Federal Law > Discipline & Termination > Miscellaneous Wrongful Discharge Claims

Miscellaneous Wrongful Discharge Claims

"It seems like we get sued for anything and everything these days. . . things just aren't the way they used to be. . .." So goes the sad lament from many business owners in today's litigious environment. Unquestionably, our society has a fixation with utilizing the legal system as a method for resolving interpersonal and business disputes. In the employment arena, employees are not only quick to file lawsuits against employers, but they and their lawyers are also using a broad variety of innovative claims to seek redress for perceived injuries. Many of the new employment claims are not founded upon claimed statutory violations but rather upon alleged breaches of duty under the common law. This chapter provides an overview of some of the more well known common law employment claims.

Wrongful discharge and employment at-will. In the past, employees who did not have oral or written contracts with an employer for a set duration were said to be employed "at-will" and were subject to immediate termination. While the doctrine of employment at-will still exists in many states, substantial exceptions to the doctrine exist in each state and have eroded the doctrine's viability.

Some states have enacted wrongful discharge laws which modify the doctrine of employment at-will.1 Other states have a variety of anti-discrimination, retaliatory discharge, and whistle blowing statutes which limit the right of an employer to terminate an at-will employee.2
As the doctrine of employment at-will has weakened, two primary types of wrongful discharge claims have also chopped away at the embattled employment rule. Those claims can be broadly termed as wrongful discharge claims for breach of public policy and wrongful discharge claims for breach of express or implied contracts.

Wrongful discharge in violation of public policy. One of the major exceptions to the doctrine of employment at-will is the so-called "public policy" exception. In several states, courts have recognized that an employer should not be permitted to discharge an employee if the reason for that termination contravenes a recognized public policy of the state. When a public policy provides either a privilege or statutory protection for an employee, an employer's right to terminate is restricted and violation of the recognized public policy will give rise to a tort claim.3
In order to give rise to a public policy tort, it is generally conceded that the public policy must be clearly demonstrated by either the express language or the spirit of a constitutional, statutory, or regulatory provision.4 In addition, if an employee attempts to raise a claim of violation of public policy, the public interest allegedly threatened by the employer's action cannot be something which is simply personal or private to the employee. As an example, a personal moral objection would not provide a foundation for a breach of public policy claim.5 On the other hand, the refusal to engage in misrepresentations on federal government contracts or retaliation for pursuing a workers' compensation claim clearly contravenes well recognized public rules or entitlements.6
It should be noted that the number of public policies recognized by this tort has grown steadily over the past ten years. Termination claims can result from an individual's insistence on statutory rights or for retaliation against an employee for refusal to disobey statutory duties. Nor may an employer discharge an employee for "whistle blowing", the performance of jury duty, or a wide variety of other legal acts.7

Avoiding wrongful discharge claims. In order to avoid legal claims alleging wrongful discharge for violation of public policy, an employer should take several steps to avoid liability. Initially, the employer should always double check the apparent motivation for taking a disciplinary or termination action against an employee. If the employer's motivation stems from an irritation with the employee's pursuit of a lawful benefit or privilege (insurance payments, workers' compensation benefits, etc.), the employer should stop and rethink the pending action. Even if the motivation is "mixed"(that is, a motivation which contravenes a public policy, along with a legitimate motivation), the employer should stop and rethink its proposed course of action. Depending upon the jury and the state law, even such mixed motivations can spell legal liability for an employer. An employer should also be mindful of the "appearance"of disciplinary or discharge actions. Even where the employer's motivation is lawful, the appearance of impropriety can quickly lead to an extended legal battle on a wrongful discharge claim.

An employer is wise to consult with counsel any time the business is aware of facts which are out of the ordinary. Many times, consultation with legal counsel prior to invocation of a disciplinary or termination action can assist an employer in sidestepping potential legal problems. As an example, if an employee has had wages garnished or has previously filed for bankruptcy and the employer has been irritated by such circumstances, a quick discussion with legal counsel will assist the employer in understanding potential difficulties associated with discipline under these facts. Bottomline? Avoid reacting in a precipitous or emotional manner when proceeding with discipline or termination. Also, consult with your attorney in the event that you have any concerns that the action you're taking could conceivably be construed as retaliation against an employee in violation of public policy. Here, the watchword is "better safe than sorry".

