MCLE Article and Self-Assessment Test
FIRING AT WILL
Has the Green decision opened the floodgates for the use of wrongful termination litigation to achieve public policy goals?
By Elizabeth H. Murphy
Elizabeth H. Murphy is an associate in the Los Angeles office of Buchalter, Nemer, Fields & Younger. She practices employment and commercial litigation.
California courts have been struggling for 30 years to craft an exception to the at-will employment doctrine that would distill two conflicting goals into a tort theory that fairly serves both employers and employees. The courts' objective was to prohibit employers from using the threat of discharge to coerce employees into committing or concealing crimes without also creating a catch-all termination theory for the overly litigious. Despite their attempts, the courts have failed. Although the public policy exception to the at-will employment doctrine was initially applied strictly and narrowly, the urge to redress a growing number of public policy violations has led to a far more liberal application of the doctrine.
The most recent evidence of this trend is last year's Green v. Ralee Engineering Company decision,1 in which the California Supreme Court held that a public policy claim may be based upon an established fundamental policy for public benefit that is either rooted in a specific statutory or constitutional provision or in an administrative regulation. Green effectively overrules the supreme court's landmark 1992 ruling in Gantt v. Sentry Insurance,2 which set forth careful parameters for the public policy exception. The potential effects of this recent expansion of the public policy exception are ominous-particularly for employers.
Labor Code Section 2922 provides that "employment, having no specified term, may be terminated at the will of either party on notice to the other." This presumption may be superseded by:
- A contract, express or implied, limiting the employer's right to terminate the employee.
- Evidence that the termination constituted unlawful discrimination under the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, or any other civil rights statute.
- Evidence that the termination contravened a public policy delineated in a constitutional or statutory provision.
The public policy exception to the at-will employment doctrine first appeared in California in 1959, when the court of appeal announced in Petermann v. International Brotherhood of Teamsters3 that an employer's right to discharge an at-will employee is subject to limits imposed by public policy. The plaintiff in Petermann, a union business agent, alleged that he was terminated after refusing to testify falsely to a state legislative committee. Overruling the trial court, the court of appeal held that although the plaintiff was an at-will employee, "[i]t would be obnoxious to the interests of state and contrary to public policy and sound morality to allow an employer to discharge any employee, whether the employment be for a designated or unspecified duration, on the ground that the employee declined to commit perjury, an act specifically enjoined by statute."4
Tameny and Foley
Twenty-one years later, in Tameny v. Atlantic Richfield Company,5 the California Supreme Court followed suit. The court addressed whether a wrongful termination claim could proceed absent a specific statute barring an employer from terminating an employee who refuses to act illegally. In Tameny, the plaintiff alleged that he was fired for refusing to engage in price-fixing in violation of the Cartwright Act and the Sherman Antitrust Act. The supreme court decided to uphold the claim, concluding that "even in the absence of an explicit statutory provision prohibiting the discharge of a worker on such grounds, fundamental principles of public policy and adherence to the objectives underlying the state's penal statutes require the recognition of a rule barring an employer from discharging an employee who has…refused to commit an illegal act."6 Although Tameny thus expanded employers' obligations by imposing, for the first time, a legal duty to implement "the fundamental public policies embedded in the state's penal statutes," the court limited its holding to situations in which the offended public policy was "firmly established" at the time of the discharge.7
In 1986, the court of appeal in Koeher v. Superior Court8 explained that the wrongful aspect of a tortious termination arises not from the terms and conditions of the employment relationship-which, for purposes of a claim based on the Tameny decision, are therefore irrelevant-but from the implied legal duty on behalf of an employer to conduct its affairs in compliance with public policy.9
The next major development in so-called Tameny claims occurred in 1988, when the supreme court addressed the precise nature of the public policy that would support such a claim. In Foley v. Interactive Data Corporation,10 the plaintiff alleged that he was fired for reporting to management his supervisor's history of embezzlement. Limiting the somewhat general language used in Tameny, the supreme court held that even when a statutory touchstone is asserted, courts must still inquire whether the discharge 1) violates public policy and 2) affects a duty that "inures to the benefit of the public at large rather than to a particular employer or employee."11 Applying the facts before it, the Foley court could find neither a specific statute imposing a duty upon the plaintiff to report the purportedly illegal activities of his or her supervisor, nor a substantial public policy prohibiting the defendant from terminating the plaintiff for performing that duty. Since the plaintiff's duty to report the information served only the private interests of the employer, the rationale of Tameny did not apply, and the plaintiff's wrongful termination claim failed.
