The Issue:
How can an employer avoid claims by former employees arising from the company's decision to terminate their employment?
I. "At-Will Employment" Defined.
The at-will rule is British in origin and was adopted in United States during the ascendancy of "laissez faire" economics in the early 20th century. The doctrine of "employment at will" provides that when a private sector employer hires an employee to work for an indefinite period of time, and the parties do not otherwise limit their rights to terminate the employment relationship, either party, the employer or the employee, is free at any time to sever the employment relationship for any reason. The theory is that because the employee makes no promise to work for a specific time and thus can quit at anytime for any reason, the employer should have the reciprocal right to terminate the employee at anytime for any reason. Pursuant to this doctrine, an "at will" employment relationship "may be terminated by either party at anytime for any reason or even for no reason."
Over the years, courts have created exceptions to the employment at will doctrine which restrict the employer's right to terminate or discipline its employees. For example, the most obvious exception involves federal and state laws making it illegal to discharge an employee for reasons that constitute unlawful employment discrimination. There are also statutes that limit terminations in situations where there are wage and overtime violations, health and safety violations, reporting suspected violations of the law, or retaliation for engaging in an activity protected by statute like filing a workers' compensation claim.
II. Five Basic Rules to Limit Potential Exposure to Litigation.
The decision to terminate or discipline an employee is one of the most difficult personnel decisions for an employer to make. Conversely, it should go without saying that an employee is greatly affected by an adverse action, and often feels upset and confused, leading to resentment and a feeling that he or she was deprived of an entitlement or right.
Because of the great potential for litigation associated with the implementation of discipline and termination policies, employer procedures in this area should be of special concern.
1. There should be a recognizable and valid connection between an Employer's policy and a legitimate business concern.
Although management concerns may be self-evident to the average employer, they may not be perceived with the same clarity by disinterested judge or juror. By the same token, employees themselves they often have difficulty in seeing how a particular rule relates to a concern of the employer, further enhancing the likelihood of a lawsuit in the event of discipline or termination for violation of the rule. Because of this, workplace rules should be reviewed periodically to determine whether or not they bear a demonstrable relationship to valid business concerns.
Connect the dots before taking an action. In other words, can you connect the personnel decision with a valid or legitimate business concern? If not, you should re-consider the proposed action.
The most difficult area is workplace rules that discharge or discipline an employee for off-duty conduct. Examples of this would include drug testing, arrest or conviction for a crime, or personal financial problems. Here, one should consider whether:
(1) Does the conduct harm the Company's reputation or product?
(2) Does the conduct render the employee unable to appear at work will perform his job duties?
(3) Does the conduct cause other employees to reasonably fear or refuse to work with the employee?
By way of example, an arrest for a DUI would be of more concern for a day-care center worker then it would be for a clerk at a retail store.
2. Employees must be provided with notice of an Employer's policies.
Advance notice of a policy is essential not only if an employer expects compliance, but also if an employee is to understand the decision-making. One essential element of "due process" is prior warning of the consequences of the failure to comply with a specific work rule. Thus, rules, standards, and policies should be set forth in an employee handbook and, as necessary, posted in the employer's facility. However, overly detailed or lengthy statements of work rules and standards should be avoided. So should absolutes or statements that the employer will always follow a prescribed course of action.
3. Employers should be consistent in the application of any policy or personnel decision.
Fairness, Fairness, Fairness. Indeed, the appearance of fairness may be more important than actually being fair. Thus, a rule that appears harsh may not be challenged if it is applied uniformly to all employees. The key is ensuring consistent application of the workplace rule.
Additionally, objective decision-making is an important aspect of this dynamic. One way to achieve this, is to limit the number of persons who have authority to take disciplinary action against an employee and/or have more than one management official involved in the decision-making. Having consistency in the documentation is also important. Reeves v. Sanderson Plumbing Corp., 530 U.S. 133 (2000) held that a plaintiff need not prove discrimination motivated employer, but merely that the reason offered by defendant is not worthy of credence. Further, an inference of discrimination can arise from proof of pretext. This can be demonstrated by inconsistent articulation of the reasons for terminating the plaintiff i.e., that the proffered reasons where pretext for unlawful discrimination.
For example, if an employer implements a new rule that employees will receive a disciplinary notice if they are absent for specified number of times, this may result in the desired effect of disciplining poor performers. However, if the company's top performing employee is also subject to discipline and the company does not enforce the rule, problems or resentment from other employees may arise.
4. Suspected infractions should be properly investigated and any resultant personnel decision should be based upon objective evidence.
An employer should properly investigate infractions of workplace rules. The degree of the investigation will vary depending on situation. For example, an allegation of sexual harassment will be significantly different than one for an employee who is excessively tardy. The employer should be able to support a disciplinary decision with substantial evidence. Credibility issues of witnesses should ideally be resolved in reference to any documentary evidence, like time cards, performance evaluations, etc.
5. Disciplinary actions should be appropriate to the infraction, administered promptly, and in accordance with established company policy.