Wrongful discharge as breach of contract. A second exception to the doctrine of employment at-will is often referred to as the breach of contract exception. Under this claim, an employee asserts that the employer's retaliatory or wrongful discharge action violated an implied contract. An implied contract may exist "in fact" or "as a matter of law". In either instance, the employee's claim argues that the employer's right to terminate at-will is restricted as a result of a contractual promise. In order to better understand this exception to the doctrine of employment at-will, let us examine some implied contract claims.

Implied "in fact" contracts. Contracts which are implied "in-fact" can arise in a variety of different ways. However, in assessing the totality of the circumstances, a finder of fact must essentially conclude that representations of the employer were intended to create a relationship with a contractual obligation.8 In examining the totality of the circumstances, the court is often asked to review job advertisements, job applications, interview statements, employee policies, manuals, handbooks and other written procedure statements of the employer and any other representation, oral or written, which may imply a contractual promise.

The vast majority of implied "in-fact"contract claims have arisen by virtue of employer representations contained in employee handbooks, manuals, policies and procedures statements. Many courts have held that employees may rely upon such representations as contractual promises unless the employer has clearly disclaimed such a contract.9 As an example, in the case of Toussaint vs. Blue Cross/Blue Shield of Michigan, 408 Mich. 579, 292 NW 2d 880 (1980), the Michigan Supreme Court decided that an employment manual providing only for "just cause" termination was legally enforceable. As such, it bound the employer to establish just cause in accordance with its own policies and procedures. The Toussaint case was one of first impression, but a substantial number of similar decisions in states around the country have followed the essential rationale offered in Toussaint.10
In order for an implied in fact contract to be found in employer policies and procedures, the following facts must generally be established:
1. A clear representation or promise by the employer concerning the terms and conditions of employment;

2. A clear acceptance by the employee of the promise (often, simply the employee's continued work for the employer after receiving the promise);

3. The policy or procedure in question was clearly disseminated and received by members of the workforce, including the claiming employee;

4. There is no express, clear disclaimer disavowing a contractual relationship.11

In order to avoid liability for such implied in fact contracts, employers should take the following steps:

1. Ensure that prominent disclaimers are attached to any handbooks, manuals, or other policies or procedures which are not to be offered as contractual promises. (State law differs in particular requirements concerning how prominent and conspicuous the disclaimers must be so it is wise to consult with your counsel in the state in question.)

2. Educate supervisors to avoid "inadvertent" representations which may serve as contractual promises by members of management.

3. Utilize employee acknowledgments which disclaim the existence of a contractual relationship.

4. If a policy or procedure is important enough to include in an employee handbook or manual, follow it. Even with a prominent disclaimer and an employee acknowledgment, there is no point in articulating a procedure or policy unless it is to be followed by the company.

5. Ensure that any contract disclaimers also reaffirm the right of the company to expunge, modify, or otherwise add to a manual, handbook, or procedure statement at any time for any reason. Also indicate that an employment contract can only exist if it is in writing and offered by a particular officer of the company.

While a detailed analysis of all of the nuances of the law in this area is beyond the scope of this general manual, employers are well advised to be cautious about any representations in the workplace which could reasonably be construed as forming contractual promises.

Implied in law contracts. A handful of states have recognized the existence of an implied in law covenant of good faith and fair dealing.12 Still, a majority of states refuse to recognize such covenants.13 Again, before terminating an employee in a given state, an employer would be wise to consult with counsel to determine whether an implied in law covenant exists which may tend to create a theory of liability for the terminated employee.

Permanent employment contracts. Just as the public policy and contract exceptions abrogate the doctrine of employment at-will, so also will a contractual promise of permanent employment. Permanent contracts arise when an employer, either expressly or inadvertently, offers an employee continuous employment essentially until the employee retires. A number of states have recognized an exception to the at-will employment rule where additional consideration for continued employment has been offered by the employee for the "permanent" employment offer.14

It is generally conceded that an offer of permanent employment must be express and definite. Mere statements such as the employer "hopes the employee will be with the company as long as he/she does a good job" or "we hope you retire from the company after a long, satisfying career" are generally deemed to be insufficient to create a definite offer of permanent employment.15 Indeed, some state courts candidly take the position that:

"Lifetime employment contracts have been met with substantial hostility in the courts for these contracts are often oral, vague on important details, and highly improbable."

