Employment Law Daily No relief on appeal for Costco meat manager fired for $114K inventory discrepancy
Friday, December 29, 2017

No relief on appeal for Costco meat manager fired for $114K inventory discrepancy

By Brandi O. Brown, J.D.

Affirming summary judgment against discrimination claims by a Costco meat department manager who was fired after he was unable to explain a six-figure inventory discrepancy, the First Circuit agreed that his evidence failed to rebut the employer’s showing of good cause under Puerto Rico’s antidiscrimination statutes. Although he identified three female employees who had had a similar discrepancy and were not fired, he neglected to note that male employees had been involved in that incident as well and had also not been fired. He was likewise unable to revive his wrongful discharge and defamation claims (Garcia-Garcia v. Costco Wholesale Corp., December 22, 2017, Thompson, O.).

Six-figure discrepancy. Before 2013, the employee was undisputedly one of the Costco store’s star employees. He worked his way up from meat wrapper, to meat cutter, to meat manager, being named employee of the month along the way. As meat manager, his “primary” responsibility was meat inventory. Therefore, in October 2013, when the regional meat manager noticed a higher-than-normal ending meat inventory at the store, the employee was one of the first people he questioned. The employee, along with the store manager and the store’s assistant manager, conducted a full accounting of the stock in the department. They found another similarly high inventory amount, so a manual count was done, which resulted in a discrepancy of $114,000 in missing product. A second manual inventory was done by the internal auditor, the employee, and the assistant manager, which produced yet a different ending value. The regional meat manager concluded that a hidden shrink of nearly $150,000 was the cause of the discrepancies and review also determined that several manual entries had been made in the system, equaling $114,000.

No explanation. A loss prevention and regional manager conducted interviews to find out what had occurred. At first, the employee was accused of stealing and then altering the numbers to cover it up. He denied those allegations, and, in fact, the investigation never fully determined what had occurred. The employee was unable to shed any light on the matter and, instead, asserted his belief that all the merchandise had been accounted for. During the investigation, however, he grieved to his supervisors that he believed he was experiencing disparate treatment based on his gender. He contended that similarly situated female employees had been dealt with differently. Ultimately, in November, the employee was fired. His request for reconsideration of the decision was denied.

He filed suit in 2014, making several claims under Puerto Rico law, including allegations of gender discrimination and retaliation under Puerto Rico Laws 100 and 69, claims of libel and defamation, and wrongful discharge. After discovery Costco filed a motion for summary judgment, which was granted. The employee appealed.

No evidence that discharge was wrongful. On appeal, the employee was unable to revive any of his claims. With regards to the wrongful discharge claim under Law 80, by which employees who are fired “without just cause” may find remedy, the court found that the employer satisfied the good-cause prong. It cited the employee’s inability to account for the missing product in the department he managed. As the meat manager, the employee admitted that the physical inventory in the meat department was his “primary responsibility.” Nevertheless, the employer’s investigation revealed that, during 2013, the department’s inventory had been inflated for nine monthly periods. The employee was unable to explain the numbers. “At best,” the court explained, “the record shows that Garcia wasn’t satisfactorily performing his primary job responsibility.” Based on that evidence a reasonable jury could conclude that the employer met its good-cause burden.

Single violation was sufficient. The employee was unable to rebut that showing. While it was undisputed his employment history was excellent, Costco was not required to establish a continuous pattern of poor behavior. One violation was enough, the court explained, particularly a costly and unexplained one. With regards to whether there was an actual discrepancy, the court was unable to find evidentiary support for the employee’s allegation that the employer’s analysis of the inventory was flawed. Finally, the court explained that the employer did not need to demonstrate without doubt that the employee was the one who manipulated the numbers (instead of another employee who may have used his information to gain access to the inventory system)—it was sufficient for the employer to have perceived the violation. A reasonable jury would be compelled to find that the employer met its burden, the court concluded, and therefore the district court’s decision was affirmed.

P.R. Law 100 claim. As for the employer’s treatment of other employees who had been similarly accused, the appeals court likewise affirmed the lower court’s decision. The employee failed to proffer sufficient admissible evidence to prove that the employer’s reason was pretextual. Although he identified three female employees who had authorized a fraudulent $95,000 purchase but were not fired, he failed to note that two male employees were also implicated and not fired. Thus, the example did not support a finding of gender discrimination. His other examples were vague and unexplained and thus could not support his pretext argument.

The court also refused to revive the employee’s retaliation and defamation claims. The former was based on his grievances during the employer’s investigation, but the court found that “any probative force” of the temporal proximity between his grievances and discharge was “belied by the fact” that the employee’s allegation came in response to the employer’s accusations. Even assuming the employee made out a prima facie case of retaliation based on temporal proximity, the employee failed to present any evidence by which a reasonable jury that the employer’s reasoning for firing him was pretextual. The appeals court affirmed the district court’s decision. It also affirmed the determination that the employee could not proceed with a defamation claim, which was based upon allegations that were not only conclusory but were based on hearsay and gossip.

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