A recent decision by the Fourth Circuit Court of Appeals may have a chilling effect on managers and employees who would otherwise report discrimination against themselves and other employees. On June 7, 2017, the court held in Villa v. CavaMezze Grill, LLC, 858 F.3d 896 (2017), that an employer did not unlawfully retaliate against a low-level Cava Mezze Grill manager when it terminated her after she relayed to upper management a subordinate employee’s report of sexual harassment, because it believed the manager fabricated the report.

Unlawful retaliation occurs when an employer takes an adverse action against an employee because she engaged in protected activity, such as making a complaint about a violation of workplace rights. While an employee’s “reasonable belief” that a violation occurred is normally sufficient to constitute protected activity, the Fourth Circuit rule – which affects federal law in Maryland, North Carolina, South Carolina, Virginia and West Virginia – creates an exception which puts managers and employees at risk when they report discrimination in good faith. Under this rule, if an employer can show it honestly concluded the report was fabricated, then it may terminate the employee for that reason without liability for retaliation, even if the employer’s belief was mistaken.

Background in Villa v. CavaMezze Grill

Villa worked as a lower-level manager at a Cava restaurant in Merrifield, Va. One of Villa’s subordinate employees, Judy Bonilla, told her that the restaurant’s general manager had offered her a pay raise in exchange for sex. Villa promptly reported the sexual harassment to the company’s director of operations, Rob Gresham, and also reported her suspicion that another employee had resigned due to a similar offer.

Gresham interviewed Bonilla, who denied that the harassment occurred and denied that she made any such statements to Villa. Gresham also interviewed the former employee as well as other employees implicated in Villa’s report, who all denied knowledge of the sexual harassment Villa described. Gresham concluded that Villa had made up the allegations herself and terminated her for making a false report.

After Villa brought suit for retaliation under Title VII, Bonilla admitted in her deposition testimony that she told Villa that the general manager had offered her a raise in exchange for sex, even though that was not true. Thus, Villa had in fact made a truthful report about what Bonilla told her, even though Bonilla had lied to her. The district court dismissed Villa’s case on summary judgment, and Villa appealed to the Fourth Circuit.

The Fourth Circuit’s Decision

In upholding the district court’s dismissal, the Fourth Circuit focused on the reason for Villa’s termination. The court pointed out that both parties agreed that Cava fired Villa because it concluded she had made a false report and thus an intent to retaliate was not the cause of her termination. The court rejected Villa’s argument that her complaint was protected by law because she had acted in good faith when she made the sexual harassment report.

The court held that, in the context of this case, false reports are not protected activity. Title VII’s anti-retaliation provision protects two different types of activity: opposition to unlawful practices (the opposition clause) and participation in specific practices such as filing a discrimination charge or participating in an investigation or hearing under the statute (the participation clause). Villa’s activity, making an internal complaint of sexual harassment, constitutes opposition conduct. Although such reports are ordinarily protected if the individual reasonably believes the underlying conduct violates the law, the court here held that a report is not protected if the employer reasonably concludes it is false.

False reports are protected under the participation clause, i.e., if an employee files a charge of discrimination that is later proven to be false, an employer still may not retaliate against the employee for participating in that process. Activity under the opposition clause, however, is not similarly protected, the court found. Therefore, Cava’s agreed-upon reason for firing Villa was not a retaliatory one because Cava did not believe Villa engaged in protected conduct.

The fact that Cava turned out to be mistaken in its conclusion that Villa fabricated the report was of no moment, according to the court. “If Villa was fired for misconduct she did not actually engage in, that is unfortunate, but a good-faith factual mistake is not the stuff of which Title VII violations are made.” Villa, 858 F.3d at 903. In other words, as long as an employer’s true reason for terminating an employee does not run afoul of Title VII, courts will not second guess the wisdom or fairness of that decision. The court rejected the plaintiff’s claim that a factual dispute existed as to the adequacy of Cava’s investigation. While evidence of an inadequate investigation would have been relevant to show that Cava’s reasons for termination were really pretext for discrimination, pretext was not at issue in this case since the parties agreed that Cava terminated Villa based on its belief that she fabricated her complaint.

The court also rejected the Equal Employment Opportunity Commission’s (EEOC) argument in its amicus brief that, rather than deferring to an employer’s business judgment in determining whether retaliation occurred, the court should adhere to the rationale of recent Supreme Court retaliation decisions such as Burlington Northern & Santa Fe Railway v. White, 548 U.S. 53 (2006), and consider more broadly whether Cava’s actions would have “dissuaded a reasonable worker” from reporting harassment. The court noted that this standard is used to determine whether an employer’s action constitutes an adverse action, which was not at issue in this case because there is no question that the termination was an adverse action. The court rejected the EEOC’s concern that a decision upholding complete deference to an employer’s mistaken belief about the truth of underlying complaints would undermine the incentives the Supreme Court has created for employees to report unlawful conduct in decisions such as Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (1998).

Impact on the Reasonable Belief and Pretext Standards

While in practice, the rule in this case could very well dissuade workers from reporting harassment, lest their employers conclude that they made a false report, there are unique facts in Villa that led to this conclusion.

Retaliation is comprised of three elements:

1. The employee engaged in protected activity.
2. The employer took an adverse action.
3. There was a causal connection between the adverse action and the protected activity.

In Villa, the parties did not dispute the last element. All sides agreed that Cava fired Villa due to its mistaken belief that she made a false report. Villa attempted to argue that because her report was made in “good faith,” Cava’s firing her for it constituted retaliation. The court looked at her conduct from the employer’s perspective rather than the employee’s perspective. Thus, it focused on whether Cava’s conclusions about her activity (i.e., that she made a false report), rather than her activity in fact (i.e., that she honestly relayed what her subordinate told her), constituted protected activity and concluded that it did not. Since there was no dispute that Cava honestly believed she had fabricated the report and fired her for that reason, the court only looked at the reason upon which the termination was truly based.

The standard for protected activity under both the opposition and participation clauses is an employee’s “reasonable belief” that the employer broke the law, even if no discrimination occurred in fact. The Villa court did not discuss this standard, and it appears to remain intact here. Although the court held that false reports of discrimination do not constitute protected conduct under the opposition clause, this only applies to knowingly false reports – which Cava believed Villa had made. An employee whose belief was reasonable, even if she turned out to be mistaken, is still protected from retaliation for opposing the actions she thought discriminatory if her employer does not conclude in good faith that she lied.

A significant reason for the result here was that the plaintiff did not dispute the employer’s reason for terminating her. In other cases, an employee may respond to an employer’s proffered legitimate, non-retaliatory reason for the adverse action with evidence that this reason is merely pretext for retaliation. This is often done by showing that the reason is actually false or unworthy of credence. In Villa, although the plaintiff attempted to dispute the adequacy of Cava’s investigation, she did not argue that its reason for terminating her was actually a pretext for retaliation. In this situation, the court accepted Cava’s non-retaliatory reason for the termination. In other situations, if an employer dishonestly “concludes” that an employee fabricated her discrimination complaint and fires her for it, the employee may argue that this “conclusion” was in fact pretext for retaliation.