is adopted as new precedent in Third Circuit.
By Paul A. Lieberman, Astrid Schaefer and Andrew Sauer (1)
In Capps v. Mondelez Global (2) the U.S. Court of Appeals for the Third Circuit affirmed the District Court’s Order granting summary judgment to the employer ruling the “honest belief” of an employer that an employee misused the Family and Medical Leave Act (FMLA) (3) is sufficient to defeat a retaliation claim. This EVW Client Alert summarizes the importance of this decision to both employers and employees, compares it to prior decisions concerning the “honest belief rule”, and examines the implications of these cases for employers.
I. Summary of Capps v. Mondelez Global: Honest Belief Rule enunciated
Plaintiff Capps worked for the Defendant since 1989. He took leave under the FMLA i.a. in 2013 and 2014. The FMLA provides eligible employees of covered employers to take up to 12 weeks of unpaid, job-protected leave per year ensuring continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. The specified (family and medical) reasons vary (e.g. birth of a child, taking care of an immediate family member, taking medical leave etc.). The FMLA seeks to accommodate the legitimate interests of employers and promote equal employment opportunity for men and women.
An employee has to meet three criteria in order to be eligible for FMLA leave. The employee must
- have worked for the employer for not less than 12 months,
- have at least 1,250 hours of service in the 12 months before taking leave and
- work at a location where the employer has a minimum of 50 employees within 75 miles of the employee’s worksite.
The Defendant’s leave policy included a provision that an employee is eligible for FMLA leave for a “serious health condition of the employee that makes the employee unable to perform one or more of the essential functions of his or her position”. The requirement for every employee wishing to take FMLA leave due to his or her own health situation is that he or she submits a certification from his health care provider to his employer.
The Defendant also had a “Dishonest Acts Policy”, which was considered a “Major Rule” by which violations of these rules are seen as inexcusable offenses that “will result in immediate suspension pending investigation, which could lead to termination”.
In this particular case, the Plaintiff suffered with Avascular Necrosis (“AVN”), which required a hip replacement in 2003. As a result, he sometimes experienced severe pain that can last days or weeks. The Defendant allowed the Plaintiff to take intermittent FMLA leave when the pain occurred. A submitted medical certification stated that the Plaintiff was unable to perform certain job functions because of his condition. In February 2013 the Plaintiff took a full day of FMLA leave again since his pain had not subsided. While on leave he was arrested for intoxicated driving on his way home from a local pub.
The Plaintiff also took a FMLA leave the next day after being released from incarceration. When he returned to work he did not report his arrest to his employer and was not required to do so under the employers’ policies. Furthermore, Plaintiff did not inform the Defendant about his conviction and sentencing.
In 2014 the Defendant noticed the Plaintiff’s arrest from a newspaper article and saw that the arrest and Court dates coincided with days on which the Plaintiff had taken FLMA leave. The Defendant investigated the case and challenged the Plaintiff with the information. In response the Plaintiff produced a letter from his physician which declared his absence on several dates due to medical problems.
The Defendant terminated the Plaintiffs’ employment based on the Plaintiff’s violation of the Dishonest Acts Policy. The Court ruled that the employer at least had the “honest belief” that the Plaintiff misused his leave. The Court could leave aside whether the Plaintiff actually did misuse his leave because the honest belief of the employer successfully thwarted i.a. the FMLA retaliation claim.
The Capps opinion cited several Sixth Circuit opinions that adopted a modified version of the honest belief rule requiring employers to show that the employer’s discriminatory reason is honest, but also is “reasonably based on particularized facts”.
II. What exactly did the Court decide in this case?
An employer’s honest reasons do not have to be built on “particularized facts”
In Capps v. Mondelez Global the Judges decided a FMLA Retaliation Claim and a FMLA Interference Claim. The U.S. States Court of Appeals affirmed the U.S. District Court’s decision, which granted the Defendant summary judgment.
Furthermore, the Court stated that under the FMLA, when an employee returns from a leave, “the employer must restore the employee to the same or equivalent position held by the employee when the leave commenced, as well as restore the employee with equivalent benefits and conditions of employment”.