Since Foley, the supreme court has continued to shape the parameters of a tortious termination claim. In its decision in 1990 in Rojo v. Kliger,12 the court held that evidence of sex discrimination, in violation of the California Constitution, and a subsequent termination may form the basis for a tortious termination claim.
The Gantt Era
Two years later, in Gantt,13 the court limited Tameny claims to those in which the fundamental or substantial public policy is "tethered" to a specific constitutional or statutory provision. The Gantt court recognized four types of cases in which the employee's actions could support a wrongful discharge claim based on public policy:
In keeping with the desire to limit rather than expand the tort, the court cautioned that "[b]ecause 'public policy' is a concept notoriously resistant to precise definition, courts should venture into the area-if at all-with great care and due deference to the judgment of the legislative branch."14
- The employee refused to violate a statute.
- The employee performed a statutory obligation.
- The employee exercised a constitutional or statutory right or privilege.
- The employee reported a violation for the benefit of the public.
Gantt recognized the inherent vagueness of public policy as a concept and, after considering the conflicting decisional law and the competing interests at stake, concluded that:
[A] public policy exception carefully tethered to fundamental public policies that are delineated in constitutional or statutory provisions strikes the proper balance among the interests of employers, employees and the public. The employer is bound, at a minimum, to know the fundamental public policies of the state and nation as expressed in their constitutions and statutes; so limited, the public policy exception presents no impediment to employers that operate within the bounds of law. Employees are protected against employer actions that contravene fundamental state policy. And society's interests are served through a more stable job market, in which its most important policies are safeguarded.15
Gantt's holding appeared, for a time, to create just the sort of stability in the area of employment law that the California Supreme Court had been striving for since Tameny. In Sequoia Company v. Superior Court,16 for example, an employee alleged that he was terminated by his employer, an insurance company, because he refused to increase reserves artificially in order to create an illusion of loss that would reduce the refunds due to customers under Proposition 103. The employee's allegation of wrongful termination was held insufficient under Gantt in that he failed to identify a specific statement in Proposition 103 or any other statute restricting the amount of an insurer's reserves. The supreme court reiterated its "specific statute or constitutional provision" requirement in its 1994 decision, Turner v. Anheuser-Busch, Inc.17 A constructive wrongful discharge claim was "doomed," according to the Turner court, because it was based on the alleged violations of an employer's internal operating procedures.
In its decisions after Turner, the court followed Gantt consistently, never questioning its conclusion that the only termination that would support a wrongful discharge action would be one that violates a fundamental public policy expressed in a statute or constitutional provision. For instance, in Jennings v. Marralle,18 the court rejected the application of the tortious termination doctrine to alleged age discrimination by an employer not subject to the Fair Employment and Housing Act. Indeed, just two years ago, in Stevenson v. Superior Court,19 the supreme court emphasized once more that "tethering public policy to specific constitutional or statutory provisions serves not only to avoid judicial interference with the legislative domain, but also to ensure that employers have adequate notice of the conduct that will subject them to tort liability to the employees they discharge."
The Broader View of Green
The landscape changed in 1998, when two districts of the court of appeal began to shift from safeguarding the narrow boundaries of the tort to recognizing its broader applicability. The Fourth Appellate District affirmed a $342,000 jury verdict in favor of a plaintiff in White v. Ultramar20 (a case accepted for review by the supreme court). The plaintiff, who was fired after stealing a soft drink from the defendant employer, convinced the jury that the theft was merely a pretext for the real reason behind the firing-the employer was retaliating against the employee for testifying at an unemployment compensation hearing on behalf of a former employee. Rejecting the defendant's argument that the plaintiff failed to specify an applicable statute or constitutional provision, the court of appeal found that "there is no express requirement that a discharge must be specifically prohibited by the express terms of a statute."
