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.