) unquestionably has a quorum to issue rulings. This comes on the heels of the U.S. Senate’s votes yesterday to confirm a 5 members of the Board, three of whom are labor-friendly and two of whom have a management background. They are: Mark Gaston Pearce, the current Board Chairman whose term was set to expire in August; Kent Hirozawa, Pearce’s chief counsel; Nancy Schiffer, a retired associate general counsel at the AFL-CIO; and Philip A. Miscimarra and Harry I. Johnson III, both partners at large law firms. The votes for the Democratic nominees were along party lines.
Confidentiality is the hallmark to any meaningful attempt to investigate workplace misconduct. Not only for the alleged victim of harassment or discrimination, but for the alleged perpetrator too. Apparently, the National Labor Relations Board does not agree with that time-honored maxim, as it continues its assault on confidentiality in workplace investigations.
Last year, in Banner Health Systems, the Board found that blanket confidentiality rules in workplace investigations violated an employee’s right to engage in protected, concerted activity. Instead, an employer seeking to maintain confidentiality in an investigation “must show that it has a legitimate business justification that outweighs employees’ Section 7 rights” by proving that “witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.” This decision, like many others decided since January 2012 is in jeopardy of being overturned if the Supreme Court finds in Noel Canning that the Board is not properly constituted.
The California Supreme Court has agreed to review a lower court’s decision which prohibited the so-called “honest belief” defense used by California employers in response to claims under the California Family Rights Act (CFRA). The high court’s review is notable because California courts have permitted employers to assert the “honest belief” defense in discrimination cases under the Fair Employment and Housing Act (FEHA).
In Richey v. AutoNation, Inc., the California Court of Appeals rejected an employer’s defense that it terminated an employee on CFRA leave based on an “honest belief” that he had lied about a back injury. In particular, while the plaintiff was on an approved leave, the employer dispatched another employee to conduct surveillance, and in the process the plaintiff was observed working in a restaurant and doing all sorts of physical activities may have gone beyond the restrictions imposed by his doctor. The employer did not, however, do any further investigation of the incident or make any effort to speak to the employee or his doctor before firing him.
The issues in the litigation of the matter was whether the employer’s “honest belief” that the employee had exceeded his doctor’s restrictions was enough to satisfy its burden of proof under the CFRA. Although the CFRA allows an employer to assert a defense that reinstatement was denied because the employee lied about the need for leave, the Court of Appeal found that an “honest belief” as to that reason was not sufficient.
This has proven to be a tricky issue for the courts. Under the FEHA, an employer’s burden is merely to offer a “legitimate business reason” for terminating an employee and the employee must offer proof of “pretext,” namely that the employer’s offered reason is a cover up for unlawful discrimination. In applying that so-called burden shifting analysis, the Court of Appeals has adopted the honest belief test, finding that “it is the employer’s honest belief in the stated reasons for firing an employee and not the objective truth or falsity of the underlying facts that is at issue in a discrimination case.” On the other hand, federal courts have been split as to whether the federal Family and Medical Leave Act (on which the CFRA is premised) allows for such a defense – the Seventh Circuit allows such a defense, but the Ninth Circuit does not.
The statute itself offers little guidance; notably, the honest belief defense is not mentioned anywhere in the statute. But, by the same token, it is not codified anywhere in the FEHA and the courts have been allowing employers to assert the defense for many years.
Ultimately, the decision may turn on the unique nature of the rights afforded by the CFRA and the FMLA. In particular, the CFRA affirmatively requires employers to provide qualified employees with up to 12 weeks of leave and makes it so that an employer, not an employee, bears the burden of justifying the decision to terminate an employee who is on an otherwise approved leave. By contrast, cases dating back nearly 40 years make it clear that under discrimination statutes, an employee always bears the burden of proving that he was the victim of unlawful discrimination.
This is a scenario which we see all the time: one employee observes another employee on leave for a supposedly debilitating condition playing softball, repairing his car, doing housework or something else which appears to exceed what his doctor has allowed. Don’t end your investigation there – conduct a full investigation and especially make an effort to talk to the employee so you can confirm if the employee really was exceeding his doctor’s limitations, whether those limitations have changed and if based on those changed circumstances, he is ready to return to work. The more fully developed your investigatory record, the more likely a court will be to uphold it – regardless of what the ultimate decision in Richey (which we may not see for at least a year).
As courts and agencies battle over the standards applied to internal investigations, California courts have surprisingly sided with employers. In a recent case, the California Court of Appeal found that while the FEHA protects an employee against retaliation based on his participation in such an investigation, it “does not shield an employee against termination or lesser discipline for either lying or withholding information during an employer’s internal investigation of a discrimination claim.”
In McGrory v. Applied Signal Technology, Inc., the employer hired an outside attorney to conduct an independent investigation of a complaint made by Dana Thomas, who alleged that her supervisor, John McGrory, had unfairly put her on a performance improvement plan (PIP) based upon her gender and sexual orientation. The attorney-investigator concluded that McGrory placed Thomas on a PIP in the good faith belief that her performance was substandard, but he also found that McGrory had violated the employer’s policy against making jokes about race and sex.
