New Decision Roundup – Cat’s Paws, Investigations and Comp Time

I usually devote each post to one decision or some part of recently introduced legislation. Several court decisions were released last week but none, in its own right (especially in light of my prior blog posts) justifies my usual (too-involved) devotion. That said, I thought I would just give a short description of the decisions and say why each merits some short attention.

Proctor Hospital fired a reservist (for "insubordination, shirking, and attitude problems) who the sued it under USERRA, claiming his military service was the real reason for his firing. A jury agreed with him but the court of appeals in Chicago set the verdict aside because the court improperly admitted "anti-military" evidence that was not shown to have influenced the final firing decision. The decision has some excellent legal points for employment defense lawyers about whether the judge or the jury determines whether statements should be admitted but for employers (especially for those who read this blog), the message should be familiar. The issue here was whether the decision-maker was free of the anti-military statements made by the subordinate because the decision-maker conducted an "independent investigation" by "look[ing] beyond" the reports of misconduct from the biased supervisors and determined, based upon the employee's poor employment history with the hospital. Interestingly, while the Seventh Circuit essentially coined the "cat's paw" phrase in the discrimination context and other courts have used the phrase, the Seventh Circuit's approach to it is pretty demanding as compared to the Sixth Circuits. Under the Seventh Circuit decisions (and other courts as well), the decision-maker must truly rubber stamp the biased decision of a subordinate. The court says the standard requires the employee to show the decision-maker was blindly reliant on the report. The standard on this issue in the Sixth Circuit is far less clear but for the reasons I've given in prior posts, employers won't err by conducting in-depth investigations.

The Sixth Circuit has brought some needed clarity to what evidence is required before an employee can show the employer's reason for firing is so unreasonable as to be pretextual. One of the Home Depots in Nashville fired an assistant store manager ("ASM") because, on two occasions, she violated the company "no-self-service" policy that prohibits employees from ringing up their personal transactions. The ASM knew of the policy and its purpose (preventing employee theft) but had not been disciplined between the first and second infractions. Home Depot – wait for it – conducted an investigation, met with the ASM, reviewed security camera footage of the infraction and the decision to fire the employee was consistent with its practice in 18 other similar situations. This isn't a "cat's paw" case, however, because there was no evidence that any manager had made sex-based comments. The ASM's argument was that her firing was "unreasonable." While the "fairness" of a firing decision is not the issue in a discrimination claim, pretext can be shown under Sixth Circuit decisions where the firing is so unreasonable that it tends to show the employer was not being honest about its reasons. Prior decisions have, however, muddied the water somewhat giving the ASM the opportunity to argue that firing her for only two violations was so extreme it was unreasonable. That argument failed here, the court said, because Home Depot's "overly strict interpretation" of its "no-self-service" policy was not alone enough to show pretext. What had to be shown was that the ASM's interpretation of Home Depot's rule was "far superior" to how Home Depot interpreted it. In other words, Home Depot might not have won if its interpretation was a pretty-good stretch under terms of its policy; an example of this appears in Mickey v. Zeidler Tool & Die Co., 516 F.3d 516, 527 (6^th Cir. 2008). It also helped, the court said, that Home Depot conducted a "reasonable investigation prior to [the ASM's] termination, which strongly supports the view that it made an honest rather than a pretextual decision when it relied on the self-service rule to terminate her." So, aside from the obvious help the investigation made, before terminating someone based upon a policy violation, be sure the policy language can be reasonably interpreted to prohibit the conduct for which you are going to terminate the employee. This case shows the policy doesn't have to explicitly prohibit the conduct but your interpretation of the policy must still be reasonable.

Turning to a completely different subject, the Seventh Circuit has clarified the DOL Wage and Hour rules on how cities must grant requests to use compensatory time ("comp time) for police officers under the FLSA. The dispute concerned Chicago taking the position that it, not the police officers, was entitled to name the date and time the officers could use their comp time. The officers, Chicago said, could only submit requests and the police department simply needed to offer some leave within a reasonable time of the request. It left the decision as to what was a reasonable time to the shift supervisors. The DOL regulation, 29 C.F.R. §553.25, says employee who request using comp time must be permitted to use the time off within a reasonable period after making the request unless that would unduly disrupt operations. Unlike other courts, the seventh circuit rejected Chicago's attack on the regulation and held that Chicago had improperly denied leave requests. The proper method, the court said, is that the "employer must ask whether leave on the date and time requested would produce undue disruption, and only if the answer is yes may the employer defer the leave—and then only for a 'reasonable time.'" Governmental employers should note that the DOL has proposed amendments to § 553.25 (among other things) which would no longer require employer to grant the leave on the date requested (you can keep up with the status and read comments about the proposed regulations at regulations.gov). Instead, the regulations as proposed would not require a public agency to allow the use of compensatory time on the day specifically requested, but only requires that the agency permit the use of the time within a reasonable period after the employee makes the request, unless the use would unduly disrupt the agency's operations. The lesson to be learned, whatever the new regulations say, is don't refuse comp time leave requests if they are inconvenient. There is a process that must be followed.

Conducting a Fair Investigation Into Employee Misconduct

Two decisions from the Sixth Circuit issued around Thanksgiving serve to emphasize the importance of an employer conducting a quality investigation before it fires an employee for misconduct. While I'll try to simplify the facts somewhat, understanding some facts are important to understanding why the Sixth Circuit held, in both cases, why a jury could reasonably find the employer discriminated against the employees.

Madden v. City of Chattanooga, the court of appeals affirmed a bench trial liability finding in a race discrimination claim. The black plaintiff worked in the service department and was fired for setting off a firecracker at work. His supervisor reported him. Plaintiff never disputed doing the deed. White employees had also set off firecrackers at work without being disciplined and there was testimony that the same white supervisor who reported the plaintiff had been present when white employees set off firecrackers and he had not reported them. Another supervisor who saw white employees use firecrackers at work merely told the employees to "knock off" the horseplay.

