Suppose an employee complains of sexual harassment by a supervisor. The supervisor admits that sexually inappropriate conduct took place, but claims the complainant was the instigator. Neither the employee nor the supervisor offers other witnesses who might shed light on what really occurred. What do you do?

The employer in Mendoza v. Western Medical Center of Santa Ana approached this situation by firing both employees following a brief investigation. Mendoza, the subordinate, sued Western for retaliation and won. Ordering a new trial on different grounds, a California Court of Appeal made some concerning comments about the hospital’s investigation. The court suggested that the lack of a “thorough investigation” could be construed as evidence of the employer’s retaliatory motive.

The Investigation

Mendoza was a nurse at Western Medical Center Santa Ana. By all accounts, Mendoza was a skilled and competent employee. But in October 2010, Mendoza (who is gay) complained that a recently-hired supervisor (also gay) was sexually harassing him. Mendoza claimed the supervisor made repeated inappropriate comments and exposed his genitals to Mendoza. The supervisor acknowledged that sexually inappropriate conduct occurred, but claimed that Mendoza consented to and even initiated it.

The hospital conducted a brief investigation. A senior supervisor interviewed Mendoza and the supervisor simultaneously. No other employees were interviewed and neither Mendoza nor the supervisor identified any witnesses to the other’s conduct. The hospital concluded that both employees violated policy, and terminated them.

Mendoza sued for wrongful termination, claiming the hospital discharged him in retaliation for making the complaint against his supervisor.

The Court’s Critique

After a trial, the jury determined that Mendoza’s complaint was “a” motivating factor in the hospital’s decision to terminate his employment and awarded him $238,328. The hospital appealed the decision based the California Supreme Court’s recent decision in Harris v. City of Santa Monica. In that case, the Court held that the unlawful motive must be a “substantial” factor in mixed-motive discrimination cases.

The Court of Appeal agreed that the judge did not properly instruct the jury regarding the mixed motive standard. However, the court declined the hospital’s request to direct a judgment in its favor. The court concluded that a jury could still find evidence of substantial retaliatory motive based on the hospital’s less than thorough investigation. The court noted that Mendoza’s expert witness testified regarding numerous shortcomings in the hospital’s investigation, including : (1) the investigation was performed by manager, who did not consult with human resources; (2) no other employees were interviewed to assess Mendoza’s or his supervisor’s credibility; and (3) the investigation was stalled for several weeks while Mendoza was on medical leave.

The hospital countered that the same expert also testified that a more rigorous investigation probably would not have revealed any further facts. But the court explained that the hospital’s cursory effort was “evidence suggesting that defendants did not value the discovery of the truth so much as a way to clean up the mess that was uncovered when Mendoza made his complaint.”

In short, the court found that a failure to fully investigate could create an inference that the hospital harbored an unlawful motive. The court acknowledged the difficulty of investigating “he said/she said” type complaints (or here, “he said/he said”), but nevertheless concluded that “employers should conduct a thorough investigation and make a good faith decision based on the results of the investigation.”

Now What?

Like most employees, Mendoza was an “at will” employee. It is well established that employers are entitled to terminate at-will employees for any reason or no reason at all, as long as the underlying purpose is not unlawful. In opinion after opinion, the courts have written that an employer’s termination decision need not be well-reasoned, correct, or substantiated by any evidence at all, except as needed to refute any claim that the real reason was discriminatory.

Another district of the Court of Appeal held in McGrory v. Applied Signal Technology that terminating an at-will employee without “conclusive evidence” of misconduct does not automatically create an inference of unlawful motive. An employer does not have a legal duty to investigate and ensure there is “good cause” (a higher standard than at will) to terminate an employee. Yet, Mendoza suggests that failure to at least seek out such evidence through a rigorous investigation may be evidence of unlawful motivation. The broader implication is that employers must perform a competent investigation even when they have the right to terminate employees “for an arbitrary, irrational reason” (another formulation of at-will employment). Although the courts usually eschew the role of a “super-personnel department,” the Mendoza decision is a clear step in that direction.

While employment lawyers may debate whether the Mendoza decision is legally sound, employers do not have that luxury. Employers must carefully evaluate their options in responding to claims of wrongful workplace conduct. In some cases, conducting a full investigation of the facts will be necessary. That investigation must be conducted either by internal human resources personnel or a competent external investigator. (By law, the external investigator must either be a licensed attorney or a licensed private investigator.) No matter who conducts the investigation, the Mendoza court has set a high bar for the scope of the investigation and the use of appropriate investigative practices.