Quirky Question # 194: Firing the Abusive Manager

Quirky Question # 194:

One of our managers is known for being very “tough.”  None of the employees he supervises has filed a complaint against him, either internally or externally, but rumors of borderline abusive behavior kept reaching our executive suite.  As a result, we investigated.  The rumors were well grounded factually – the guy was much rougher on employees than we realized.  Based on our investigation, we’d like to fire him.  But, he falls into two protected classes.  Given that fact, we are anxious about a discrimination lawsuit if we terminate his employment.  Got any advice?  What are the risks of doing nothing versus doing something?

Dorsey’s Analysis of Quirky Question # 194:

Let us begin by offering our compliments on several scores. We commend you for conducting an investigation, even in the absence of a formal complaint. We also commend you for your expressed desire to do the right thing – here, fire the abusive manager. Lastly, we commend you for asking the right questions. As in so many other employment law contexts, the questions will lead to a balancing of both risks and harms. Let’s go back to your inquiry and flesh out some of these observations.

As referenced above, you were prudent to conduct an investigation. This is true even when no formal internal complaint has been filed. As you point out, “rumors of borderline abusive behavior kept reaching our executive suite.” This highlights several key features of your fact pattern. The offending conduct was persistent. Similarly (and perhaps unsurprising when behaviors are persistent), the offending conduct was observable. Further, the conduct involved seemingly was serious, so serious that the rumors about your manager’s behavior had filtered up to the top of the organization. We’d hypothesize that in a context like this, the rumors also were widespread in the lower levels of the company, among the affected employees’ co-workers and others who had to interact with your problematic manager.

When advising clients on similar fact patterns, we try to highlight the appropriate company response by focusing on three issues. At the point where a company has learned of troubling or problematic behavior, it has two choices – investigate or ignore. Those who advocate the latter approach typically point to the facts that no “formal” complaint has been filed or that no lawsuit has been initiated. Especially if the manager is successful (generating sales or contributing in other ways to the company’s profitability) it is perhaps understandable that a company is reluctant to investigate someone who is making the company money, especially if that investigation might result in termination. While understandable, however, the “do nothing” approach is, charitably-put, imprudent.

As referenced above, those determining whether to conduct an investigation should consider three critical issues.

First, We encourage our clients to consider a practical issue – what is the impact of inaction on employee morale? How will employees adversely affected by the conduct perceive the corporation? Will the company lose capable employees, either to other types of jobs or, worse yet, to your competitors? What effect will your failure to investigate (and address the problems) have on your applicant pool? What impact might this fact pattern have on your customer base, especially if the offending behaviors are not reserved exclusively for employees? Or, even if the manager keeps his temper in check and his obnoxious behaviors to a minimum when dealing with customers, how will your customers react if they later read about the behaviors in the newspaper after a lawsuit is initiated?

While it might sound simplistic, the Golden Rule is a reasonable basis for evaluating employee conduct. Is this the way you would like to be treated? Or, in the sexual harassment context for example, is this the way you would want your spouse treated at her worksite? Or, for any parent, how would you feel if your daughter experienced this type of abuse on her first foray into corporate America? If your executives’ reaction to these types of inquiries is a resounding “No” (or something a bit more emphatic and profane), this is a pretty good indicator that the behaviors in your own company should at least be investigated. Remember, at this stage, all you are doing is gathering more information, information on which a more thoughtful judgment can be made at a later date.

Second, We encourage companies to consider the impact of inaction on the litigation risk? Admittedly, it is difficult to predict with accuracy whether litigation will be initiated in connection with any particular problem. Here, as you note, there have not even been internal complaints, let alone charges filed with an administrative agency or a lawsuit. But, ask your executives to imagine themselves in a deposition in a hypothetical lawsuit a year or two down the road. Invariably, some version of the following questions will be asked: “When did you first learn that this manager was behaving abusively towards his subordinate employees? How did you first learn? What action did you take after acquiring that knowledge?” We’d maintain that responding to the final question by stating, “We did nothing,” is not a compelling response. You may as well get out your checkbook after the deposition concludes.

Even more problematic is the possibility that the offensive behaviors increased in intensity or severity since your executives made the decision not to investigate. In this context, you not only are trying to explain your inaction, you are doing so in a lawsuit where the plaintiff’s counsel will be able to make a compelling argument that if your company had acted, the subsequent (and more severe) harm, either to the existing employees or someone new, would never have occurred. Again, this is not an enviable position for a company.

Third, We urge companies to evaluate their potential legal exposure on the basis of the well-established “knew or should have known” standard. Here, some of the rumors have made their way up the corporate ladder. Arguably, in this context, the company “knew” of the problems, however imprecisely. But, even if you could persuade a fact-finder (whether judge or jury) that your organization did not really “know” what was going on, it will be more difficult for your company to convince anyone that it “should not have known.” The behaviors were sufficiently pervasive and serious that rumors had reached your executive suite. In this setting, your company is on notice. In short, you either had “actual knowledge” or “constructive knowledge” of the problems, or both.  Sadly, in a far more egregious setting, the ongoing criminal prosecution of Jerry Sandusky, and the inevitable civil lawsuits that will follow, present a stark example of the risks associated with the failure to act once a company (or a university) is on notice.  There simply is no good explanation for inaction when that passive response may put others at risk.

As you can tell,  we’re not fans of the “do nothing” approach. Hence, our previous compliments about your organization’s pro-active decision to initiate an investigation.

