Monday, September 12, 2016

Making Sense of the Sixth Circuit's Honest Belief Rule

In numerous decisions over the years, including most recently in Richardson v. Wal-Mart Stores, Inc., No. 15-1142 (6th Cir. Sept. 9, 2016), the Sixth Circuit has applied the "honest belief" rule in evaluating whether a defendant intentionally discriminated against a plaintiff in violation of Title VII of the Civil Rights Act of 1964 or another EEO law. Pursuant to the honest belief rule, a plaintiff cannot prevail if the evidence establishes that the employer honestly believed that its asserted reason for taking an action was based in fact, even if it turns out that the employer's belief was mistaken. In Reva, for instance, the court held that the employer's decision to terminate the plaintiff under its coaching policy was protected by the honest belief rule, and therefore, the plaintiff could not prevail on her age discrimination claim.

This post examines the Sixth Circuit's application of the honest belief rule and explains why it appears to be inconsistent with fundamental principles of disparate treatment and of burdens of proof.

The honest belief rule commonly arises in cases in which the plaintiff was terminated for having allegedly engaged in misconduct, and the plaintiff tries to establish pretext by showing that he did not engage in the alleged misconduct. In such a case, the employer prevails if it honestly believed that the plaintiff had engaged in the alleged misconduct.

For example, in Clay v. United Parcel Service, 501 F.3d 695 (6th Cir. 2007), the defendant asserted that it fired Olin Clay for violating its three-day, no-call, no-show policy, and Clay presented evidence that he had only missed two consecutive days of work. The Sixth Circuit explained that "[o]ne way in which a plaintiff may demonstrate pretext is by showing that the reason given by the employer 'is ultimately found to be mistaken, foolish, trivial, or baseless.'" The court stated that Clay's "most compelling argument that UPS's reason was pretextual is that he missed only two consecutive days of work, not three, [and] [t]his evidence certainly tends to show pretext in that UPS's proffered reason does not appear to be anchored in the facts." Nonetheless, UPS was entitled to summary judgment if it could establish that it was entitled to the benefit of the honest belief rule.

The Sixth Circuit concluded that the district court had erred in applying the honest belief rule without analyzing whether the defendant's allegedly honest, but mistaken, belief was "reasonably based on particularized facts." The court explained that the burden is on the employer to establish that the honest belief rule applies.
The honest-belief rule is, in effect, one last opportunity for the defendant to prevail on summary judgment. The defendant may rebut the plaintiff's evidence of pretext, by demonstrating that the defendant's actions, while perhaps "mistaken, foolish, trivial, or baseless," were not taken with discriminatory intent. We give the defendant an opportunity to show that its intent was pure, because "the focus of a discrimination suit is on the intent of the employer. If the employer honestly, albeit mistakenly, believes in the non-discriminatory reason it relied upon in making its employment decision, then the employer arguably lacks the necessary discriminatory intent."
Applying this standard, the Sixth Circuit concluded that UPS had not shown that it had reasonably relied on facts available to it at the time the decision was made to fire Clay for violating the three-day, no-call, no-show policy, and therefore, it was not entitled to the protection of the honest belief rule.

As illustrated, the Sixth Circuit's honest belief rule is essentially a judge-made affirmative defense. It allows an employer to avoid a trial on liability even though the plaintiff has established what would otherwise be a jury issue as to pretext. Seen this way, the honest belief rule appears to be a boon to employers.

Nevertheless, dissenting in Clay, Judge Alice Batchelder came to the opposite conclusion. She criticized the majority's application of the honest belief rule as improperly shifting the burden of proof to the defendant to disprove discriminatory intent. In her view, UPS was only required to produce evidence that it had an honest, even if possibly mistaken, belief that Clay had missed three consecutive days of work, and the burden of proof remained on Clay to produce evidence that UPS's mistaken belief was not honestly held.

Judge Batchelder's dissent is consistent with the approach taken by the Seventh Circuit. In Little v. Illinois Department of Revenue, 369 F.3d 1007 (7th Cir. 2004), the court stated: “[E]ven if the business decision was ill-considered or unreasonable, provided that the decisionmaker honestly believed the nondiscriminatory reason he gave for the action, pretext does not exist.” Rejecting the Sixth Circuit's approach, the Little court stated that "[w]here the employment action is grounded in an honest and permissible reason, there can be no intent to discriminate unlawfully -- even if that reason is not reasonably based on particularized facts."

So what’s the correct approach?

In my view, Judge Batchelder and the Seventh Circuit have it right. The Sixth Circuit makes a mistake right out of the gate by adopting a per se rule that a plaintiff can establish pretext by showing that the employer's reason is mistaken. Thus, in the Sixth Circuit's view, an employer's mistaken belief is a pretext for discrimination, even if the employer was actually motivated by the mistake. But I don’t see how this can be correct. An employer's decision to terminate an employee because it mistakenly believed he engaged in misconduct cannot be a cover for discrimination if the employer actually believed that the employee engaged in the misconduct. Under such circumstances, the employer's reason for the termination was not that the employee necessarily engaged in misconduct, but that the employer believed the employee engaged in misconduct. By merely showing that he did not engage in misconduct, the employee therefore does not establish that the employee's belief that he did so is pretextual. To establish pretext, the employee would have to show that the employer did not actually harbor such a belief.

To be sure, the reasonableness of an employer's belief is not irrelevant. In Little, the Seventh Circuit stated that "the more objectively reasonable a belief is, the more likely it will seem that the belief was honestly held." In this regard, the reasonableness of an employer's belief is relevant in determining whether a reasonable jury could conclude that the employer did not honestly believe that the employee engaged in misconduct. But an employer's asserted honest belief is not pretextual merely because it is unreasonable. Rather, the unreasonableness of the belief is evidence that the belief was not honestly held. Under the Sixth Circuit's view, an employer is essentially held to a negligence standard, under which it is liable if it acted unreasonably, regardless of whether it acted with discriminatory intent.

One practical effect of the Sixth Circuit's approach is that it might increase the likelihood that an employer will be liable for a decision based on unconscious bias. The Clay court stated that the defendant's honest belief must be "reasonably based on particularized facts rather than ignorance and mythology." If a decisionmaker's belief is based on unconscious stereotypes about an employee's race, age, disability, or other protected characteristic, it might be grounded in bias even if honestly held. The Sixth Circuit's honest belief rule may help to guard against such forms of implicit bias.

As discussed in this previous post, Supreme Court case law suggests that employer decisions motivated by unconscious bias do not constitute intentional discrimination, i.e., disparate treatment. But even assuming that such actions can be said to be intentionally discriminatory, the Sixth Circuit's approach appears to go too far by equating unreasonableness with discriminatory intent and by shifting the burden of proof to the employer to show that it did not act with discriminatory intent.

One final comment about the Sixth Circuit's recent decision in Reva. The defendant alleged that it fired the plaintiff because she had received a fourth coaching for not meeting job expectations or for violating the defendant's policies and procedures. Although the plaintiff apparently challenged all of the coachings, the court concluded that the honest belief rule applied because the decisionmaker who terminated the plaintiff based on the fourth coaching reasonably relied on the previous coachings in her personnel file. For the honest belief rule to apply, however, I would think that the court would have had to have determined that each of the four coachings was reasonable, given that each of them was necessary to justify the plaintiff's termination under the defendant's coaching policy.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.