Washington Court of Appeals Expands "Jeopardy" Element of Claim for Wrongful Discharge in Violation of Public Policy

This month the Washington State Court of Appeals, Division III issued a ruling in Becker v. Community Health Systems, Inc. that expands protections in a wrongful termination action based on violation of a public policy.

In Becker, the Plaintiff, a former chief financial officer for Community Health Systems, Inc. (“CHS”), alleged that while CHS initially represented that it would have a $4 million operating loss, Becker calculated a projected $12 million operating loss in 2012. When CHS requested Becker revise his projection prior to submitting it to the U.S. Securities and Exchange Commission (“SEC”), Becker refused. CHS placed Becker on a performance improvement plan and conditioned his continued employment on revising the loss projection. Becker documented his concern with the CHS calculation and advised the company that unless it remedied its misconduct he would be forced to resign. CHS accepted Becker’s notice as a resignation. 

Becker sued in superior court for wrongful discharge in violation of public policy (he also filed a whistleblower retaliation complaint with the U.S. Occupational Safety and Health Administration).  After the trial court denied CHS's motion to dismiss for failure to state a claim under CR 12(b)(6), CHS sought discretionary review with the Court of Appeals.

The elements of a claim of wrongful discharge in violation of public policy in Washington require the plaintiff establish (1) the existence of a clear public policy (the clarity element); (2) that discouraging the conduct in which the plaintiff engaged would jeopardize the public policy (the jeopardy element); (3) that the public-policy-linked conduct caused the dismissal (the causation element); and (4) the defendant is not able to offer an overriding justification for the dismissal (the absence of justification element)." See Gardner v. Loomis Armored, Inc., 128 Wn.2d 931, 941, 913 P.2d 377 (1996). The heart of the dispute in Becker is whether Plaintiff was able to establish the “jeopardy" element.  Ordinarily, when a plaintiff has other available means for promoting the public policy that are adequate, such as remedies under state or federal statutes, the common law public policy claim must fail.

The Becker Court found that the plaintiff's complaint adequately alleged the jeopardy element of a wrongful discharge claim under CR 12(b)(6), and that his case could proceed.  The Court reached that conclusion despite the fact Becker had available remedies under no less than five statutes, including the Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Act of Washington, under which he could have sought protection from retaliation or helped authorities prosecute CHS for misconduct in securities reporting. The Court found that each of these forms of relief were inadequate to “fully vindicate public policy,” because they did not foreclose simultaneous use of other remedies. Rather, each law acknowledged that it was a nonexclusive source of relief. The Court explained that reliance on upholding the public policy under such circumstances renders public policy enforcement uncertain “at best.”

Washington employers should proceed with caution when evaluating potential plaintiff’s common law claims for wrongful termination in violation of public policy. Even where the former employee could have utilized extensive federal and state laws and related mandatory agency reporting provisions, Washington courts may now find these statutes inadequate to preserve the public interest when the legislative text does not explicitly indicate the law is an exclusive form of protection.

Oregon Court of Appeals Upholds Wrongful Discharge Claim By Whistleblowing Prison Guard

Is the Oregon Court of Appeals back in the wrongful-discharge business? It’s a fair question to ask after the court’s decision last week in Lucas v. Lake County, --Or. App.-- (2012).  Reversing the trial court's motion to dismiss, the court held that a sheriff’s deputy who served as a correctional officer could sue for wrongful discharge in violation of public policy based on his allegation that he’d been fired for demanding that the sheriff implement a training program regarding sexual relations with inmates, and for concluding that another sheriff’s deputy had traded contraband for sex with an inmate.  

What Is An "Important" Public Duty?

Wrongful discharge has had an eventful history in the Oregon courts.  Broadly speaking, in a wrongful discharge claim an employee alleges that the employer terminated him for a reason that is inconsistent with an important public policy.  The key (and usually thorny) legal issue is identifying the public policy and weighing whether it is sufficiently important to protect an employee from being fired.  The Oregon courts have deemed an employee’s need to be absent from work to serve on a jury (Nees v. Hocks, 272 Or. 210 (1975)) and an employee’s internal protest that a fire department covered up evidence of a safety violation (Love v. Polk County Fire Dist., 209 Or. App. 474 (2006)) important enough to qualify.  On the other hand, a doctor’s disagreement with his medical group’s treatment recommendations (Eusterman v. Northwest Permanente P.C., 204 Or. App. 224 (2006)) and private security guards’ lawful arrest of drunken concertgoers (Babick v. Oregon Arena Corp., 333 Or. 401 (2002)) didn’t make the cut.