The next question is how you go about your investigation. That’s a separate topic for another day. (Indeed, we routinely present seminars on how to conduct appropriate workplace investigations, so this is a content-rich subject area.) Given that you conducted an investigation, however, and confirmed your worst fears about the manager’s behavior, for the purpose of this analysis we can skip over the investigation issues, with one exception. At some point in your investigation, you must interview the offending manager. This is critical, from both a substantive and procedural fairness standpoint. (You don’t indicate whether you conducted that interview here; we will assume that you did and that the information learned in that conversation did not alter your analysis regarding the appropriate response.)

As you described, you have concluded that your manager’s conduct was more serious than you had been led to believe and you have determined that discharge is the appropriate response. It may be. There also may be some interim steps that could be explored. We’ll also assume, however, that in this instance, those steps would be futile and your conclusion that termination is the only appropriate response is warranted.

In this context, haven’t you really already answered your question about the wisest course of action going forward? You’ve investigated. You’ve concluded that your manager is beyond redemption. You recognize that a failure to discharge likely will expose your firm to civil liability at some point down the road, possibly from multiple plaintiffs in one or more lawsuits. In this context, don’t you need to terminate your manager?

We appreciate your concern about the fact that your manager falls into two protected classes. But, if you are choosing between the unattractive options of a lawsuit filed by an abusive manager or one or more lawsuits filed by the managers’ victims, which would you rather defend? For us, this is an easy call.

Moreover, the mere fact that your manager falls into two protected classes does not necessarily suggest that he is likely to prevail. The federal discrimination laws, and the parallel state anti-discrimination statutes, prohibit discrimination. They do not prohibit (and should not inhibit) your company from terminating an individual who falls into a protected class, whether it is age, national origin, race, religion, or some other category. The anti-discrimination laws prohibit discrimination on the basis of one or more protected criteria, whatever they might be. The laws do not restrict employers from terminating employees who are not meeting your company’s performance expectations, or who violate your company’s policies, or who abuse other employees, or who misappropriate your company’s trade secrets, or who engage in any other conduct antithetical to the interests of your company.

Of course, your instincts about a possible lawsuit by the discharge employee might be on target. We have yet to determine a way to protect against frivolous lawsuits. Your manager might assert a claim that the reasons advanced by your company for taking the adverse action against him (whether discharge, or any other adverse employment action) are merely a “pretext” for discriminatory conduct. But your ex-employee will have to prove that the reasons your company articulated were not the real reason for your company’s actions. In the fact pattern you have described, don’t you think your company will prevail on that point? Your corporation heard rumors of serious misconduct. You conducted a careful investigation. The investigation established that the rumors were not just true, the problems were even more serious than you previously had believed. To protect your other employees from this abusive and unfair treatment, you made the difficult decision to terminate an otherwise high performing manager, a decision that could well have short-term adverse economic consequences for your company. Further, if the problems were pervasive (as your investigation presumably established), you should have no shortage of witnesses to come forward to express these sentiments. This sounds like a pretty compelling defense case if you are later confronted by a lawsuit filed by the abusive manager.

There are any number of judicial decisions that address fact patterns similar to the one you described. Let us bring one to your attention. In Martinez v. W.W. Grainger, Inc., No. 11-1422 (8th Cir. Dec. 22, 2011), the intermediate appellate court addressed a situation not too different from the facts you briefly recounted. The employer, W.W. Grainger (Grainger), had terminated Martinez, who fell into two protected categories (race and national origin). The termination resulted from an investigation into Martinez’s conduct, an investigation that revealed Martinez had created what his subordinates described as a “fearful” work environment. These employees described Martinez as demeaning, volatile, and intimidating to employees, and provided examples of Martinez yelling and using profanity toward his subordinates. The company’s investigation resulted in very negative conclusions about Martinez’s conduct. Significantly, Grainger met with Martinez as part of the investigation to elicit his reaction to the information gathered by the company. In the interview with Martinez, he seemingly was reluctant to “take ownership” of his “managerial shortcomings.”

Following his discharge, Martinez sued. The federal District Court granted Grainger’s motion for summary judgment on all counts. The Eighth Circuit affirmed. As the appellate court pointed out, “Martinez failed to establish that Grainger’s proffered legitimate, nondiscriminatory reason for his termination was pretextual. [Witnesses] testified that Martinez was terminated based on the gravity of his conduct as described by other employees and his perceived failure to take responsibility for the environment at the branch and his own leadership deficiencies.”

Note that Martinez attempted to persuade the trial court, and later the appellate court, that he had been treated differently from other managers who also had displayed similar managerial problems. Given that a key component of discrimination claims is the concept of differential treatment, this was an important issue for the courts to consider. If Martinez could establish that other managers had created similar “fearful environments”, but had not been terminated, the company’s actions toward him might have been more suspect. Consequently, the court carefully considered five other managers who Martinez contended had exhibited similar problems but who had not been discharged. The Eighth Circuit concluded, however, that “the other five branch managers differed from Martinez in material respects.” Martinez’s claims were dismissed.

The bottom line is that you should trust your instincts. Having conducted a careful investigation (which, again, presumably involved an interview of your manager), having corroborated your concerns, and having concluded that this manager poses a significant risk to your company, whether evaluated on the basis of employee morale or legal exposure, don’t let your anxieties about a possible lawsuit deter you from taking appropriate action.

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