Delay in investigating an incident could result in the loss of evidence or the eroding of a witness' memory. Also delay in concluding a investigation or taking action once a decision is made could impact the perceived fairness of the investigation.
It is important that the disciplinary action be consistent with previous decisions for similar conduct. The "punishment should fit the crime," in the sense that termination should be reserved for the more serious offenses or for repeated violations. Ideally, the disciplinary action should also be based on conduct that is proscribed by workplace rules. The company may also wish to take into account mitigating factors, such as an employee's work record and years of service. Juries are more sympathetic to an employee with a long, unblemished work record. But be careful to avoid inconsistent application or making exceptions for a favorite employee.
One Additional Basic Rule to Limit Potential Exposure to Litigation: The most important rule to remember is to consult an attorney, particularly for difficult, complex situations or if you anticipate that litigation may ensue from your decision.
The time, money and expense you may expend consulting with an attorney can assist in avoiding a major headache much latter down the line!
III. Potential Causes of Action.
1. Employee Handbooks
Some courts have relied upon the terms and conditions of an employee handbook to create an exception to the employment at will doctrine. These courts have held that the terms of an employee handbook create an implied contract not to terminate an employee without good cause. The issue is whether the personnel policies set forth in an employee handbook, or oral representations made to employee, constitute an enforceable contractual obligation. Generally speaking, clear disclaimers that the handbook does not create an employment contract are sufficient to avoid these problems and to reserve the employer's right to change its policies at its discretion at anytime. Adams v. Catalyst Research, 659 F.Supp. 163 (D.Md. 1987)(a convenant of good faith and fair dealing is not implied in an at-will relationship). ButseeSisco v. GSA Nat'l Capital Fed. Credit Union, 689 A.2d 52 (reversing summary judgment where handbook contained a progressive discipline policy and, in the case of several enumerated offenses, required "reasonable grounds" for suspension and "conclusive proof" for discharge); United States v. Howard Univ., 153 F.3d 731 (D.C. Cir. 1998)(handbook stated that regular employees could be discharged only for cause and after specified procedures).
2. Public Policy
Under the public policy exception, a number of state courts have held that employer should not be permitted to discipline or discharge an employee for reasons that violate an established public policy. Most courts hold that the public policy exception is applicable only where the plaintiff can identify a specific state statutory or constitutional provision embodying the policy. Typically, the public policy may be found in a specific statute relating to the public health, safety, or welfare. For example, a nurse may be able to make a claim that his discharge was in violation of a public policy if he is terminated after reporting the improper care of a patient. These claims are also often recognized as a "whistleblower" claim. In Carl v. Children's Hosp., 702 A.2d 159 (D.C. 1997), the court held that public policy exceptions must be based on a clear mandate of public policy or some identifiable policy that has been officially declared in a statute. Further, plaintiff must show that the wrongful discharge claim cannot be vindicated or remedied by the existing statute. The court broadened Carl in Wallace v. Skadden Arps, 715 A.2d 873 (D.C. 1998), where the court held thatnot only must a wrongful discharge claim be firmly tethered or anchored in a statute or municipal regulation, the plaintiff must also show that he or she was terminated either solely or substantially for engaging in the protected conduct.
3. Defamation
A defamation action requires: 1) a false statement by the defendant; 2) proof of publication or communication of defamatory words to a person other than the one defamed and 3) some degree of fault by the defendant. The courts have recognized two defenses; 1) that the statement was true or 2) that the statement was privileged. An employee may claim defamation based on the contents of a discharge letter, statements made by the employer to prospective employers, statements made by the employer to other employees, or statements made by the employer to state authorities such as unemployment compensation or workers' compensation boards.
Statements by employers may be held privileged where: 1) the statement is made in good faith with a valid business purpose; 2) on a subject in which the party communicating has an interest and 3) made to a person with a corresponding interest. Thus, statements made among employees who have aright to know about work-related topics will presumptively be subject to the qualified privilege. The qualified privilege is lost if the plaintiff can show either actual malice or excessive publication (communication to those who have no legitimate business-related reason to hear them).
Non-verbal behavior can also be the grounds for defamation, such as having a security guard escort an employee from a building. SeeWallace v. Skadden Arps, 715 A.2d 873 (D.C. 1998)(the employer's inactivation of the plaintiff's access key was capable of defamatory meaning, as long as this treatment was ordinarily meted out only to attorneys who engaged in criminal or unethical activity).
Some courts have found a cause of action in instances where a former employee is forced into making a "self publication" of a defamatory statement. Under that theory, when the terminated employee is compelled by circumstances to repeat false statements made by a previous employer to prospective employers, the previous employer may be liable for the effects of the defamatory statements.
