Employee Lawsuits: Public Policy Exceptions to Employment-at-Will Rule

Creative lawyers may argue after-the-fact public policy violations.

The cases recognizing a public policy exception to the employment-at-will rule are extremely varied in their reasoning. In most cases, however, the basis for a public policy wrongful discharge suit is usually grounded in one of three reasons: 1) The employee has been discharged for exercising a statutory right; 2) the employee has been discharged for refusing to commit an illegal act; or 3) the employee has been fired because he or she threatened to report or did report illegal activities of the employer. This latter category may involve a wholly internal complaint process or

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a disclosure to government authorities. As mentioned above, these "whistle blowers" may be protected by statutory prohibitions against retaliation, in which case the employee may have to pursue a statutory remedy because a common law suit for wrongful discharge will be foreclosed under the exclusive remedy doctrine.

There is yet no clear and concise understanding of what constitutes a "public policy." Some courts have been careful to distinguish between a discharge that burdens a public interest as opposed to one that thwarts an employee's private interest. One state supreme court described the basis for the tort as a discharge for a "socially undesirable motive." The crux of the problem for employers is that the definition of "public policy" has been left for courts to determine on a case-by-case basis. In California, where the public policy exception to the employment-at-will rule first received wide acceptance, the courts have generally held that the public policy of the state is found in its constitution, its statutes, and the decisions of its courts. Other states have expanded the sources of public policy for the purpose of protecting at-will employees. For example, Colorado courts have held that administrative regulations and the professional ethics code can serve as the basis for a public policy wrongful discharge claim. Other courts have even gone so far as to find sources of public policy in "sound morality."

The Many Sources of Public Policy

There are so many potential sources for public policy that employers cannot be certain that a discharged employee won't find a creative plaintiff's attorney to argue an after-the-fact violation of public policy in a wrongful discharge suit, despite the fact that the employee never voiced any policy concerns during his or her employment. A discussion of some of the published cases will illustrate the danger to employers in this area of the law.

In Tameny v. Atlantic Richfield Co., a landmark decision in California, the plaintiff alleged that he was discharged after 15 years of service because he refused to participate in a scheme to fix retail gasoline prices in violation of antitrust laws. The California Supreme Court, while holding that the plaintiff could maintain a tort action for wrongful discharge, stated that it is against "public policy" for an employer to demand that an employee commit a criminal act to further the employer's interests. The source for the public policy in Tameny was the federal antitrust laws. Tameny represents the classic public policy wrongful discharge theory: an alleged discharge for refusing to violate the law.

An Arizona decision, however, found a violation of public policy where no law was specifically violated. Instead, the employee was discharged for reasons the court described as running "contrary to public standards of morality." While on a camping trip with her supervisor and other employees, the plaintiff refused to participate in a skit that parodied the song "Moon River" and concluded with the participants in the skit "mooning" the audience. She also refused to participate in the "Moon River" skit when it was performed twice more after the group returned to work following the camping trip. The plaintiff claimed that she was discharged for refusing to go along with the "mooning."

The plaintiff argued that the source of the public policy that was violated by her discharge was the Arizona criminal statute prohibiting indecent exposure in public. The Arizona Supreme Court said that a violation of public policy occurs even if the employer had reason to believe there would be no crime because "all the onlookers were voyeurs and would not be offended" by the display of bare buttocks. The court said, "In this situation, there might be no crime, but it would be a violation of public policy to compel the employee to do an act ordinarily proscribed by the law." The court protected the employee's refusal to moon in public by concluding that the legislature had established a clear policy that "exposure of one's anus or genitals is contrary to public standards of morality."

In a New Jersey case, a plaintiff brought a wrongful discharge action after she was fired for refusing to perform a catheterization. The plaintiff was an X-ray technician, not a licensed nurse, and thus could not legally perform the medical procedure. The New Jersey Supreme Court held that public policy prohibits the termination of an employment-at-will in retaliation for the employee's refusal to perform an illegal act. The court emphasized that "this rule is especially cogent where the subject matter is the administration of medical treatment, an area in which the public has a foremost interest and that is extensively regulated by various state agencies."

In another decision out of California, a plaintiff was able to use a Penal Code provision as the source of public policy for his wrongful discharge claim. The plaintiff was a vice president for a corporation that had as one of its divisions, a department store chain. The plaintiff and his girlfriend visited one of the department stores where, upon leaving the store, both the plaintiff and his girlfriend were forcibly detained. The plaintiff's girlfriend was accused of theft and made to enter a room where she was strip searched by security personnel. The plaintiff sued after he was fired about six months later allegedly because he complained to management that its search policy was unlawful. The court concluded that the plaintiff had stated a viable cause of action for wrongful discharge in violation of public policy where he alleged that: 1) The strip search was contrary to a California Penal Code provision; 2) he protested to management about the procedure; and 3) the company terminated him in retaliation for his protest.

