The “Honest Belief” Rule

One of the things I like to do here is blow up some of the insidious “doctrines” that the defense bar has, with some success, foisted on the judiciary.  Judges like rules, because they make deciding cases easier, if only a little.  Every decision, especially a decision throwing a case out of court, has to answer the question “why?”  “Your case stinks” is not an acceptable answer.  It is much better, judicially speaking, to be able to have some rules that justify throwing the case out.

Today, I’m going to discuss a recent case from the 6th Circuit Court of Appeals, Marshall v. Rawlings Co., which was decided on April 20, 2017 (we try to give you only the freshest decisions here!).  Generally, I write about cases that were wrongly decided.  Today is different.  Marshall was correctly decided.  

The 6th Circuit is a confused court.  It doesn’t know whether it wants to fulfill its purpose as protector of rights of individuals and implementer of remedial statutes, or whether it wants to be 4th Circuit lite.  (The Fourth Circuit Court is generally very pro-corporation.)  The reason for this is geographic.  The 6th Circuit includes Michigan, Ohio, Kentucky and Tennessee.  Two industrialized states, which tend to produce a judiciary that recognizes that individuals and workers are people too, and two southern states which, ahem, are sometimes less enlightened.  Since the populations of Michigan and Ohio are so much greater than the others, judges from those states set the tone of the court.  But those states are changing, and so is the 6th Circuit.  

Rawlings Co. is an awful corporate “citizen.”  It sucks money from injured people and gives it to insurance companies.  Robin Hood in reverse.  Rawlings keeps 20 percent of the take in the process.  Here’s how it works.  You are injured in an accident, and your health insurance pays your bills (that’s what health insurance is for, after all.)  If somebody else is at fault for your injury, you probably will seek compensation.  In theory, the insurance company has also suffered damages because of the other person’s negligence.  You can’t sue for recovery of the medical bills (because you didn’t pay them).  The insurance company can, but it rarely does.  Instead, they found another way to get their money back: instead of suing the people at fault, they take it from the victim.  In the insurance policy (which you’ve never read; they are unreadable) is a provision that gives the insurance company the “right” of recovery.  It says basically: “if you’re injured and we pay your bills, and if you recover any money from the person who caused the injuries, you agree to reimburse us for your medical bills.”  

Rawlings is the bloodsucker that pesters your lawyer, pretending to assert “liens” and “subrogation rights,” etc.  Fortunately, New York passed a law which said that these clauses can’t be enforced.  

Marshall worked at Rawlings Co.  She was a worker’s compensation analyst, and she suffered from depression.  (Probably caused by working at such an awful place.)   She took an FMLA leave.  When she came back, she was demoted, although she was a top producer.  She complained that she was being harassed by her manager because of the leave she had taken.  Rawlings was brought in for a meeting with Mr. Rawlings himself.  Before the meeting, plaintiff’s manager told Rawlings that she was complaining of harassment to cover up her “poor performance.”  After the meeting, Rawlings fired her.

Marshall sued.  Rawlings said that it didn’t matter whether plaintiff’s supervisor resented Marshall’s FMLA leave, because he didn’t fire her, Rawlings did, and Rawlings didn’t know anything about her leave.  

Marshall’s case relied on what is called the “cat’s paw” theory of liability.  When a supervisor with discriminatory intent causes a higher up to terminate the employee, the company is liable, even though the manager that did the actual firing had no discriminatory intent.  If you’re like me, your reaction is “duh!”  

The reason I say that is simple.  Generally speaking, the only person in management who knows whether an employee is a good performer is the employer’s supervisor.  The supervisor makes or breaks the employee.  Everybody knows this.  Since the supervisor is the only one who really knows anything about the employee’s performance, the company necessarily relies on the supervisor to make performance based judgments about the employee.  It doesn’t matter what form this takes or what process the employer uses for the decision making.  