Madden would be a routine disparate treatment case except for the fact that the decision to fire Madden was made by senior managers who, the facts showed, did not know that white employees had set off firecrackers and for whom there was no evidence of a biased motive. (The Seventh Circuit calls this a "cat's paw" type of case. Shager v. Upjohn Co., 913 F.2d 398, 405 (7^th Cir. 1990)). In a crucial footnote, the Sixth Circuit pointed out that the "scope and nature" of the City's investigation before firing Madden was "unclear" but appeared to have been "limited" to interviewing the biased supervisor and the plaintiff.

To explain, the federal courts of appeal widely diverge on when the bias of a subordinate is imputed to the decisionmaker and the Supreme Court has twice expressed an interest in resolving the dispute. But one recognized way to avoid the cat's paw problem altogether is to conduct an independent investigation because that investigation should break the causal chain between the biased report of the subordinate and the final employment decision. Wilson v. Stroh Companies, Inc., 952 F.2d 942, 946 (6th Cir. 1992) is one such decision and other courts have also recognized the principle. Pennington v. City of Huntsville, 261 F.3d 1262, 1270 (11th Cir.2001) ("[w]here a decisionmaker conducts his own evaluation and makes an independent decision, his decision is free of the taint of a biased subordinate employee."); Willis v. Marion County Auditor's Office, 118 F.3d 542, 547 (7th Cir.1997) ("[W]hen the causal relationship between the subordinate's illicit motive and the employer's ultimate decision is broken, and the ultimate decision is clearly made on an independent and a legally permissive basis, the bias of the subordinate is not relevant."). In Cariglia v. Hertz Equip. Rental Corp., 363 F.3d 77, 87 n.4 (1st Cir. 2004) while the court held a jury trial was required but the court also observed that the employer would have won had it given the accused employee a "meaningful chance to address the allegations against him").

Madden amounts to a crack-down on what the court held was a less than adequate investigation. Remember the crucial footnote? So, with an "unclear" investigation which was "limited," an employer hangs itself out to dry even if the decision is made by an undisputedly non-biased decisionmaker. It is hard to say what the employer did in the investigation but the court clearly faulted the employer for not finding out whether other employees had been allowed to engage in similar conduct without being disciplined.

The decision in Martin v. Toledo Cardiology Consultants, Inc. shows what happens when the court conclude the employer's investigation amounted to a fait accompli. The employee had worked in the same doctor's office for years but then a new doctor assumed control of the practice. The new doctor didn't exactly follow the best employment practices; he reorganized the office, designating "favorites" (all of whom were under 40) as "team leaders" and telling employees his treatment of the "favorites" would not be subject to question. The doctor complained to the plaintiff about some of her conduct (it was clear the court found these complaints petty to the point of harassment) and later confronted her with evidence that she had used of racial slur to describe a patient. The slur was allegedly heard by another doctor and one of the "favorites." During the meeting, plaintiff signed a document admitting to the racial slur. As a result, she received a salary reduction, was put on probation and ultimately fired over a dispute about the work she wanted to perform. At her deposition, however, she flatly denied making the racial slur.

Like Madden this case largely turned on the quality of the investigation. (Unlike Madden, of course, this case didn't concern an "independent" investigation within the meaning of the "cat's paw" cases because here the decisionmaker was supposedly biased against the plaintiff.) The decisionmaker made a number of mistakes but what seemed to most trouble the court was that he didn't seem to listen to the plaintiff when he asked if she had uttered the racial slur. To be sure, there was evidence she had said it and she did sign a document saying she had said something (the majority and dissenting opinions conflicted on this point) but the court described the plaintiff being presented with "documents that she could sign, quit, or be fired." And the plaintiff testified that she was single and helping to support her mother, so she needed the job and therefore signed the papers. So, despite evidence from two witnesses that plaintiff had referred to a patient in a racially derogatory manner, and despite the fact that she had signed a document admitting to using a racial slur, the court nevertheless found plaintiff's deposition testimony created a factual dispute as to whether or not the employer made a reasonably informed decision in disciplining her for the racial slur. (The investigation into the reasons given for firing plaintiff was not any better but I don't need to bury my point.)

In theory the quality of the investigation shouldn't matter but practically it does because a good investigation can remove any dispute over the facts. I easily found three fairly recent Sixth Circuit decisions where the employer won because it conducted a full investigation and fairly resolved any factual disputes which arose during it. By doing a full and fair investigation, the employers were able to show that the decision was honestly held based upon the facts it knew at the time. Abdulnour v. Campbell Soup Supply Co., LLC, 502 F.3d 496, 502 (6th Cir. 2007); Michael v. Caterpillar Fin. Servs. Corp., 496 F.3d 584, 588 (6th Cir. 2007); Wright v. Murray Guard, Inc., 455 F.3d 702, 707-709 (6th Cir. 2006).

So while none of these decisions say so, the quality of the investigations played a very significant role in the outcome. In Martin evidence that the outcome was predetermined helped kill the employer's defense. In Madden, while the plaintiff was interviewed, that alone was not enough. And Madden shows that an employer must always determine whether or not there have been prior similar incidents by other employees outside of the protected class. Had the employer in Madden shown that it had asked the employee whether or not he knew of any other times other employees had thrown firecrackers, no matter what the answer, the employer certainly would have been much better off in making the decision and/or in defending the lawsuit. And worst case scenario, if an employer ever has to defend a decision to a jury, a thorough and fair investigation unquestionably helps persuade jurors that no discrimination motivated the decision.