Accordingly, many courts have erected a veritable array of obstacles to their enforcement.16 However, if a definite offer of permanent employment has been made, the employee who accepts the offer and provides additional consideration can bind the employer to a permanent contract. The additional consideration provides the court:

". . . a better reason to believe that the parties, in discussing "permanent" employment, were referring to lifetime employment and were not, instead, simply making a distinction between temporary or seasonal employment and employment which is steady or continuing although nevertheless terminated at-will." Pine River State Bank vs. Mettille, 333 N.W.2d 622, 628-29 (Minn. 1983).

If, in fact, the employee has provided additional consideration beyond mere willingness to serve the employer, the courts will demand a showing of just cause in order for the employer to terminate the employment relationship.17

Additional employment tort claims. In addition to the aforementioned legal theories which exist as exceptions to the doctrine of employment at-will, there are also many employment related torts which commonly accompany claims of discrimination or wrongful discharge in an employee lawsuit. Depending upon the circumstances of the litigation, an employer who is subjected to an employment lawsuit could see any, or all, of the following additional tort claims:

1. Assault and/or battery

2. Defamation

3. False imprisonment

4. Fraud

5. Intentional infliction of emotional distress

6. Invasion of privacy

7. Interference with contract or prospective economic advantage

8. Negligence, including negligent hiring, negligent retention, negligent supervision

While the aforementioned list is not exclusive and a detailed discussion of each one of these claims is beyond the scope of this text, an examination of some of the more prevalent tort claims is important.

Defamation. Defamation is the publication of information about a current or former employee which is false and damaging to the individual's reputation. As a general rule, defamation has essentially two components, (1) a false statement about an individual that is (2) disseminated to a third party. A defamatory statement is typically one which subjects the person to hatred, contempt, or ridicule.18 It is commonly ruled that either a written defamation (libel) or an oral defamation (slander) is defamation as a matter of law if an employee is attacked in his/her employment as incompetent.19
The mere fact that someone has been terminated is not sufficient to state a claim for defamation. Further, only statements of fact, as opposed to statements of opinion, by an employer are actionable. If an employer's statements are not protected by a privilege, they can form the basis for a defamation claim if they have been sufficiently "published". Publication is a non-privileged communication to a third party. Many times, defamation claims arise as a result of an employer's statements to a prospective or subsequent employer concerning the performance of a former employee.20 Some courts have even recognized that a terminated employee may be forced into a position of self-compelled defamation if he/she is forced to repeat the employer's false statement to a prospective employer or other third party.21
In defending against a defamation claim, an employer may assert truth as an absolute defense to the employee's claim.22 Another defense arises by virtue of the existence of a "privilege"which may attach to the communication. As an example, the courts have recognized an absolute privilege for employers who have made allegedly defamatory statements in official proceedings.23 In addition, a "qualified" privilege may attach where co-employees in the business discuss the allegedly defamed individual only on a "need to know" basis.24 An employer's protected qualified privilege in communicating allegedly defamatory information on a need to know basis will be lost if the employer's statements are motivated by ill will or malice toward the employee.25
To avoid defamation claims, an employer should very carefully screen any information which it intends to disseminate concerning an employee. Information will only be circulated between those individuals who have a need to know and the information should be accurate and concise. Finally, an employer should examine its motivations for making any derogatory statements about a current or former employee to ensure that the statements are not motivated by ill will or malice.

Intentional infliction of emotional distress. Terminated employees often assert a claim of intentional infliction of emotional distress as a part of a discrimination or wrongful discharge lawsuit. The claim is founded upon the argument that the employer's conduct was so extreme and outrageous as to create severe emotional distress for the employee.

In order for an employee to assert this claim, a majority of courts have demanded that the employee show extreme and outrageous conduct on the part of the employer which exceeds all bounds of decency in a civilized society.26 In addition to extreme and outrageous conduct associated with termination of an employee, an increasing number of cases are finding a sufficient factual basis for this claim by virtue of an employer's harassment, including sexual harassment, of an employee.27
An employee attempting to establish a claim for intentional infliction of emotional distress must show that emotional distress did, in fact, result and that the distress was severe. To prevail, the plaintiff must show the finder of fact that no reasonable person could be expected to endure the emotional hardship inflicted by the defendant.28
Perhaps it goes without saying that an employer should handle all employment issues in a rational, dispassionate, and even empathetic manner. There is no excuse for angry, abusive, hostile or harassing management actions in the workplace. An employer who engages in such conduct could be given the opportunity to defend itself against a claim of intentional infliction of emotional distress in court.

