SmartLaw: Attorney and Lawyer Referral Service. Divorce, bankruptcy, criminal, accident, business
The Los Angeles County Bar Association Lawyer Referral and Information Service, the largest and oldest such service in the United States, has hundreds of pre-screened, qualified and insured lawyers in the Los Angeles area who can help you with your legal issues. Contact us now and our courteous, professionally trained staff will help you connect you with the right lawyer. The LRIS is a nonprofit public service of LACBA.

Message #803 Wrongful termination

mp3 #803 Can Employees Sue if Fired? (mp3 file)

Most employees are considered at-will employees, which means that you can be fired at the will of your employer, unless you have an agreement with your employer that you can be fired only for good cause.

Legislation establishing a just cause requirement for employee terminations or forbidding the discharge of employees for "whistle-blowing"---which occurs when employees report illegal acts or unsafe conditions to their supervisors or to public authorities---is pending in about a dozen states. If passed, that legislation would further limit the right of a private employer to terminate an at-will employee.

Court decisions limiting an employer's right to fire an employee, on public policy grounds, fall into three general types of cases. Courts permit employees to recover from employers, when they are terminated for refusing to commit an unlawful act, or for performing a public obligation, or for exercising a statutory right. These cases involve retaliatory firings of employees because, for example, the workers refused to participate in illegal price-fixing schemes, or they served on a jury.

The public policy cases are important because the worker may win an award of more than just out of pocket expenses, or other economic losses. Now that many courts have recognized public policy limitations on the right of an employer to fire an employee, employers may also be subject to additional damages to punish the employer for intentional misconduct, especially when they violate public policy that already has been established, such as discrimination.

No state's public policy has as yet required a just cause requirement for the firing of an employee, though some courts have come close to that. That usually occurs when the facts are very appealing, such as when a longtime employee, perhaps one who expects commissions or other payments from an employer, is fired. It can also occur when an employee is induced to relocate, gives up a job with a certain amount of security, buys a home, and then is terminated unjustly.

Although an employee discharged in violation of a clearly mandated public policy may sue his company in many states, courts in those states take different approaches to defining public policy. Some courts say that the policy has to be rooted in a statute, but other courts say that it can either be in statutes, or in Administrative codes and regulations, or in professional codes and ethics, or derived from the constitution, or from sources such as court opinions.

The California Supreme Court said, in 1988, that regardless of the source of the public policy, the policy must benefit the public at large, rather than a particular employer or employee. In that 1988 case, Foley v. Interactive Data Corporation, the employee, Foley, told his company that a recently-hired executive was being investigated by the FBI for embezzling bank funds where he formerly worked. This new executive then became Foley's immediate supervisor, and Foley was fired. The court held that the information Foley had given to his company, about the new executive's past criminal behavior, was information that would benefit only the company, and it was not information that would benefit the general public. Therefore, there was no legal reason to prevent the company from firing Foley for sharing this information that the company did not want to hear.

Also in the 1988 Foley case, the California Supreme Court decided that contract remedies, instead of tort remedies, provided sufficient financial compensation for wrongful terminations in the absence of a public policy violation. The result of this decision is that financial compensation for victims of wrongful termination not based on a violation of public policy, is now much lower than in the past, when higher punitive damages used to be awarded.

So if an employee reports an employer's violations of consumer protection laws to state agencies, or reports discovery of the payment of commercial bribes, a firing of that worker in retaliation can be in violation of public policy.

Another protection for workers is an implied employment contract. Employees who can claim that a contract exists, that forbids discharge without just cause, are a step ahead of the game. They don't need to claim that their discharge violated public policy, but they can state merely that they were fired in violation of their contract.

These types of implied employment contracts have been found in everything from personnel handbooks and company manuals, to oral statements made by job recruitment interviewers, and although today, most courts say that personnel handbooks do not create contractual liability, this view may be about to change. There is a growing willingness on the part of courts to recognize a personnel manual as a basis for finding a contract, if the manual says, without qualification, that the policy of the company is not to fire except for just cause. Liability for such cases is limited to contractual damages.

And some of those states, that recognize a contractual claim based on an employer’s publications, say that employees do not even need to have seen or relied on the employee handbook, in order to gain the benefits of it.