The attorney-investigator’s conclusions about McGrory’s conduct during the investigation were troublesome. In particular, McGrory refused to turn over written performance appraisals he had done on other, similarly situated employees and he refused to identify other employees who had supposedly complained about Thomas. McGrory was terminated based on the investigator’s report, namely his lack of cooperation with the investigator and his inappropriate jokes.
McGrory sued for wrongful termination, claiming specifically that he was fired because he participated in an internal investigation. The trial court granted the employer’s motion for summary judgment, and the Court of Appeal affirmed. The court explained that, although the FEHA prohibits retaliation against an employee for participating in an internal investigation, such “participation” does not include lying to the investigator or withholding requested information, and that an employer can terminate an employee for such actions.
The McGrory decision also re-affirmed two principles of effective internal investigations – principles that have been highlighted in other California cases recently:
(1) In an internal investigation, an outside attorney is held to a “good faith” standard. In other words, an outside attorney’s conclusions need not be correct, but have to be “objectively reasonable and based upon good faith.” See also Joaquin v. City of Los Angeles 202 Cal.App.4th 1207 (2012); Richey v. AutoNation, Inc., 210 Cal. App. 4th 1516 (2012); Cotran v. Rollins Hudig Hall International, Inc. 17 Cal.4th 93 (1998).
(2) So long as outside counsel conducts an investigation in “good faith,” a court will be unlikely to second-guess personnel decisions made by the employer as a result of the investigation. As this court stated, “we are not concerned with the wisdom of the termination, just with whether the Employer has proffered nondiscriminatory reasons.”
The McGrory decision serves as good guidance for one of the other central principles of internal investigations: the purpose of the investigation is not to determine whether the law has been violated, but rather whether an employer’s policies have been. The plaintiff’s “jokes” here may well have been found by a court to be isolated or sporadic, but the question the outside attorney investigating the complaint faced was not what a court would do but whether the employer’s zero tolerance policy had been violated.
- Monte Grix (Los Angeles)
Take a look at our recent e-Alert on the decision of the U.S. Court of Appeals for the D.C. Circuit, which found that President Obama’s recess appointments to the National Labor Relations Board were imrpoper and, as a result, the Board did not have a quorum to issue any of the decisions it issued since the appointments were made over a year ago. This stunning decision potentially invalidates all of the controversial decisions reached by the Board in the past year, many of which we have already blogged about (here, here, here, here, here, here, and here).
- Dan Handman (Los Angeles)
Under Board precedent, if an employer’s policy proscribing employee conduct is ambiguous, the Board will find it lawful unless one of three conditions apply: (1) the policy was adopted in response to union activity; (2) it has been applied to restrict the exercise of employee’s rights under the law; or (3) employees would “reasonably construe” it to prohibit protected, concerted activity. In two recent decisions, the NLRB has shown its willingness to strike down virtually any policy with even remotely ambiguous language under the guise that, regardless of context, employees can “construe” an ambiguous word to prohibit them from engaging in protected activities.
In Costco Wholesale Corporation, the Board required an employer to remove a policy which prohibited an employee from making an electronic statement that “damages the Company or defames any individual or damage any person’s reputation,” finding that it would chill employees from making any type of statement that was critical of the employer. Instead, it reasoned that the only statements that could be prohibited are those which are “malicious, abusive or unlawful” (of course, defamation is unlawful, so the Board’s decision begs more questions than it answers).
More significantly, the Board ordered the employer to remove a policy which prohibited employees from discussing: (1) “private matters of . . . other employees . . . including sick calls, leaves of absence, FMLA call outs, ADA accommodations, worker’s compensation injuries, personal health information, etc.”; (2) “sensitive information such as membership, payroll, confidential financial, credit card numbers, social security numbers, or employee personal health information”; or (3) “confidential information such as employees’ names, addresses, telephone numbers, and e-mail addresses.” The Board found that an employee could “reasonably construe” those policies as prohibiting employees from discussing their compensation or other terms and conditions of their benefits. In so doing, the Board flatly refused to read the supposedly offending words in context with the other words surrounding it, instead finding that if the policy could be read in any possible way to apply to protected activity, it was invalid.
The Board reached a very similar finding in Flex Frac Logistics, LLC, finding that a non-disclosure policy in an employee handbook which prohibited employees from disclosing sensitive information about pricing, business plans, software and the like was overbroad because it also prohibited employees from disclosing “personnel information and documents.” Under the Board’s reading, an employee could “reasonably construe” that policy to prohibit discussion about wages or other terms and conditions of employment. Again, the Board refused to read that language in the larger context of the legitimate confidentiality restrictions contained in that policy.
In both of these decisions, the Board gave short shrift to decisions of federal appellate courts finding that policies like this need to be given a “fair reading” in the context of the entirety of their language. While the appellate courts may ultimately deny enforcement of these decisions, employers would be well-advised to review their policies to determine potential trouble in case the Board reviews them.
- Dan Handman (Los Angeles)