'Sorry, It’s My Bad, but You’re Still Fired--& Have No Case': The Honest Belief Defense in Employment Law

What happens when you make a mistake that results in harm to another person? In social situations, for most adults in the U.S., you apologize and, if possible, work to correct it. If you’re a vehicle driver in the U.S., it’s likely you’ll be required to pay to fix or compensate for the harm, or your vehicle insurance company will (except for your deductible) and your premiums will go up. More generally under American tort law if you are a person or enterprise who makes a mistake that causes harm to another person, you can be required to pay compensation to that person, at least if your mistake was unreasonable. But if you are an employer in the U.S. who fires an employee based on a mistaken belief the employee engaged in misconduct, or other mistaken belief, you probably won’t have to correct your mistake or compensate the employee harmed by it. In that situation multiple courts and agencies will say you owe nothing to that employee. That result is probably unsurprising to those familiar with the concept of “employment at will,” which means that the employment relationship “may be terminated at any time, by either the employer or the employee, without cause,” and is the default rule in 49 states. However, what’s become known as the “honest belief defense” protects employers from consequences for mistakenly harming employees even when the default rule of employment at will does not apply. Both state courts and – even more so – federal courts apply the honest belief defense even when an employee pursues a claim under an employee protection statute, or employment contract, or other source of law that has been recognized as an exception to employment at will. Consequently, the honest belief defense has been applied to dismiss claims under anti-discrimination statutes, anti-retaliation provisions, the federal Family and Medical Leave Act, employment contracts, and more. One reason for this may be that Congress and the President of the United States have never enacted a statute that in general makes it illegal for an employer to fire an employee for a mistaken reason. And currently the only state that arguably has such a statute is Montana, with its Uniform Employment Termination Act that requires terminations to be for “good cause.” However, as is discussed in this article, the National Labor Relations Act already has, and the Family and Medical Leave Act at least arguably has, “interference” provisions that make it illegal for an employer to “interfere” with an employee’s exercise of rights under those statutes, even when based on an “honest but mistaken belief” the employer was justified in doing so. Moreover, just because an employer claims it had an honest reason for its adverse action against an employee does not necessarily mean the true reason of the employer (or its agent) was not unlawful. Courts have already developed standards to deal with the possibility that an employer’s claimed reason for action against an employee is pretextual. Although federal and state court decisions are extensively discussed in this article, it currently appears that in many parts of the U.S. neither federal nor state courts are likely to do much to assist employees who are harmed by employer mistakes. It should not be overlooked, however, that Congress and state legislatures could amend existing statutes to protect employees who are mistakenly terminated or otherwise harmed by employer action, and state courts could do the same in interpreting state laws such as the growing number of state laws governing minimum wage or requiring leave for employees. This article will thus discuss the current legal rules for the honest belief defense for employers, and propose some possible changes in the rules for that defense that would provide more protection for employees and, in some cases, better further the objectives of statutes. Part I of the article discusses the current legal rules applying to employer honest belief, under state employment contract law, anti-discrimination and other “illegal motive” statutes, and the federal Family & Medical Leave Act. Part II discusses the rule for the National Labor Relations Act’s “interference” provision, affirmed in 1964 by the U.S. Supreme Court in NLRB v. Burnup & Sims, Inc., that an employer cannot interfere with an employee’s exercise of a protected right even for an honest but mistaken reason. Part III proposed rules for the honest belief defense: Subpart A proposes that the Burnup & Sims rule be applied to the “interference” provision of the Family and Medical Leave Act when the employer’s termination of or other adverse action against an employee interferes with the employee’s exercise of a statutory right; Subpart B discusses and assesses some apparent policy reasons why courts have created such a strong honest belief defense for employers; and Subpart C discusses some standards courts should consider adopting for the honest belief defense.