In Connecticut, a court ruled that it was against public policy to discharge a movie theater projectionist who had emptied the theater at the request of police officers looking for a possible burglary suspect. On the day in question, the plaintiff was working alone in the theater. While he was selling tickets, he heard noises coming from the projection booth that made him believe there was a burglar in the booth. The plaintiff then called the police, but when they arrived, they refused to go in the theater unless the plaintiff turned on the lights. When the plaintiff turned on the lights, the entire theater emptied. The police found no burglar.

When the plaintiff was discharged, he sued for wrongful discharge. The court ruled in his favor, holding that it was a public policy of the state to protect the safety of the public at movie theaters. The court found that the plaintiff, by turning on the lights, was merely fulfilling the employer's legal duty to protect the public.

A decision by the Washington Court of Appeals demonstrates that employees may possess facts, unknown to, or at least not contemplated by the employer at the time of discharge, that can form the basis for a public policy wrongful discharge claim. If the employer, however, can demonstrate that the employee had an opportunity to raise her public policy concerns, and either failed to do so or had those concerns addressed by the employer, the employer is likely to prevail at trial.

For example, in the Washington case, a nurse was discharged for four separate work-related infractions, including not giving medications as prescribed and violating the nursing home's narcotics control procedures. After her discharge, however, the nurse sued her employer, claiming among other things, that she was discharged because she complained about alleged unsafe practices at the nursing home. The court recognized that a public policy against abuse and neglect in nursing homes existed in the state but found that the plaintiff was not able to show that the alleged complaints were the real reason for her discharge. In fact, the incidents to which the plaintiff was referring occurred sometime prior to her discharge and she did not treat them with significant concern. For example, she discovered that a door did not lock properly and she reported it to the maintenance supervisor. She found a foreign substance in a patient's ointment and she noted it on a chart distributed to the director of nursing. She allegedly found glass or plastic in another container of ointment but failed to report it to anyone.

The court of appeals rejected her retaliatory discharge claim. The court said the nurse never treated the alleged incidents of neglect and abuse "as anything other than an isolated or unintentional incident." Noting that the plaintiff had never even reported the second "ointment" incident, the court found that the plaintiff had failed to show that her employer's articulated reasons for discharge were a pretext to cover up "a conspiracy to prevent [her] from exposing abuse and neglect at the nursing home."

Some states require an evil intent or degree of malevolence on the part of the employer before they will award damages for wrongful discharge. For example, in Monge v. Beebe Rubber Co., one of the first cases recognizing the public policy exception, the New Hampshire Supreme Court concluded that a retaliatory discharge of an employee for refusing to date the foreman was motivated by bad faith or hostility and was a breach of the employment contract. The court said that "the employer's interest in running his business as he sees fit must be balanced against the interest of the employee in maintaining [her] employment." The court concluded that a bad faith termination of an at-will employment "is not [in] the best interest of the economic system or the public good."

New Hampshire courts continue to require the element of bad faith before ruling that a termination is in violation of public policy or contrary to "the public good." One case that met this requirement involved the discharge of an employee for filing a tort claim against his supervisor after the supervisor's dog bit the employee's son. The company fired the plaintiff almost immediately after he had written a letter to the supervisor advising him of his liability for the dog bite. The court said the discharge violated the public policy that guarantees "unrestricted access to the courts." The court noted that the plaintiff was fired on the same day that his supervisor received the liability letter.

Finally, a wrongful discharge decision out of Virginia underscores the uncertain status of the concept of public policy and the resulting lack of clear guidance to employers regarding the exact nature of the public policy exception. In 1985, the Virginia Supreme Court recognized an exception to the employment-at-will rule in Bowman v. State Bank of Keysville, where the court held that ex-employees can sue for both punitive and compensatory damages when their discharge violates some "established public policy." However, the court gave no further definition to the term "public policy."

The first public policy exceptions recognized in Virginia after the Bowman decision were based on Virginia statutes. This reliance on statutory sources for public policy protection changed, however, when a Virginia Circuit Court Judge used federal highway regulations as a source of Virginia public policy.

The case involved a long distance truck driver who claimed that he was ordered by his supervisor to drive for a longer time than was permitted by federal regulations and to falsify his trip logs to make them appear to comply with rules governing interstate carriers. He also claimed that he was ordered to drive long distances without taking required rest periods. At first, he went along with his employer's demands but when he later refused to continue this practice, he was discharged. The judge ruled that the plaintiff had stated an actionable claim for retaliatory discharge in violation of Virginia public policy. This decision is another example of the increased judicial willingness to create expanded protections for discharged employees. If every regulation is to be a source of protection against discharge for employees, the uncertainty for employers will obviously be magnified.

Constitutional Provisions as a Source of Public Policy

There are a number of decisions that have rejected the U.S. Constitution or state constitutions as sources of public policy where such constitutional provisions prohibit only government infringement of individual rights and thus require "state action" to implicate those protections. For example, the U.S. District Court for the Eastern District of Pennsylvania has held that the right to be free from unreasonable searches and seizures under the Fourth Amendment of the U.S. Constitution cannot be the basis for public policy exceptions to the employment-at-will doctrine under Pennsylvania law.