Similarly, the Second Appellate District, in Phillips v. Gemini Moving Specialists,21 found in favor of the plaintiff notwithstanding the tenuous causal link between the plaintiff's complaints to management and his termination. In Phillips, the facts allegedly constituting constructive termination occurred two months prior to the plaintiff's complaint about an unauthorized deduction from his paycheck.
In late 1998, the supreme court followed the appellate courts' lead and adopted a broader view of the public policy exception by holding in Green22 that the fundamental public policy may be grounded in an administrative regulation-not just a statute or constitutional provision. The defendant in Green, Ralee Engineering Company, manufactured aircraft fuselage and wing components and supplied them to major airline companies. The plaintiff, a graveyard shift employee who inspected aircraft parts prior to their shipment, alleged that, beginning in 1990, the defendant was shipping parts that had failed the plaintiff's inspections. The plaintiff further claimed that he repeatedly objected to supervisors, management personnel, and the president of the company over the next two years, but to no avail. In response to these complaints, the defendant corrected its practice, but only for some of its airline clients. In March 1991, defendant Ralee, citing what it claimed was a reduced demand, closed its night shift and fired some of the staff, including the plaintiff-who alleged that Ralee retained other night shift employees, including some with less experience than the plaintiff.
Claiming retaliation for his complaints about Ralee's inspection practices, the plaintiff sued for wrongful termination in violation of public policy. The plaintiff's public policy argument, however, was based on Federal Aviation Administration (FAA) regulations that did not even apply to Ralee. Although the trial court granted Ralee's motion for summary judgment based upon the plaintiff's at-will status, the court of appeal reversed, holding that a tortious termination claim could be stated even though neither the court nor the plaintiff could identify a "particular statute or constitutional provision" prohibiting airline parts manufacturers from supplying defective parts or falsifying documents.
In affirming the court of appeal, the supreme court justified its modification of the Gantt requirement that the cited public policy must be grounded in a statute or constitutional provision by examining its purpose, which was to curb judicial policy making by mandating deference to legislative pronouncements. The court tied administrative regulations to statutes by reasoning that the legislature authorizes administrative bodies to promulgate and implement regulations in order to carry out the legislative purpose behind a statute-and thus the finding that public policies based in authorized administrative regulations would not entail a substitution of judicial rulings in place of legislative decisions. By enacting the legislation that established the FAA, Congress not only declared a public interest in commercial air safety but also delegated to the agency the responsibility for ensuring safe air travel by prescribing regulatory standards for the design, material, construction, quality of work, and performance of aircraft.
The Green court purported to limit further expansion of the public policy exception by including a few limitations, none of which provides much concrete guidance for future litigants or judges. The court excluded as a basis for future claims "other potential sources of policy not discussed here or in any of our cases following Gantt."23 In light of the court's decision to adopt administrative regulations as a broad category of public policy sources for future claimants, this general limitation appears meaningless. Indeed, employers must now make termination decisions with knowledge of, and in compliance with, the vast number of administrative regulations that exist. Even more alarming for employers is the prospect that an employee will assert a public policy exception based on administrative regulations applicable to the conduct of entities doing business with an employer but not to the employer itself. Chemical companies may now be subject to federal air pollution regulations, for example, and truck manufacturing companies may need to follow federal highway administration regulations. The problem of notice in all these potential circumstances defies the court's prior acknowledgment that "[i]t would be unreasonable to expect employers [to] realize that they must comply with the law from which they are exempted under pain of possible tort liability."24
The Perils of Overreaching
Perhaps recognizing the potential for opening a Pandora's box, the Green court noted that policy-generating regulations must be consistent with the "terms or intent of the authorizing statute" and "reasonably necessary to effectuate the statutory purpose."25 Like the public policy exception, however, these restrictions are similarly broad and ill-explained. For the unwary employer, Green actually poses more questions than it answers and ultimately provides little if any guidance for employers in determining appropriate workplace policies.
