Two recent opinions from the Alaska Supreme Court offer helpful guidance to employers regarding termination processes.
In Barickman v. State, an employer suspected an employee of theft. When confronted, the employee signed a letter of termination and then wrote a letter stating that he was resigning to avoid a “black mark on his record.” The employee later sued, alleging wrongful termination based on breach of good faith and fair dealing.
To win a claim of wrongful discharge in Alaska, the employee must show that (1) he was discharged by his employer and (2) that the employer breached a contract or committed a tort in connection with the termination. Here, the employee argued that his employer terminated him in bad faith, treated him differently than similarly situated employees, and failed to conduct a reasonable investigation before deciding to fire him.
Alaska law provides that when an employer makes a good faith determination that misconduct has occurred, there is no breach of the implied covenant of good faith and fair dealing, even if the employee can subsequently prove that the factual finding of misconduct was a mistake. Here, the Supreme Court found that the employee did not raise any facts alleging that the employer’s determination was made in bad faith, particularly since the employer provided a spreadsheet showing instances where other employees accused of similar charges were dismissed or asked to resign. The Court ultimately held that the employer did not breach its duty of good faith and fair dealing. The Court likewise found that the employee failed to present enough evidence on the issues of whether the employer had treated him differently than other similarly situated employees or whether the employer’s investigation was unreasonable.
Boyko v. Anchorage School District involved a teacher who sued the Anchorage School District, one of Alaska’s largest employers. The parties had entered into a verbal resignation agreement wherein the employer promised not to release any negative information about the teacher to prospective employers. The teacher claimed that the District had provided information that was not positive to another school district, and that these actions breached the termination agreement, violated the covenant of good faith and fair dealing, and interfered with her prospective contractual relations. She also claimed disability discrimination, because the termination stemmed from incidents associated with the teacher’s drinking problem. The employer won on summary judgment all counts in the lower court, where the court found that the employer was immune under an Alaska statute (see AS 09.65.160) immunizing employers who disclose job performance information in good faith.
The Supreme Court largely disagreed, finding that evidence the teacher produced in the trial court raised sufficient factual issues as to whether the District had breached the resignation agreement, and therefore whether the District had violated the covenant of good faith and fair dealing and interfered with the teacher’s prospective contractual relations. The Court also noted that statutorily-created rights can be waived where there is “direct, unequivocal conduct indicating a purpose to abandon or waive the legal right.” Ultimately, the Court found that whether such a waiver occurred through the District’s verbal negotiation of a resignation agreement was in itself a material issue of fact, and remanded the claim to the lower court.
It was not all bad for the employer. On the disability claim the court found that District had provided a legitimate, nondiscriminatory reason for the dismissal and that the teacher had not raised sufficient doubts as to whether the reason was a pretext. Therefore, the Court affirmed the lower court’s entry of summary judgment on the claim.
Four Practical Tips For Terminations:
- Always act in good faith and deal fairly with employees.
- Consider whether termination of employment is consistent with applicable policies and past practices.
- Good documentation demonstrates process (and calm reflection).
- Be careful what you say at termination – it can become an oral contract.
Melanie Osborne contributed to this post.
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.
Unless your life’s ambition is to reprise George Clooney’s role in Up In The Air, Part II, you probably don’t like having to fire people. But someone’s got to do it . . . and it has to be done right. Here are some things to consider before you step into that room to do the dirty deed. (Pronouns are a nuisance, so our terminated employee will be known as Fred .)
- Has the decision been properly vetted by everyone who should participate? You may simply be the “implementer,” not the “decider,” so make sure you have buy-in from all the relevant stakeholders.
- Particularly when the decision is prompted by misconduct, poor performance or something else Fred did, have you gotten his side of the story? Even if you end up finding Fred’s version a little less than credible, wouldn’t you rather know now what he has to say for himself, rather than read it for the first time in a Summons and Complaint?
- Has the basis for the decision been properly documented? Most, if not all, employment lawsuits could be avoided if the employer took the time to properly document the performance faults, the efforts made to remedy performance (i.e., notice to Fred of his poor performance), and the legitimate business reasons for the termination decision.
- Have you reviewed Fred’s file to determine whether he has any post-employment obligations such as a covenant to not compete, or to not solicit your customers or your employees, or a confidentiality agreement? If such agreements exist, be sure to give Fred another copy of the document and remind him of his continuing obligations.
- Will you offer severance? If so, more often than not, you will want to have an appropriate release to give Fred to consider. There are occasions when you will want to offer severance but not require a release of claims, but that rarely happens these days.
- If you are going to have a written separation agreement (and you don’t have to have one), have you considered other provisions that might induce Fred to sign the release, like:
- A letter of recommendation;
- An agreement to not oppose an unemployment benefits application;
- An agreement to reimburse Fred for a certain amount of COBRA expenses, etc?
