Every teacher and parent of multiple children has probably done it at some point: They walk in on a heated dispute, and after listening to the claims and counterclaims, throw up their hands and announce that everyone is in trouble. It’s no surprise that companies do it, too. But a California appellate court ruled in January that it’s not OK.

Extending the California Supreme Court’s standard for proving workplace discrimination to retaliation cases, California’s Court of Appeal for the Fourth District toppled a $283,000 jury verdict and issued a warning for employers: Don’t try to avoid liability for “he said/she said” sexual harassment cases by terminating both employees.

In his ruling in Mendoza v. Western Medical Center of Santa Ana, Justice Raymond Ikola put it this way: “Hopefully, this opinion will disabuse employers of the notion that liability (or a jury trial) can be avoided by simply firing every employee involved in the dispute.”

The employee at the center of the matter was Romeo Mendoza. He was by all accounts an exemplary nurse at an Orange County hospital for 20 years, reaching a middle management level. In 2010 he reported he was being harassed by a supervisor, Del Erdmann. Mendoza said Erdmann had made inappropriate comments, physical contact and even exposed himself to Mendoza. Erdmann told corporate investigators that Mendoza had been a willing participant in the conduct, and that Erdmann had only reluctantly gone along.

The company fired both men for unprofessional behavior, prompting Mendoza to sue for wrongful termination in violation of public policy—namely, retaliation for reporting sexual harassment. An Orange County Superior Court jury found Mendoza’s reporting to be “a motivating factor” in his dismissal and awarded $93,000 in economic loss and $145,000 in emotional distress damages.

Last year, however, the California Supreme Court set a higher standard of causation in a case brought under the Fair Employment and Housing Act. Harris v. City of Santa Monica held that employees have to prove discrimination is “a substantial motivating factor” in a termination.

Mendoza’s attorney argued that Harris applies only to FEHA cases, but the Fourth District disagreed. “It would be nonsensical to provide a different standard of causation in FEHA cases and common law tort cases based on public policies encompassed by FEHA,” Ikola wrote, ordering a new trial. Justices Kathleen O’Leary and William Bedsworth concurred.

The medical center had further argued that it should prevail because no evidence was presented at trial that it retaliated against Mendoza. In fact, the company argued, it had acted on Mendoza’s complaint in good faith by terminating Erdmann.

Ikola disagreed, pointing to evidence that the company’s investigation had been sloppy. Mendoza and Erdmann were interviewed together, rather than separately, and by their supervisor, rather than by an HR official. “The lack of a rigorous investigation by defendants is 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,” Ikola wrote.

He noted that at oral argument, medical center attorney Donald Vaughn of Vaughn & Vaughn asked what employers were expected to do when two employees provide conflicting accounts of inappropriate conduct. “Our answer is simple,” Ikola answered. “Employers should conduct a thorough investigation and make a good faith decision based on the results of the investigation. Here, the jury found this did not occur.”