That means, when employees invoke rights granted under the FMLA, employers may not “interfere with, restrain, or deny the exercise of or attempt to exercise” these rights. Nor may employers “discharge or in any other manner discriminate against any individual for opposing any practice made unlawful”. In addition, 29 C.F.R. § 825.220(c) prohibits employers “from discriminating or retaliating against an employee or prospective employee for having exercised or attempted to exercise FMLA rights.
Retaliation Claims require proof of the employer’s retaliatory intent. The Court referred to the burden-shifting framework of McDonnell Douglas Corp. v. Green (4), which requires a Plaintiff to first establish a prima facie case of discrimination. If he is successful, the Defendant must articulate a legitimate, nondiscriminatory reason for the adverse employment action. Thereafter it is again up to the Plaintiff to prove clearly that the named reason was simply an excuse for discrimination. The Court confirmed that the Plaintiff could not successfully provide evidence of his being discharged in retaliation for taking FMLA leave and of the Defendant denying him his rights under the FMLA.
To prove this retaliation or discrimination the employee had to show a causal connection between the FMLA leave and the termination. To establish such causal link, the employee has to show a direct- temporal proximity between taking leave and the termination.
The proof of this connection can be rebutted by the employer showing its honest belief about the employee’s misuse of the FMLA. The thought is that an honest belief in certain reasons is nondiscriminatory, regardless whether the reasons can be proven or not. This case is the first time that the Third Circuit adopted the honest belief rule, since in two previous non-precedential decisions it was only mentioned.
The Court also stated that even assuming the Plaintiff would have been able to establish such a causal link, the Defendant met its burden of demonstrating a legitimate, nondiscriminatory justification for the Plaintiff’s discharge with evidence that he was terminated for his misuse of FMLA leave and dishonesty surrounding the leave in violation of the employer’s policies (adoption from the Seventh, Eighth and Tenth Circuits, e.g. Kariotis v. Navistar Int’l Transp. Corp. (5), see below II.).
The Court stated that “arguing about the accuracy of the employer’s assessment is a distraction because the question is not whether the employer’s reasons for a decision are right but whether the employer’s description of its reasons is honest” (see Scruggs v. Carrier (6): “the question is not whether (the employer) was correct to believe (…) but rather whether he honestly believed that (the employee) did”).
The Court explained that according to Medley v. Polk (7) discrimination laws allow employers to discharge for almost any reason, as long as the reason is not illegal. In Capps v. Mondelez the Defendant could clearly show a legitimate, nondiscriminatory justification for discharging the Plaintiff, which is its honest belief that the employee misused his FMLA leave and was otherwise dishonest in violation of the Defendant’s policies.
Furthermore, the Court decided that having failed to prevail on his Retaliation Claim, the Plaintiff also lost his Interference Claim; because there was no retaliation the Defendant did not interfere with rights of the Plaintiff. The Court explained that “because the Plaintiff received all of the benefits to which he was entitled by taking leave and then being reinstated to the same position from which he left, (…) he fails to make a prima facie showing of interference”.
III. Additional cases relying on the honest belief of employers
The honest belief of employers has been relied on in other cases. In Scruggs v. Carrier the Court stated that the question is not whether the employer was correct to believe that the employee misused his FMLA leave, but rather whether it honestly believed that the employee did. Furthermore, the judge said that although the employer could have conducted a more thorough investigation, it was not required to do so.
In Pulczinski v. Trinity Structural Towers (8) the Court found that the critical inquiry in employment discrimination cases is not whether the employee actually engaged in the conduct for which he was terminated, but whether the employer in good faith believed that the employee was guilty of the conduct justifying discharge. If an employer, in explaining a termination for purposes of an employment discrimination action, says it believed that the employee violated company rules, then proof that the employee never violated company rules does not show that the employer’s explanation was false. That proof only shows that the employer’s belief was mistaken.
To prove that the employer’s explanation for a termination is false when the employer says that it believed that the employee violated company rules, one has to show that the employer did not truly believe the employee violating company rules. To put it simply, employers are allowed to make even hasty business decisions, as long as they do not discriminate unlawfully.