To protect themselves from lawsuits by fired employees, some businesses are now reviewing all pre-employment recruitment and interview documents, to determine whether any-language promises, even implicitly, the benefit of permanent or long-term tenure. They are also telling their recruiters that all promises or commitments they make, may be enforceable as contracts.

To guarantee that no reliance is placed on a statement by a recruiter or in any application form or manual, some employers have new employees sign statements at the time of their hiring, in which they agree that they are at-will employees, subject to being discharged for any reason and at any time.

Disclaimers are being added to handbooks or manuals, stating that nothing in those documents should be construed as a contract, and that employees can be terminated at any time regardless of cause.

To avoid any risk of an implied contract being found by a court or jury, employers are also considering employment contracts for all employees, specifically stating the terms of employment. This is especially true in states such as California, where a long tenure and satisfactory work could give rise to implications that just cause is needed for termination. Modifications of company manuals may be effective, at least for employees who keep working after the manuals are amended.

Probationary periods for newly hired employees are also being defined carefully. Employers using probationary periods are emphasizing the special nature of the probationary period as the time the employee receives closer scrutiny and more periodic reviews. Going beyond that and saying that the employee can be terminated at any time and without notice during the probationary period, however, may imply that after the probationary period, there is a right to employment.

Descriptions of the probationary periods are being changed to say that an employee will become "a full -time or regular" employee after the probationary period, rather than a "permanent" employee.

Company managers are not told that evaluations of an employee's performance should not be perfunctory. Insincere evaluations, and appraisals where employees always get good reviews can come back to haunt a company.

That can occur in two ways. First, good evaluations can be used by fired employees, to show that they were not fired for the reason cited by their employers--namely, that their work was inadequate--and could lead to courts or juries finding that they were fired for reasons that violate public policy. Second, an employee with a longstanding good record who is fired for cause, may sue the employer for negligent evaluation. In one case, an employee had received glowing evaluations. But when he started to slide, he hadn't been warned. The court said the employer owed him a duty to warn him that he was slipping, and failure to satisfy that obligation held the employer open to liability.

The need for fair evaluations leads into a requirement that some have called progressive discipline. If a problem develops with an employee, the employer will discuss it with the employee. If the problem continues, the employer writes to the employee on the subject, and then follows up on the memo. The purpose of this, of course, is to establish a record that will support the employers' position that the employee-was fired for a valid reason, if the employee brings suit after being discharged.

Keeping inappropriate documents in an employee's file is now being avoided. Employers should not keep documentation about an employee's extracurricular activities. Employers keeping tabs on what employees may do after work in their own private time, are going to appear to be snooping; they may also make an employee out to be a martyr.

Stale or out-dated items that pertain to an employee's work and are no longer relied upon, are also being discarded. The personnel records acts that many states are passing, which give employees access to their records, now force many employers to face up to the questions of what they want an employee to see.

With whistle-blowing becoming a hot topic for both legislatures and courts, employers are now adopting procedures for looking at employee objections to company actions, or actions that employees may be asked to take. With a channel that employees are required and encouraged to use to register their objections, employees may be less likely to go to the press or to government agencies with their concerns, and if their concerns are valid, an employer may be saved from a significant civil or criminal liability.

If there is a procedure established for handling employee terminations, either in a personnel handbook or manual or in company practice, that procedure should be followed to avoid any argument that the dismissal was improper.

At the time of any firing, an employer should give careful review to whatever documents, other evidence, or information that will be relied on in taking action. Review of all the elements that go into a discharge decision will allow a better evaluation of the issue, and a determination can be made as to whether the discharge is for proper or improper reasons.

Something that is gaining in popularity among employers is a specific severance agreement in which a discharged employee agrees not to sue the employer for any reason arising out of the employment or discharge. These courts might approve agreements, especially for higher-level employees, if something is given to the employee in exchange for signing the agreement. This could be several extra weeks of vacation pay, severance pay, or extra pension benefits.

Because of the many wrongful discharge cases upholding the claims of employees in recent years, employers now try to establish a good faith reason for firing an employee, such as insubordination or business reorganization. If you feel that you were fired unjustly, you may wish to contact your union or an attorney. This information has been provided with permission of the ABA Journal, The Lawyer’s Magazine.

Back to Top