- Similarly, if you are going to have a written agreement, have you included all the provisions you need, in addition to the release of claims, like:
- A non-disparagement clause;
- An agreement to not reapply (watch out – these clauses can be tricky);
- An acknowledgement of continuing confidentiality duties;
- A promise to return all company property;
- If Fred is over forty, all of the provisions necessary to comply with OWBPA?
- Will you conduct the termination meeting alone or with a witness? The advantage of having a witness there is that he or she can take notes and be the corroborating witness should things go south. The disadvantage is that the presence of the silent witness may irritate Fred. Nine times out of 10, you’ll want the witness.
- Have you advised your trusted IT person to sever Fred’s computer access (including remote access) during the time that you will be meeting with him? Rarely will you want the employee to work at all after the termination meeting. If the meeting is delayed, be sure to tell the IT person.
- Have you considered when to schedule the meeting? Best is near or at the end of the day. Your office or Fred’s office is fine, but it might be easier to meet in Fred’s office or a conference room so that you can leave if Fred wants to argue and you need to end the meeting. It is easier to leave Fred’s office than to try to make him leave your office. Wherever you choose, make sure it is private.
- During the meeting: Don’t beat around the bush. Be direct, but gentle. Give a reason, but don’t go into detail. Resist being drawn into an argument. State that the decision has been made, is final, and won’t be reconsidered. Acknowledge Fred’s pain. Sensitive, caring companies get sued less often than cold, heartless ones.
- If Fred claims he is being or has been discriminated or retaliated against for some unlawful reason, (as opposed to just complaining that the decision isn’t right or isn’t fair) ask him to tell you very specifically why he says that, make careful notes of what he says, tell him that you will investigate the claim and get back to him, but that the decision stands. Call your lawyer.
- Tell Fred that his computer access has been cut off. Explain that you will work with him to get any personal information off his computer.
- Ask for Fred’s keys, card access, phone, laptop, thumb drive, or whatever other company property he has. Ask him if he has any company property or documents at home. Ask him if he ever emailed himself company documents. If he has materials at home, arrange a time to pick those things up. If he sent himself documents at home, get his assurance that he will delete those emails. You may need to take more serious steps than these if you suspect that Fred is not being straight with you.
- Decide in advance how Fred will collect his personal items. Will you walk him back to his desk and watch him pack? Will you agree to meet him at the office on the weekend?
- Regardless of whether you offer benefits in exchange for a release, give Fred a letter that says he has been terminated and reminds him of any post-termination obligations, if any. (Some states require that you state the reason for the termination.)
- Know what final pay is due and when it is due. State rules vary a lot. Do you have to pay out unused vacation upon termination? Depends. Do you have to pay out unused sick leave? Depends. When is the final paycheck due? Depends on whether Fred quits with or without notice or is fired or leaves by mutual agreement. In Oregon, because he was fired, Fred is entitled to receive his final pay no later than the end of the first business day following his termination. During the termination meeting, you should ask Fred whether he will come in to pick up his check or whether he wants you to mail it to him.
- Do your final paperwork or take steps to see that it gets done.
- Go home. Have a drink.
On my way in to work this morning, I was listening to NPR’s Morning Edition, and caught an interview with Lewis Maltby, president of the National Workrights Institute. The interview was ostensibly to promote Mr. Maltby’s new book, “ Can They Do That?” in which he discusses employment termination cases that were deemed legal, but seem, in his opinion, to be disproportionately severe or unjust.
What Mr. Maltby appeared to decry (without using the proper terminology) is the American presumption of “at will” employment—the notion that an employer may terminate an at will employee’s employment for any reason or no reason, so long as it’s not otherwise illegal. A couple of Mr. Maltby’s examples demonstrate that concept well. For example, he mentioned instances where it was permissible for an employer to terminate an employee based on the political bumper sticker on the employee’s car, and for a school to terminate an overweight teacher’s employment because the teacher did not project the correct image. As there are no laws that specifically protect individuals from discrimination based on political affiliation or weight, these terminations were in fact permissible. (I would caution, of course, that terminating an overweight employee does carry risk to the extent the employee might be considered to have a disability under state or federal law.)
Mr. Maltby’s credibility, however, ends there. Mr. Maltby incorrectly made the assertion that there are no laws at all to protect employees—and his other examples demonstrate a lack of understanding of the law. For instance, he implied that there is no recourse for an employee whose employment is conditioned on having sexual relations with a superior. That is, of course, false. Such behavior constitutes impermissible quid pro quo sexual harassment under federal law and the laws of nearly every state (if not all of them). He also cited an example of an employee who was seen by his boss drinking beers at a bar after work, and where the boss fired the employee because drinking is “a sin.” While the outcome of a lawsuit would depend on the specific facts, such a scenario could constitute discrimination based on religious belief—another category protected by federal law and the laws of most if not all states. Every state and locality has a variety of employment laws already in place that protect employees from a wide range of impermissible employer conduct. Rather than engaging in hyperbole by stating that no laws exist to protect employees, a more useful discussion revolves around whether, as a policy matter, it makes sense to pass new laws protecting additional personal characteristics or affiliations. The challenge, of course, is striking the right balance between protecting those few things we all (or mostly) agree should be protected, with the interests of employers who should have the right to conduct their businesses as they see fit. A copy of the NPR story is available here.