The case of Medley v. Polk establishes that discrimination laws allow employers to discharge employees for almost any reason whatsoever (even a mistaken but honest belief) as long as the reason is not illegal discrimination. An employer who discharges an employee honestly believing that the employee has abandoned his or her job and is not using FMLA leave for its intended purpose does not violate the FMLA, even if its conclusion is mistaken.
The Court in Kariotis v. Navistar International Transportation stated that an employer who honestly believes it is firing a fraudulent employee may not be liable for intentional discrimination under ADA, ADEA, ERISA or FMLA. To successfully challenge the honesty of the company’s reasons an employee must specifically rebut those reasons. An opportunity for rebuttal is not an invitation to criticize the employer’s evaluation process or simply to question its conclusion about the quality of an employee’s performance. Rather, rebuttal must include facts tending to show that the employer’s reasons for some negative job action are false, thereby implying (if not actually showing) that the real reason is illegal discrimination.
In other words, “arguing about the accuracy of the employer’s assessment is a distraction (…), because the question is not whether the employer’s reasons for a decision are right, but whether the employer’s description of its reasons is honest”. A reason honestly described but poorly founded is not a pretext as that term is used in the law of discrimination.
In the landmark decision Burwell v. Hobby Lobby Stores, Inc. (9) the United States Supreme Court allowed closely held for-profit corporations to be exempt from a regulation its owners religiously object to if there is a less restrictive means of furthering the law’s interest, according to the provisions of the Religious Freedom Restoration Act (RFRA).
Burwell v. Hobby Lobby Stores, Inc. shows similarities to the previous cited honest belief cases. In Hobby Lobby the Court held that a Plaintiff makes a prima facie case under the RFRA by showing that the government substantially burdens a sincere religious exercise. The burden then shifts to the government to show that the compelling interest test is satisfied through application of the challenged law to the claimant whose sincere exercise of religion is being substantially burdened. This burden-shift is also relevant in the honest belief cases.
Furthermore, the Supreme Court stated that their only task was to determine whether the Claimant’s belief was sincere, and if so, whether the government applied substantial pressure on the claimant to violate that belief. The owners of Hobby Lobby refrained from providing coverage for drugs or devices they considered to induce abortions. The Court stated, that it is not for them to question whether that belief is reasonable.
The Court also referred to Thomas v. Review Board of the Indiana Employment Security Division (10) and United States v. Lee (11). Thomas involved a Jehovah’s Witness who worked for a company owning a foundry and a factory manufacturing turrets for military tanks. After being transferred from the foundry to the factory, the Plaintiff raised a religious objection to the factory job. Distinguishing between factory and foundry work, the Court found that the Plaintiff drew a line and it was not for the Court to say that the line was unreasonable.
In other words, the distinction that the Plaintiff drew was not as important as the fact that he made it based upon his religious beliefs and then it did not matter whether the line was acceptable, logical, consistent or comprehensible to others in order to merit First Amendment Protection. In Lee, the Court found that it is not within the judicial function and judicial competence to determine whether a Plaintiff has the proper interpretation of his faith.
In all these cases – as in the honest belief cases – the Courts clearly state that they do not control the faith of the employee or employer or the specific beliefs as long as they are honest and sincerely held beliefs. It is not for the judges to examine whether a religious belief is sensible, logical, genuine or the like, as long as the decision by the employee/ employer is made on grounds of the belief. The new honest belief cases are similar, as it does not matter if the belief is right or wrong – e.g. if the employee really misused his FMLA leave as in Capps – as long as the employer honestly believed it.
IV. What consequences do these cases have for employers?
Reasons are not required to be based on “particularized facts”.
As emphasized above, the main consequence of these honest belief cases is that it does not matter if the employer or employee was right in its or his/ her belief, as long as it truly believed. As a result, the (retaliatory) intent of the employer is very important and as long as the employer’s intention or belief is nondiscriminatory and the reason for termination or discharge is not illegal, the action of the employer will be accepted by the Courts. All in all, this is a fairly employer friendly jurisprudence.
Nonetheless, employers should look at the language of their policies and procedures to be sure that their actual practices provide sufficient evidence of nonretaliatory basis, because the employee’s burden will be to prove that the honest belief was pretextual. The Courts do not specify exactly what evidence establishes that a belief is honest. Certainly there has to be some foundation to the belief, but the Courts seem to make case by case decisions.