4. Fraud, Promissory Estoppel or Detrimental Reliance
Proof of fraud has the following elements: 1) a promise that the employer should reasonably expect to induce action or forbearance on the part of the employee; and 2) the promise does induce such action or forbearance. This tort requires a showing of intentional misrepresentation of existing facts. Fraud also may be proven by showing that a promise was made with no intention that the promise would ever be honored. For example, in Sea-Land Serv., Inc. v. O'Neal, 224 Va. 343, 297 S.E.2d 647 (1982), an employee was told that she could transfer to a different position, but she would have to resign and be rehired. The employee resigned and the employer refused to rehire her. The court held that the employee stated a valid claim for fraud. However, most courts will deny a claim of fraud where the plaintiff merely has vague hopes which do not support detrimental reliance on employer's misrepresentation.
5. Intentional Infliction of Emotional Distress
Employees who believe that they have been wrongly discharged often assert a claim of intentional infliction of emotional distress. Proof of this tort requires a showing of conduct so outrageous and extreme as to exceed the bounds of decency. The action must be regarded as atrocious and utterly intolerable to a civilized community. Physical harm is not an element. Generally speaking, the standard of proof is so high as to preclude most claims. In District of Columbia v. Thomson, 570 A.2d 277 (D.C. 1990) the court held that where the employer intentionally, and falsely, criticized her performance, fabricated a non-existent reason for her termination and physically accosted her, failed to establish the standards for this tort.
Negligent infliction of emotional distress can occur from a direct physical injury or where there is no physical impact, but the defendant's negligence places the plaintiff in a zone of physical danger where he or she fears for their safety.
6. Constructive Termination
A claim of constructive discharge may be brought under the theory that the employer did not actually discharge the employee, but made the working environment so intolerable that a reasonable person would be forced to resign. Some courts require proof of an employer's intent to cause the employee to resign by creating the intolerable working conditions. Other courts focus on whether the conditions of employment are so intolerable that a reasonable person would feel compelled to resign.
7. Intentional Interference with Contract
A party who intentionally interferes with the rights of another to a contract, or induces a breach thereof, without legal justification, is liable to the injured party to the contract. In order for a plaintiff to succeed with this claim, a third party must be involved. Supervisors are agents of the employer and generally are not found to be third parties capable of inducing the employer to breach its contract with the employee. Former employees often alleged that their former employer interfered with the procurement of an employment contract with a new employer. The law in DC is distinguishable, and unlike most jurisdictions, allows an employee to bring a claim against an individual officer or employee for orchestrating the employee's termination. SeeSorrells v. Garfinkel's, 565 A.2d 285 (D.C. 1989). However, the plaintiff is obligated to show more than intentional conduct and must demonstrate actual malice.
8. Negligent Hiring and Supervision
To prove a cause of action, plaintiff must demonstrate that the employer knew or would have known through reasonable diligence that the individual was dangerous and posed a threat to the safety of the plaintiff. The plaintiff must also show that, under negligence standard, that the applicable standard of care was breached and that the deviation from the standard of care was a substantial factor in causing the harm. SeeRollerson v. Dart Group, 1996 WL 365404 (D.C. 1996)(no negligent hiring claim in a sexual harassment case where there was no evidence that the harasser had harassed others before hired by defendant).
IV. Sample Policies on Progressive Discipline and Termination.
1. Sample Termination Policy.
Separation from employment with the Company may occur by voluntary resignation (with due notice), involuntary termination, reduction in force, or retirement.
The Company reserves the right to terminate any employee at any time. Separation is effective immediately or upon such date as determined by the company. The grounds for termination include, but are not limited to, the following:
(1) Breach of the standards of conduct;
(2) Unsatisfactory performance;
(3) Reporting to work with impaired abilities resulting from the use of alcohol or drugs not prescribed by a physician because of the possession, consumption, or distribution of illegal drugs;
(4) Misrepresentation of any material fact in seeking employment or benefits;
(5) Violation of the company's sexual harassment or nondiscrimination policy;
(6) Abusive language on company premises;
(7) Provoking or engaging in a physical or verbal altercation with employees or customers;
(8) Excessive use of the telephone for personal telephone calls;
(9) Theft from the company or its employees;
(10) Excessive absences;
(11) Repeated failure to report to work on time;
(12) Other causes determined by management at its discretion.
The Company may also terminate employees as a result of the elimination of an individual position or general reduction force. If possible, reasonable notice will be given to affected employees prior to a reduction force.
2. Disciplinary policy
Employees shall be subject to disciplinary action if the Company determines that employee's conduct is either counterproductive or not in the best interests of the company. The Company utilizes the following forms of disciplinary action:
► Verbal discussion and warning;
► Written reprimand placed in the employee's file;
► Suspension without pay; or
► Termination
This is not a progressive list of disciplinary action. The Company may choose any one or more forms of action from this list that the Company determines is necessary to correct the employee's behavior. This determination will include factors such as the gravity of the infractions, the facts and circumstances surrounding the infractions, and the employee's past work and disciplinary record.
The Company reserves the right to supplement the forms of disciplinary action and to implement remedies not mentioned above. Significant deviations from expected employee behavior may result in immediate termination of employment and benefits.