I am sure there are some who would take issue with my assertion about the supervisor having exclusive knowledge of the employee’s performance.  I acknowledge some work settings, such as restaurants and retail stores, where there are more than one supervisor or where the second level supervisor (generally, store manager) will have sufficient contact with rank and file employees to be familiar with their performance, but these are simply variations on a theme.  If the second level of supervision has day to day contact with the rank and file, the principle remains intact.  

The principle, which we might call an axiom, is this: In those workplaces where the corporation purports to make performance based decisions, the supervisor or supervisors with first hand knowledge of the employee’s performance are the de facto decision makers.  This is a matter of pure logic.  The decision cannot be performance based if the decision maker knows nothing about the employee’s performance, and if the decision maker does not have first hand knowledge, that knowledge has to be acquired from somebody who does.  

This is where an intellectually vapid doctrine called the “honest belief rule” rears its ugly head.  The rule, simply stated is this: it doesn’t matter that the information upon which the adverse decision is based is tainted with discriminatory intent if the decision maker “honestly believed” it to be true.  The “idea” behind this rule is that, in such a case, the employer lacked the necessary intent to be guilty of illegal discrimination.

O brother, where to start?  

This is how it’s supposed to work:  an employer is guilty of discrimination if it makes an adverse employment action because of a forbidden factor, let’s say skin color.  If a supervisor who wants to get rid of employee “x” because of his skin color tells the official decision maker that “we ought to get rid of “x” because his work is highly substandard and will cause the business to suffer, and the decision maker fires “x” based on that information, the only question for the jury should be whether “x” was fired because of his skin color. 

Isn’t it a little unfair?   The official decision maker did not have a discriminatory bone in his body and was, in effect, duped by the supervisor?  How is a company supposed to prevent something like that from happening?  The short answer is no, it’s not unfair at all.  A corporation can act only by its employees, the supervisor is an employee of the corporation, the corporation is responsible for the actions of its employees that violate the law, and the supervisor violated the law.  

Let me give you an example in a different context.  An airline instructs its pilots to fly with skill and safety.  The number one rule is “don’t crash the plane.”  This is undisputed.  Notwithstanding all the airline’s efforts to promote safe flying, a pilot gets a little careless and flies into the side of a mountain, killing everyone on board.  The company now says it would be unfair to hold it responsible, because it honestly thought that the pilot would not fly the plane into the side of the mountain.  The company would be laughed out of court.

The airline is responsible, because it entrusted the pilot with the plane.  In our case, the employer entrusted the supervisor with reporting on the performance of the workers he supervised.  The fact that the company honestly believed the supervisor is a red herring, it has nothing to do with anything.

It’s important to keep in mind what is really going on here.  Corporations don’t want to face a jury; they want judges to decide employment discrimination cases.  The only way to avoid a jury is to persuade the judge to grant summary judgment.  Summary judgment can only be granted if there are no disputed facts.  Obviously, whether somebody believes or does not believe something should be recognized as a question of fact.  By dressing up the issue as a “rule,” it is easier to persuade a judge that he or she is applying law, not deciding facts.  

Getting back to the Marshall case . . . .  This was a split decision, two judges ruled one way, the third judge disagreed and dissented from that ruling.  The majority correctly recognized that the belief of the decision maker was irrelevant.  The dissenter was Jeffrey Sutton, considered an intellectual star among conservative circuit court judges.  Sutton is without question highly intelligent, but look how he approaches this issue.  

First, he writes:  

The Court permits these claims to go to a jury on the ground that the “cat’s paw” theory overrides the honest-belief rule. I doubt we can sidestep the honest-belief rule so easily. But even if we could, the “cat’s paw” theory fails on its own terms here. Under the theory, a lower-level supervisor, motivated by actionable animus, commits actions or makes recommendations to convince the decisionmaker, oblivious to the discriminatory animus, to take an adverse employment action against the employee.

Here, Judge Sutton signals that he would be receptive to the argument that the “honest belief” rule can be used as a defense to the cat’s paw theory of liability.  This is a radical notion, as the whole point of the cat’s paw theory is that the supervisor’s belief is irrelevant.  In effect, Judge Sutton is suggesting a way to eliminate the cat’s paw theory (even though it has been approved by the Supreme Court.)