A third consequence for employers is stated by the Court in Kariotis v. Navistar: Discrimination could have been proved if the employee had pointed out that the company investigated her differently because she was an older employee or because she was on disability leave. So it is important for employers not to discriminate when conducting investigation and build sufficient support to establish its honest belief.
Fourth, certain risks for employers remain. Capps v. Mondelez was decided by a U.S. State Court of Appeals and presently there is no U.S. Supreme Court judgement. Additionally, several other Courts do not go as far as Capps concerning the honest belief of employers. The Sixth Circuit in Wright v. Murray Guard, Inc.,12 an earlier opinion, decided that an employer must establish its reasonable reliance on the particularized facts that were before it at the time the decision was made. This reasonable reliance is a slightly higher requirement than the other decisions discussed above.
Contrary to Wright the Court found in Pulczinski v. Trinity Structural Towers that even if the business decision was ill-considered or unreasonable, provided that the decision maker honestly believed the nondiscriminatory reason he gave for the employment action, then a pretext for the decision does not exist.
A serious problem for the Capps v. Mondelez decision is that it disregards the U.S. Department of Labor guidance. Under the DOL guidance an employee can unlimitedly do whatever he wants during his FMLA leave, unless the employer has a divergent policy. Next to the honesty policy the employer in Capps didn’t specify what the employees were allowed to do during leave.
Furthermore, the FMLA legislative intent is to make the employee’s working life compatible with personal matters and an employee might be uncertain whether to claim a FMLA leave – or other employment rights – if the honest belief of his or her employer is sufficient to justify employment actions. Thus, these honest belief decisions can be interpreted as possibly undermining this legislative intention.
In conclusion, it is important for employers to be familiar with the decision in Capps v. Mondelez, the honest belief line of decisions, review firm’s policies and procedures, and to base their employment decisions on a broad understanding of the facts. If some of the facts turn out to be unable to be proven or even false, it should not result in exposure for employers in the Third Circuit (which covers Pennsylvania, New Jersey and Delaware) as long as they honestly believed that the facts were true. Whether the Third Circuit’s precedent will be adopted in other jurisdictions remains to be seen.
For further consultation, please contact Paul A. Lieberman at (212) 561-3628 or firstname.lastname@example.org, or your regular EVW attorney.
© Eaton & Van Winkle, LLP, 2017. All rights reserved. This memorandum was prepared as a service to clients and friends of the firm to report on recent developments that may be of interest to them. The information in it is therefore general, and should not be considered or relied on as legal advice.
1 Paul Lieberman is Partner at EVW. Astrid and Andrew are German “Referendars” completing a legal traineeship at EVW as their final stage of the German formal legal training. Astrid graduated from the University of Erlangen-Nuremberg and Andrew from the University of Mannheim.
2 Capps v. Mondelez Global: United States Court of Appeals, Third Circuit,No. 15-3839, 01/30/2017.
3 The Family and Medical Leave Act of 1993, Public Law 103-3, Enacted February 5, 1993.
4 McDonnell Douglas Corp. v. Green: 411 U.S. 792 (1973).
5 Kariotis: United States Court of Appeals, Seventh Circuit, 131 F.3d 672, 12/9/1997.
6 Scruggs: United States Court of Appeals, Seventh Circuit, 688 F.3d 821, 8/3/2012.
7 Medley: United States Court of Appeals, Tenth Circuit, 260 F.3d 1202, 8/9/2001.
8 Pulczinski: United States Court of Appeals, Eighth Circuit, 691 F.3d 996, 8/31/2012.
9 Hobby Lobby: United States Court of Appeals, Tenth Circuit, 723 F.3d 1114, 6/27/2013.
10 Thomas v. Review Board of the Indiana Employment Security Division: 450 U.S. 707, 101 S.Ct. 1425, 67 L.Ed.2d 624 (1981).
11 United States v. Lee: 455 U.S. 252, 102 S. Ct. 1051, 71 L.Ed.2d 127 (1982).
12 Wright v. Murray Guard, Inc., 455 F.3d 702, 708 (6th Cir.2006).