In this case, the plaintiff worked as a sales clerk for his employer for 15 years. In January 1990, the company adopted a drug and alcohol policy requiring all employees to sign a form consenting to urinalysis screening for drug use as a precondition for continued employment. The consent form that all employees were required to execute also authorized the employer to conduct searches of employees' personal effects located on company premises. The plaintiff refused to sign the consent form and was thereafter discharged from employment.

The plaintiff sued the company for wrongful discharge, alleging that the company's actions in terminating him were in violation of public policies embodied in the First and Fourth Amendments to the Constitution. The U.S. District Court for the Eastern District of Pennsylvania rejected the plaintiff's claim and observed that the Pennsylvania Superior Court "has not recognized a wrongful discharge public policy emanating from a constitutional amendment." The court concluded that in a dispute "between private parties, where no allegation of state action has been made, the constitutional provision cited by the plaintiff should not apply."

The District Court's decision was undoubtedly correct in its analysis that constitutional provisions should not be the basis for public policy exceptions to the employment-at-will rule. The Bill of Rights to the Constitution protects against government infringement of individual rights - it does not apply to conduct by private employers. If the decision by the court had been otherwise, purely private acts of employers would be subject to the limitations of state and federal constitutions and the "state action" defense would be meaningless.

Unfortunately, there have been decisions that have used the Constitution as a source of public policy despite the fact that the Bill of Rights only prohibits government infringement of individual rights. For example, the Maryland Court of Special Appeals has held that a real estate management company that fired an apartment manager for refusing to enter the tenants' apartments and "snoop through" their private papers had wrongfully discharged the manager and could be liable for damages. Using some very loose language, the court stated that its ruling was based upon its belief that "the constitutionally protected right of privacy, the right to be free of...snooping, spying, rummaging or searching through one's personal and private papers, is such a fundamental right that no employer may require an employee to violate it as a condition of employment."

Carried to its logical extreme, the decision would require an employer to be a guarantor of constitutional rights in the workplace. One can only imagine the disharmony that will result if every employee exercised their freedom of speech rights with impunity in the workplace. Suppose a salesman disparages his employer's product. Must his supervisor refrain from disciplining him for fear of violating his First Amendment rights? Hopefully, the "public policy" exception to the employment-at-will rule will not expand to the parameters suggested by the Maryland court's decision.

Preparing for the public policy argument

Employers must train their supervisors to recognize situations that are likely to give rise to potential public policy claims. For example, employees who seem to complain about every minor safety or environmental issue in the workplace may be able to claim retaliation if they are discharged for other reasons later. Employees who have filed a worker's compensation claim or have just returned from a worker's compensation leave carry with them a protected status because any discharge soon after the filing or the return from leave will likely be characterized as retaliatory. Government contractors are particularly vulnerable to employees who, after discharge, may allege that it was their intent to "blow the whistle" on practices by the contractor in violation of federal law.

For these reasons, supervisors must take the following actions to protect their employer against wrongful discharge claims:

  1. Supervisors must know the whistle blower, antidiscrimination, and antiretaliation statutes that govern the company's conduct and make sure that none of these statutory protections are implicated by a potential discharge decision.
  2. Supervisors must show respect and consideration to all employees who complain about workplace conditions or the employer's practices or policies. Even though the complaint may seem to be minor, the supervisor should document the complaint and the response to demonstrate the appropriateness of the supervisor's response to the complaint in later proceedings.
  3. ( Supervisors should urge employees who seem to have a serious problem with a policy, procedure, or practice of the employer to file a formal complaint with management, using the employer's complaint procedure. In that way, a potential public policy claim and its resolution can be documented. If the complaint has validity, it can be remedied by management. If the complaint is frivolous, its existence in writing will be valuable for impeachment of the employee if he brings a litigation claim.
  4. Employers should consider using an employee complaint procedure that allows appeal to an internal adjustment panel that will provide a "hearing" to the complaining employee. The hearing procedure can be limited to suspension or discharge situations. The employee must be required to put the complaint in writing and all "testimony" by the employee at the hearing should be reduced to a written "transcript" by a secretary who has excellent shorthand skills. No lawyers should be at this proceeding to make the employee more loquacious about the facts underlying his or her claim.
  5. A hearing serves several purposes: 1) A written complaint signed by the employee and a documented "record" of the employee's testimony of the hearing limits the employee's ability to expand on his theories during any subsequent litigation; 2) the employer will have notice of a potential "public policy" claim; 3) the employee may perceive that he or she got a "fair hearing" and not pursue the complaint further; and 4) if the appeal panel is truly neutral, the appeal procedure may establish a legal "exhaustion" requirement for ex-employees who wish to sue the company. If an employer wants to preserve its discretion to overrule an internal panel's decision, the procedure will still provide a deliberate process by which discharge decisions can be reviewed.

Excerpted from Slam the Door on Employee Lawsuits: Keep Your Business Out of Court. Copyright 1998 by Paul M. Lusky. Published by arrangement with Career Press.

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