Mr. Maltby’s credibility, however, ends there. Mr. Maltby incorrectly made the assertion that there are no laws at all to protect employees—and his other examples demonstrate a lack of understanding of the law. For instance, he implied that there is no recourse for an employee whose employment is conditioned on having sexual relations with a superior. That is, of course, false. Such behavior constitutes impermissible quid pro quo sexual harassment under federal law and the laws of nearly every state (if not all of them). He also cited an example of an employee who was seen by his boss drinking beers at a bar after work, and where the boss fired the employee because drinking is “a sin.” While the outcome of a lawsuit would depend on the specific facts, such a scenario could constitute discrimination based on religious belief—another category protected by federal law and the laws of most if not all states.
Every state and locality has a variety of employment laws already in place that protect employees from a wide range of impermissible employer conduct. Rather than engaging in hyperbole by stating that no laws exist to protect employees, a more useful discussion revolves around whether, as a policy matter, it makes sense to pass new laws protecting additional personal characteristics or affiliations. The challenge, of course, is striking the right balance between protecting those few things we all (or mostly) agree should be protected, with the interests of employers who should have the right to conduct their businesses as they see fit.
A copy of the NPR story is available here.
Oregon Court of Appeals Upholds Employer's Right to Ask Potentially Disabled Employees to Take Medical Exams
Today in Heipel v. Henderson et al., the Oregon Court of Appeals affirmed summary judgment on an Oregon disability discrimination claim in favor of an employer who asked an employee to take an independent medical exam (IME) as part of an investigation into the employee's disturbing work-related behavior. The court confirmed that such exams must be "job related and consistent with business necessity," and that the exam in this case met those criteria.
Plaintiff Barbara Heipel worked for the Oregon Employment Department. Her supervisors received an escalating string of complaints about her job performance and erratic behavior. Her actions included:
- standing in the bathroom in a "trance" pulling out paper towels into an overflowing trash can;
- leaning against a bathroom stall in a "despondent state";
- total loss of emotional control with supervisors and coworkers;
- accusing her coworkers of stealing shredded documents from a trash can and pasting them together for personal use; and
- false and contradictory complaints to customers about her employer and coworkers.
Heipel's employer asked her to take an IME to determine whether she posed a threat to herself and others and whether she could perform the essential functions of her position. Plaintiff refused, and the Employment Department terminated her for refusing. Plaintiff filed a lawsuit claiming, among other things, that her employer had unlawfully discriminated against her under Oregon employment statutes for having a disability.
ORS 659A.136(1) provides that such examinations are appropriate only where they are "job related and consistent with business necessity." The Oregon Court of Appeals, relying on federal cases in the Sixth and Eighth Circuits, ruled that, under these circumstances, the requested exam met both requirements.
This decision should not be seen as a blanket endorsement of all IMEs in the workplace. Although this exam was ruled appropriate, the Court of Appeals' inquiry was fact-specific -- and the facts here were unusual. Employers should understand the risk of requesting such exams and should carefully evaluate the individual circumstances before forging ahead.
Is a Washington employer prohibited from terminating an at-will employee because she took leave from work to protect herself from domestic violence? Yes, according to last week's opinion from the Washington Supreme Court in Danny v. Laidlaw Services.
In Danny, the plaintiff sued her former employer in federal court, alleging she was terminated for taking leave from work in order to respond to domestic violence. The federal court certified to the Supreme Court the question of whether Washington has a clear public policy that would support Danny's claim of wrongful discharge. The Washington Supreme Court responded in the affirmative, stating that Washington "has...established a clear mandate of public policy of protecting domestic violence survivors and their families and holding their abusers accountable."
Washington employers take note: if you have an employee who is taking time off from work - perhaps in violation of your attendance policy - to respond to an incident of domestic violence or to testify against an abuser, terminating that employee will be extraordinarily risky. A safer course may be to work with that employee to find a way to allow her or him to get the time off that she or he needs, and then return to work. Need more help on how to work with an employee who is dealing with domestic violence? Check out these resources from the Family Violence Prevention Fund.
The touchstone in any litigation regarding termination is fairness. A jury will look to see if the employee was treated fairly given the circumstances, or if the employer acted in an arbitrary and unfair manner. An employer should always ask, "Is this termination fair to the company? To the employee? To our customers? To our shareholders?"
- Interactive dramatization
- Written materials guiding you through the important steps leading up to a termination
- How to avoid pitfalls in the termination process
- How to minimize the risk of employment litigation
For more information (including registration information) click here.