Just as a housekeeping matter, on July 27, 2010, the Home Depot decision I discussed in this post was vacated by the court of appeals and the lawsuit was dismissed. (They even took down the reported decision so the link below doesn't work.) This happens, most likely, when the parties reach a settlement, as one legal journal has reported. It means that as legal precedent, the decision is no longer binding. Of course, the cost of taking the case all the way to court of appeals before settling it was significant so I hope employers will learn from Home Depot's experience.
I am returning to one of my frequent topics, how an employer can avoid liability by conducting an independent investigation.
I've emphasized that employers need to make sure to conduct a fair investigation. This means, as one post emphasized, that employers need to listen to the employee and form an opinion only after hearing the employee's version of events. It also means, as a minimal standard, looking into how similarly situated employees have acted without being disciplined.
An appeals court decision involving Home Depot managers from Florida and Alabama provides additional fodder for employer investigatory mistakes. Two Home Depot store managers were fired after complaining about sexual harassment by a regional HR Manager. The store managers lost the harassment claim but persuaded the appeals court to reverse the retaliation claim.
Home Depot deserves some criticism for the manner in which it terminated the store managers. They didn't produce a written policy (about personal use of a company cell phone) and did not have very strong evidence that the store managers gave out discounts to vendors beyond what other store managers had done. Worse still, there was some evidence that some of the "illegal" discounts were actually authorized by district managers; the discount policy was not put into evidence as an exhibit.
It is never good when the court's discussion of the investigation starts by saying that it was "riddled with inconsistencies and contradictions." Perhaps no adequate investigation could have rescued Home Depot - but that is an issue for a trial. For employers that want to avoid a jury trial in a termination case, however, the decision points to several problems to avoid in conducting an investigation into employee misconduct.
Timing is everything. Home Depot maintained it fired the store managers because it began investigating improper discounts in "late Spring of 2005." The earliest documentation in the investigatory file, however, was dated late September 2005. Also some of the documents that were purportedly relied to make the termination decisions were dated after the store managers were fired. (Even so, one decision-maker testified she reviewed these documents before she decided to fire the store managers.)
Conduct an even-handed investigation. Home Depot maintained that the investigation into improper discounts was district wide. Yet, the investigator's notes about the two store managers who were fired was "far more detailed" than for any other store manager. The investigator maintained he was "never particularly focused" on the two fired store managers. No doubt, it is natural to see an increase in detail when the violation might lead to firing an employee. The important point here is that in any investigation, the same type of information should be retrieved for everyone, not just the ones who are ultimately fired.
Firewall the accused. The whole point of an investigation is to provide the employer with a non-discriminatory motive. That point is lost where, as here, there was evidence that the person accused of harassment is not obviously excluded from the investigation (in any investigatory capacity). Home Depot maintained otherwise (it appears the decision-makers were never told about the allegation of harassment) but when the termination notice is signed by the accused harasser (among others), and the accused harasser delivers the bad news, the employer is not making it easy for the court to see that the investigation is fair and above board. (It didn't help that the accused harasser bragged, allegedly, about getting the store managers fired.)
Follow company policy. The court of appeals roundly criticized Home Depot because "no specific policy violations" were listed on the termination notices even though the forms said to specify the policy that had been violated. The problem was particularly acute here because the store managers maintained that there was no policy. Strictly speaking, this last point wasn't a failing of the investigation itself but the court found this failure called into question the legitimacy of the investigation. It is a good practice point. Any investigation should, at a minimum, identify the exact policy that governs the situation.
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