As disgruntled employees respond to their terminations and fashion new lawsuits, courts will undoubtedly be called upon to dissect and clarify Green's parameters and adjudicate virtually limitless litigation over the myriad of so-called public policies that will be found in federal and state administrative regulations. What is more, the Green rule offers little in the way of standards, thus allowing judges who are so inclined to enforce their public policy preferences by finding some regulatory expression, however remote, that is related to a case at issue.
As California litigants wade through the fallout from Green, employers and employees in other states remain subject to the more limited philosophy that had characterized California's decisions until 1998. An Arizona appellate court recently rejected a public policy claim asserted by a man who was terminated after refusing to "fill in" at work because to do so would have left his four-year-old son unattended. Cautious of the floodgate effect of a contrary ruling, the court held that the father's reasons for refusing to go to work, however reasonable and sympathetic, were immaterial "so long as the act required by the employer [was] a lawful act." 26
A Washington appeals court similarly held that an employer's decision to terminate an employee because of his sexual orientation-even though the decision is conceded to be "morally wrong"-did not violate public policy. In Webb v. Puget Sound Broadcasting Company,27 the Washington court held that provisions of the Seattle Municipal Code and the King County Code prohibiting discrimination based on sexual orientation did not necessarily represent the public policy of the state as a whole and were therefore insufficient to establish a violation of statewide public policy. The court also rejected a Washington state statute prohibiting hate crimes as a basis for public policy.
The varying application of the tort of wrongful termination in violation of public policy may, like the inconsistent judicial enforcement of mandatory preemployment arbitration agreements, invite final determination by the U.S. Supreme Court. Until then, however, California litigants, lawyers, and judges will have to contend with the potentially dire effects of Green. Clearly, as Justice Baxter noted in his dissent to the Green majority, everyone supports "motherhood, the American flag and commercial air safety"-but they should not be addressed or promoted through employment-related litigation.
1 Green v. Ralee Eng'g Co., 19 Cal. 4th 66 (1998).
2 Gantt v. Sentry Ins., 1 Cal. 4th 1083 (1992).
3 Petermann v. International Bhd. of Teamsters, 174 Cal. App. 2d 184, 187 (1959).
4 Id. at 188-89.
5 Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980).
6 Id. at 174.
7 Id. at 176.
8 Koeher v. Superior Court, 181 Cal. App. 3d 1155 (1986).
9 Id. at 1166.
10 Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988).
11 Id. at 669.
12 Rojo v. Kliger, 52 Cal. 3d 65 (1990).
13 Gantt v. Sentry Ins., 1 Cal. 4th 1083 (1992).
14 Id. at 1095.
16 Sequoia Co. v. Superior Court, 13 Cal. App. 4th 1472 (1993).
17 Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238 (1994).
18 Jennings v. Marralle, 8 Cal. 4th 121 (1994).
19 Stevenson v. Superior Court, 16 Cal. 4th 880, 889 (1997).
20 White v. Ultramar, 62 Cal. App. 4th 939 (1998).
21 Phillips v. Gemini Moving Specialists, 63 Cal. App. 4th 563 (1998).
22 Green v. Ralee Eng'g Co., 19 Cal. 4th 66 (1998).
23 Id. at 79.
24 Jennings v. Marrallle, 8 Cal. 4th 121, 135-36 (1994).
25 Green, 19 Cal. 4th at 81.
26 Lloyd v. AMF Bowling Centers, Inc., 1999 Ariz. LEXIS 22 (Feb. 23, 1999).
27 Webb v. Puget Sound Broadcasting Co., 1998 Wash. App. LEXIS 1795 (Dec. 12, 1998).
|EARN CLE CREDIT|| ||By reading this article and answering the accompanying test questions, you can earn one CLE credit.|