 

Courts and attorneys attempting to discern the difference among these cases were left scratching their heads about how to figure out whether a public policy was “important.”   Three years ago, the Oregon Supreme Court appeared to bring some clarity to the “important public policy” question in Lamson v. Crater Lake Motors, 346 Or. 628 (2009), where the court decided that a car salesman’s complaints about what he deemed to be unethical (although not unlawful) sales tactics did not go to an important policy, even though Oregon’s consumer protection laws clearly indicate a general policy against deceptive trade practices.  Going forward, the court said, an employee would have to do more than identify “some general public policy expressed in statute, constitution, or case law that would be ‘thwarted’ by the discharge at issue.”  Instead, “the sources of law that express the asserted ‘public policy’ must in some sense speak directly to those acts” that got the employee fired in the first place.

Lucas:  Keeping The Peace Is Sufficiently Important Public Duty For Prison Guards

Turning back to Lucas, is there any portion of Oregon law that “in some sense speak[s] directly” to a deputy’s recommendation that a sheriff’s office adopt a particular training policy, or his investigation of a subordinate's misconduct?  Not exactly.  Oregon law states that county sheriffs must be certified police officers, have the obligation to “arrest and commit to prison all persons who break the peace, or attempt to break it,” and that a deputy’s duties are derivative of the sheriff’s. ORS 206.010.  But that's as close as it comes to addressing the conduct that (allegedly) precipitated the deputy's termination. 

That was enough for the Court of Appeals, which said that because the deputy "alleged that he was terminated for seeking to enforce the criminal laws by preventing, detecting and investigating crime," he was entitled to go before a jury on his claim that his firing violated an important public duty.

Whither Wrongful Discharge?

In the long term, it's hard to know whether the Lucas decision signals that the Court of Appeals will be more receptive to wrongful-discharge cases that aren't grounded directly in a clear statutory command.  Certainly, the lurid facts of Lucas (not to mention the public safety context) made it easy for the Court to conclude that the termination violated public policy.  In addition, and whatever the difficulty of explaining just what is or isn’t an “important” public policy, it remains relatively simple for a plaintiff to state a similar type of claim under Oregon’s various whistleblower-protection statutes, primarily ORS 659A.199 (prohibiting employers from taking action against employees who report literally any unlawful activity), but also potentially ORS 659A.203 (for public employees), 659A.230 (protecting employees who complain of criminal conduct), and 659A.233 (employees who report violations of specific laws).  An employee who lacks a discrimination claim under Oregon’s anti-discrimination statutes can use the considerable ambiguity of the Lucas opinion (and of the whistleblower statutes) to pursue a wrongful discharge claim against his employer.  This area of the law bears watching in the future.

 

Why Should Employers be Fair?

Martha walks into your office and says she wants to fire her assistant, Roy, because he keeps sending emails with typos and it is embarrassing. Martha says, “We are at-will and I want him gone by the end of the day.”  Like most others, Alaska is an “employment-at-will” state, which means that the employee and employer are free to end the employment relationship at any time and for almost any reason. But is there more to consider in terminating Roy?

Every employment relationship in Alaska contains an implied covenant of good faith and fair dealing. An employer can violate the covenant by acting with an improper motive, like firing an employee two weeks before he is tenured. The covenant also requires employers to treat employees in a way that a reasonable person would consider fair.

Violation of the covenant of good faith requires a very fact intensive inquiry, which often requires going through a trial with witnesses rather than resolving issues through a motion for summary judgment. Trial is incredibly expensive for employers, not only in court costs but also in terms of stress on staff and distraction from business. However, two Alaska Supreme Court cases issued in early July of this year, that you can see here and here, show that summary judgment is alive and well if an employer can adequately demonstrate it acted fairly and without improper motives in its termination process. The application of the implied covenant of good faith and fair dealing to the employment context varies from state to state, and clearly does not apply in some states, like Washington. Nonetheless these recent cases are a good reminder that fair and equitable treatment in discharging employees can help employers avoid costly and disruptive claims.

So what do we do about Roy? Here are five suggestions to help ensure compliance with the implied covenant of good faith and fair dealing:

  • Follow a process. Require supervisors to provide good faith, fair reasons for discipline. Provide the employee an opportunity to respond to any allegations. Hear facts from Roy now, rather than for the first time in an EEOC proceeding or in court.
  • Be fair.  Enforce personnel policies in a way that a reasonable person would regard as fair. Follow personnel policies when disciplining employees. What policy is Roy violating? Is termination an appropriate response to Roy’s violations?
  • Be consistent. Treat like employee alike, and justify any reasons for inconsistency in treatment. What type of conduct has resulted in other terminations? Have other employees received progressive discipline under similar circumstances, instead of termination? Treat Roy like other employees in similar situations.
  • Act in good faith. Do not manufacture reasons to justify a termination. Is Martha frustrated with Roy for some other reason? Better to learn about it now.
  • Document your process, fairness, consistency, and good faith.

Meghan M. Kelly also contributed to this post.