Judging favorably typically means that one gives someone the benefit of the doubt. If the act he did or the words he uttered could be understood as bad - then we are to judge him favorably. If the deeds are not ambiguous but are closer to being certainly bad - then judging him favorably is a pious act but is not required.
We see from the following Rabbeinu Yonah that the tzadik or talmid chachom is judged differently. Even if the evidence is highly likely that he sinned - his is not to be judged as sinning. The assumption is that it is so highly unlikely that he sinned. Thus Rabbeinu Yonah says this is not called giving him the benefit of the doubt - it is just not in the realm of likelihood - even if we have strong - but not conclusive evidence that he sinned.
Rabbeinu Yonah(Shaarei Teshuva 3:218): In a situation that a person says something or does something and it is possible to judge his words or his actions either as being good or bad. 1) If he is a G-d fearing man then truth demands that he be judged innocent even if his words or actions are reasonably closer and inclined to being bad. 2) However if he is an average man who tries to be careful not to sin - even though he occasionally does sin - then you should push aside the doubt and judge him favorably. This is in accord with Shabbos (127b), "One who judges his fellow favorably then G-d will judge him favorably." Doing so is a positive command from the Torah as it says in Vayikra (19:15), "With righteousness you shall judge your neighbor." And even if the action seems more likely bad than good – it should remain a doubt – but don't decide that he is guilty. 3) Nonetheless if most of the man's deeds are bad or if you have established that he lacks fear of G-d in his heart – in such a case then in the case of doubt you should assume that his words and deeds are evil as it says, "The righteous one considers the house of the wicked, overthrowing the wicked to their ruin" (Proverbs 21: 12). We have already interpreted this verse.
But what if he actually sinned and there is clear evidence that he sinned. Rabbeinu Yonah uses a different principle. It is not longer that he has a chezkash kashrus that is so strong that it is highly unlikely that he actually sinned - but that it is now highly unlikely he hasn't repented and thus the sin is not to be held against him. He bases himself on Berachos (19a).
Rabbeinu Yonah(Avos 1:6): Judge everyone favorably – This is talking about a case of a man who it is not known whether he is righteous or wicked or that he is known as an average person who sometimes does evil and sometimes does good. Therefore if he does something which could be evaluated as being either sinful or as good – or even if it seems more likely to be sinful – but since it is possible to understand it as good it should be believed that he intended it for the good. However this rule does not apply to either the truly righteous or the truly evil. A truly righteous person even if he does something which is totally bad - he should be judged as innocent by saying that it was an accident and that he has repented for the sin. This is stated in Berachos (19a), "If you see a talmid chachom at night doing a sin one should not suspect him of being sinful the next day because he has definitely repented."... Thus we see that a talmid chachom is never to be viewed as a sinner and therefore there is no need to say that he should be judged favorably. Similarly a truly wicked person is not judged favorably - even when he does something totally good that there is no basis to question – he should still be viewed as an evil person and that he is a hypocrite for acting as if he were good. This is stated in Mishlei 26:25),
Rabbeinu Yonah(Mishlei 24:28): Don’t be a gratuitous witness of your fellow man – ...This principle is stated in Berachos (19a), If you see a talmid chachom sinning at night, do not suspect of him of sinning anymore by the day because he will surely have repented by then. Since he has the reputation of a person who is fearful of sinning and he is upset and regrets that his lust overcame him. However if the talmid chachom is in fact a wicked person who is mistakenly thought by the people to be righteous – he is not only to be criticized to those who know how to keep quiet – but in fact it is a mitzva to publicize his deeds until they are well known to the public. That is because severe harm occurs when wicked people are honored because he will turn many away from the proper path and denigrate the honor of the righteous and encourages sinning. There is in fact profanation of G‑d’s name by honoring the wicked because some people will be aware of the sins the wicked do and will concluded that there is nothing wrong with sinning and that it doesn’t lower one’s stature (Yoma 86b)…
The obvious problem with this Rabbeinu Yonah is that the gemora makes a clear distinction and says that the presumption of immediate teshuva is only for sexual sins - but not for monetary ones. Why doesn't Rabbeinu Yonah makes this distinction. A second problem is that we see clearly in our generation that talmdidei chachom commit sexual crimes they don't repent immediate and in fact we have seen recent cases where there sinning has continued over many years? The answer to these questions is that the Chavis Yair (62) and others say simply that the status of talmid chachom for these issues hasn't been relevant for hundreds of years.
It is also interesting that this explanation seems unique to Rabbeinu Yonah
Rambam(Avos 1:6): Judge all people as innocent. This means that if there is a man that you don't know whether he is righteous or wicked and you see him do something or say something that can be interpreted either as good or bad – you should understand it as good and not bad. However if you know the person to be an established tzadik and his deeds are good and he apparently does something that is bad and only by using a far-fetched explanation can it be justified – then it is proper to assume that in fact it was good and do not suspect him of evil.... On the other hand a person well established as evil then it is best to avoid such a person and not to believe he is capable of doing anything good – if there is anyway of interpreting it as evil behavior. Finally if the person is not known to you and his deeds have not been determined to be good or bad – then it is necessary as an act of piety to judge him favorably.
This takes us to another issue - the principle of judging favorably is apparently going against truth. In other words we are to judge favorably even when it is reasonable that a person actually sinned. An additional problem is that turning off our critical awareness - is harmful to society. While it is true based on Nidah (61a) that one should take defensive actions - but it still highly increases the likelihood of erring when the person is actually sinning - then if we didn't have this principle. There are many examples of this dealing with sexual abuse and financial misconduct. [to be continued]