He goes on to make the following argument:

Bradshaw’s criticism of Marshall at the demotion meeting, as Marshall testified at her deposition, was that Marshall “do[es]n’t know what [she’s] doing, [she’s] completely inefficient. [She] come[s] in here long hours and [she] still can’t get [her] job done.”  That reflects an honest belief that Marshall worked too much to do too little, not that she was skipping too much work for her FMLA leave.

(In case you’re wondering about all the little brackets, it’s because Sutton changed Marshall’s testimony from the second person to the third person.  There’s nothing really wrong with that, it just makes it a little harder to read.)  

Marshall testified that when Bradshaw demoted her, he said “You don’t know what you’re doing, you’re completely inefficient.  You come in here long hours and you still can’t get your job done.”  According to Judge Sutton, this is evidence that Bradshaw honestly believed in the reason he gave for demoting Marshall.  Remember, summary judgment has to be based on undisputed facts, and so when a judge recites evidence in a summary judgment motion, it means that the evidence is (supposedly) undisputed.  Judge Sutton was willing to accept Bradshaw’s explanation for demoting Marshall as undisputed.  This is complete nonsense.  Marshall’s whole case is about disputing the reasons given for her demotion.  

Again, Judge Sutton is signaling his willingness to depart radically from settled law in order to rule against an employee and in favor of a corporate employer.  He would accept an employer’s explanation for an adverse employment action as “undisputed evidence” of the employer’s “honest belief” for that action.  This would turn the law on its head.  Every employer puts forth a superficially acceptable reason for its adverse employment action.  This explanation is not evidence, it is a contention.  Yes, Marshall’s account of what Bradshaw said to her is evidence, but it is evidence only of the fact that Bradshaw said it.  Rawlings could not rely on Bradshaw’s  statement for the truth of the statement, because that would be inadmissible hearsay.

The argument would be that defendant is not using Bradshaw’s statement to prove that plaintiff was a poor worker, but that Bradshaw believed that she was.  The underlying premise is that he wouldn’t have said it if he didn’t believe it.  This would be fine, except that people, including supervisors, say things all the time that they don’t believe.  One of the cardinal rules of summary judgment is that all evidence must be viewed in the light most favorable to the party opposing summary judgment, but here Judge Sutton (who certainly knows better) does just the opposite.  

There is something even more fundamentally wrong with Judge Sutton’s opinion here.  Judge Sutton’s whole point assumes that Bradshaw’s “honest’ belief about Marshall’s performance is one thing, while her actual performance is something else.  In an employment discrimination case such as this, the employee generally must prove that the reason given for the adverse employment action was false.  The only way for Marshall to prove that the reason given (poor performance) was false would be to prove that her performance was satisfactory.  Her supervisor’s “honest belief” should play no role here.  Bradshaw, as Marshall’s supervisor, was presumably familiar with her performance.  That’s his job.  There is no reason to manufacture an escape hatch for the supervisor.  If a supervisor wrongly accuses an employee of poor performance, it is fair for a jury to infer that the supervisor was doing so intentionally.  

Corporations constantly attempt to avoid responsibility for the acts of their employees by arguing that employers are allowed to make bad decisions and have poor business judgment.  We hear all the time the old canard: “You can’t prove discrimination by showing that the employer’s decision was a bad one.”  The “honest belief” rule is a variation on this theme, because it is really based on the premise that somebody didn’t know what he or she was doing.  In other words, it may look like employment discrimination to you, but it is really just mistakes, incompetence and bad judgment.  This stands reason on its head.  The law should presume that employers make rational, competent and informed decisions.  If an employer wants to make the contrary argument as a defense, fine, but let it make it to a jury, and it should have the burden of proof.  

The “honest belief” rule is an example of the defense bar foisting an intellectually dishonest “doctrine” upon the courts in order to make it accepted jurisprudence.  It is the role of competent employment discrimination lawyers to make sure this does not happen.