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Good Faith Belief in Employee’s Wrongdoing Serves as Defense Against Retaliation Claim

July 25, 2017

A recent Fourth Circuit Court of Appeals ruling may offer employers in North and South Carolina another defense against an employee’s retaliation claim: No liability for adverse action against an employee based on the employer’s genuine belief that the employee made a false complaint of discrimination.

The case before the Fourth Circuit, Villa v. CavaMezze Grill, LLC, et al., involved plaintiff Patricia Villa, who was a manager in one of the defendant companies’ restaurants, the Cava Mezze Grill in Merrifield, Va.  Villa told an upper manager of one of the restaurant’s parent companies that she believed two former employees of the restaurant, Judy Bonilla and Jessica Arias, had been sexually harassed by the restaurant’s general manager.  The company investigated Villa’s report by interviewing the two alleged victims and an employee who allegedly had been present when Bonilla told Villa about the harassment.  During the company’s investigation, however, Bonilla and Arias denied having been harassed and having told Villa that they had been harassed.  Also, the alleged witness to the conversation between Villa and Bonilla said he never heard Bonilla say such a thing.  As a result, the company concluded that Villa had made a false report of sexual harassment and terminated her for that reason.

Villa sued her former employer’s parent companies in federal district court, alleging Title VII retaliation.  During discovery of the case, Bonilla changed her story and admitted that she, in fact, told Villa she had been sexually harassed by the general manager but that – unbeknownst to Villa – she actually never was harassed.  In their defense, the defendants maintained it was undisputed still that the former employer’s conclusion that Villa had made up her allegations was its true reason for terminating Villa and not a pretext for retaliatory animus.  Without disputing that the true reason for her termination was for making a false report, Villa argued that her termination constituted illegal retaliation nonetheless because she acted in good faith when she made her complaint, regardless of what her former employer honestly believed.  The district court agreed with the defendants, however, concluding that the former employer had not engaged in unlawful retaliation and dismissing the case on summary judgment. Villa then appealed to the Fourth Circuit Court of Appeals.

On appeal, the Fourth Circuit confirmed that an employer cannot be held liable for retaliation when it lacks a retaliatory motive in terminating an employee.  Affirming the district court, the Fourth Circuit ruled that an employer who fires an employee based on a good faith belief that he or she engaged in wrongdoing is not liable for retaliation – even if it later turns out that the employee had not engaged in wrongdoing and actually had engaged in protected conduct.  

In Villa’s case, the Fourth Circuit reasoned, her employer did not terminate her in retaliation for reporting the alleged harassment, but because it genuinely believed she had made up the report.  Consequently, the court rejected Villa’s argument that her termination constituted illegal retaliation because her complaint was based on what turned out to be a good faith belief that discrimination had occurred.  Rather, Title VII’s “focus is the employer’s subjective motivation for the action, the facts the decision-maker actually perceived matter,” the Fourth Circuit reminded the litigants.  “If an employer, due to a genuine factual error, never realized that its employee engaged in protected conduct,” the court said, “it stands to reason that the employer did not act out of a desire to retaliate for conduct of which the employer was not aware.” 

When it fired Villa, the employer “did not know Villa had engaged in any protected conduct,” the court stated, adding: “Because its investigation led it to conclude in good faith that Villa had simply made up her conversation with Bonilla,” the employer’s reason for terminating her “was necessarily not retaliatory. Whether the termination decision ‘was wise, fair, or even correct’ is immaterial.”

For employers in the Carolinas, the Fourth Circuit’s ruling offers another example of how the courts will hold employees or former employees to the requirement of proving retaliatory animus under Title VII.  The case also affirms the Fourth Circuit’s view that employers should be afforded deference when making sound and reasonable business decisions.

Sara Svedberg is an attorney in Nexsen Pruet’s Columbia office, who concentrates her practice on advising businesses on employment law matters, as well as products liability matters, and representing companies in civil litigation in both state and federal courts. She also advises federal contractors on their legal compliance responsibilities.