Mistakes happen. Including in the context of employment
decisions. But not every mistake amounts to actionable employment discrimination. That’s the
lesson of this case, where Robyn Smith’s employer fired her after it wrongly concluded that she
had been stealing from one of the company’s clients.
So starts the 6th Circuit’s opinion in Smith v. Towne Properties Asset Management Co.
Robyn Smith worked as a community manager for apartment complexes. As part of her compensation, she lived rent-free on site.
Several years into her employment, Smith developed pseudotumor cerebri—a condition caused
by spinal fluid pressure on the brain—the symptoms of which include migraines, blurred vision, vertigo, and short-term memory loss. She took several leaves of absence under the FMLA, all without incident.
Thereafter, a co-worker complained to management that Smith had been embezzling money by coding her gas and electric bills to vacant apartments. Following an investigation, Towne Properties fired her.
As it turned out, prior ownership had permitted Smith to have free utilities, a fact that no one had bothered to disclose to new ownership. Even after discovering its mistake, however, the company refused to reconsider its termination decision.
The appellate court concluded that the district court had properly dismissed Smith’s discrimination lawsuit. Why? Because, even though the employer’s reason for firing her turned out to be incorrect, it had an honest belief about it when it reached its decision.
To win on her claim, Smith must show (among other things) that Towne’s explanation for firing her was pretext for disability discrimination. In other words, that the neutral explanation is simply cover for a discriminatory motive. Smith can’t show a trialworthy dispute about pretext if Towne honestly believed that she was misappropriating utilities even if that belief turned out to be mistaken.
The court relied on the company’s investigation, including interviews of witnesses and review of documents, to conclude that “Towne made an informed decision based on specific facts.”
The “honest belief rule” is one of the most effective shields available to employers in discrimination cases. As long as the employer has an “honest belief” in its proffered nondiscriminatory reason for discharging an employee, the employee cannot establish that the reason was pretextual simply because, in reality, it is incorrect.
Yet, if you want to be able to argue that your honest belief justifies your decision, you must be able to support your claim. Contemporaneously-made documentation, coupled with corroborating evidence developed in a thorough investigation, is best. Courts are loath to second-guess employers’ business judgment, but will not hesitate if it appears an employer slacked in its investigatory responsibilities. Smith v. Towne Properties Asset Management is a good roadmap for employers to follow in claiming the protections of this rule, in the event a decision later turns out to be mistaken.