Interference with contractual relationships. Many times employees who have been terminated may seek to assert claims that supervisors or co-workers interfered with their employment relationship thereby causing their termination. Sometimes they will also claim that a former employer interfered with new employment or their prospects for employment. These types of claims give rise to the torts of interference with contractual relationships.

As a general rule, an employer or its agents, managers, or supervisors cannot be held liable for interfering with an employment relationship to which they are a party provided the individuals act within the scope of their assigned duties and responsibilites.29 As a consequence, in order for a plaintiff to prove some type of actionable interference, it must be shown that the individual who interfered with the employment relationship was seeking to gain some personal advantage or to take revenge against the plaintiff.30
In terms of interference with a new employment relationship, not every action taken by the former employer to interfere with the new relationship is recognized under the tortious interference with contract claim. As an example, an employer may have a qualified privilege to interrupt a former employee's new employment relationship in order to assert a legal right, such as enforcement of a valid covenant of non-competition.31
Certainly, great care should be taken in communicating with an employer concerning the former employee. If references are to be provided to third parties, the employer would wisely obtain an appropriate acknowledgment and waiver from the employee permitting the former employer to divulge candid information concerning the individual's former employment. Further, references should be done in writing, not verbally.

Fraud. A party can be held liable for fraudulent misrepresentation where:

1. The party makes a false representation of a fact.

2. The party communicating the misrepresentation knows it to be false or recklessly asserts such information.

3. The party intended to have the person to whom the statement is made to act in reliance upon it.

4. The party to whom the information was communicated was prompted to act or was justified in relying upon the fraudulent statement.

5. The party relying upon the statement suffered damage.32

Examples of fraudulent misrepresentations in the employment context can include erroneous promises of financial benefits or representations concerning the quality of the employee's work which were false.33
Suffice it to say that an employer should carefully monitor representations in the workplace to avoid allegations of misrepresentation. Further, once an employer makes a statement or represents something concerning a term and condition of employment, the employer must follow through on the statement. Some courts have been less than receptive to misrepresentation claims, but an employer should not count upon judicial differences of interpretation to avoid legal liability for fraud.34

Invasion of privacy. Many states are not anxious to quickly recognize invasion of privacy claims in the employment context for private employers. Still, those states which do recognize an invasion of privacy claim classify it in one of four distinct categories as follows:

1. Public Disclosure of Private Facts. If an employer discloses private facts about an employee, such as information concerning the employee's termination, the employer could be held liable for invasion of privacy.35

2. Appropriation of Name or Likeness. Although not frequently utilized as an invasion of privacy claim in the employment context, an appropriation of an employee's name or physical likeness without obtaining the employee's prior consent could provide a foundation for a claim of invasion of privacy. This type of situation may occasionally arise when the employer seeks to utilize alleged private information for advertising on the company's behalf. However, the courts are reluctant to find violations based upon appropriation of name or likeness.36

3. False Light in Public. Where an employer has disseminated incorrect information which tends to place the employee in a "false light" before the public, an invasion of privacy claim may lie. It is not necessary that the employee show that the information which was disclosed was derogatory.37

4. Intrusion into Seclusion. On occasion, an employer will attempt to crowd into an employee's "living space" or attempt to involve itself in the personal details of the employee's life. Where the employer takes intrusive measures such as inappropriate drug screening or physically forcing its way into the employee's home, intrusion into seclusion may constitute a proper claim.38

As is the case with many of the previously identified tort claims, an employer who acts rationally and deliberately can generally avoid tort liability even where discipline or termination of an employee becomes necessary. Ancillary tort claims such as assault and battery, intentional infliction of emotional distress, invasion of privacy, and others simply do not originate in a vacuum. In order for such claims to be viable, an employer must have created the factual foundation for the claim by acting in an angry, intrusive or malicious manner.  

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