Common Law Claims for Wrongful Termination Based on a Claimed Violation of Public Policy: Five Tips for Employers to Avoid Liability

June 24, 2020 The at-will employment doctrine provides extensive flexibility to both employers and employees to conclude their employment arrangements. As a general matter, this at-will rule permits an employer to terminate an employee for a good reason, a bad reason, or no reason at all as long as the termination does not implicate a protected federal or state statutory basis—most particularly, statutory protections against employment discrimination.

By: Ryan M. Walters

The at-will employment doctrine provides extensive flexibility to both employers and employees to conclude their employment arrangements. As a general matter, this at-will rule permits an employer to terminate an employee for a good reason, a bad reason, or no reason at all as long as the termination does not implicate a protected federal or state statutory basis—most particularly, statutory protections against employment discrimination. By the same token, the employee, without facing legal liability for doing so, can submit their resignation to their employer at any time without providing a reason. 

As with virtually any common law rule, states recognize some exceptions to the at-will employment doctrine. A contractual modification to the at-will relationship is one major example. In addition, the vast majority of states recognize an exception to this doctrine under the principle that the termination cannot violate that state’s public policy. Suffice it to say that state courts have taken dramatically different approaches on the scope of their own versions of the public policy exception. 

A typical formulation of the judicial standard for whether the termination of an employee (or, as applicable per jurisdiction, any other adverse action against the employee) amounts to a violation of public policy is as follows: (a) the existence of a clear mandate of public policy; (b) the employee engaged in protected conduct within the scope of that public policy; and (c) the employee’s protected conduct constituted a substantial motivating reason for the adverse action against the employee. Proximate causation for damages and proof of damages are also items that an employee must prove in connection with such a cause of action.

While the individual nuances of the public policy exception for each jurisdiction can be complex, there are certain recurring dynamics that it can be helpful for an employer to keep in mind to limit exposure to claims under this doctrine:

  1. Understand the parameters of your local jurisdiction’s public policy exception. There are various different formulations of the public policy exception across the United States such that it can be a challenge for an employer to ascertain the applicable parameters of this rule, especially when that employer operates in multiple states. As an initial step, understanding the actual test that courts apply in a given jurisdiction helps an employer determine whether the public policy exception comes into play in a given situation. Some jurisdictions apply this public policy exception relatively narrowly, for instance requiring a constitutional provision or statute directly defining a public policy before they will apply the doctrine. Common examples of such policies include statutory protections for reporting workplace safety violations to certain governmental agencies, testifying in judicial or legislative proceeding, and serving on a jury. Statutes sometimes provide express private rights of actions when claimed employee retaliation occurs for exercising legal rights, such as submitting a workers’ compensation claim. In comparison, some state courts have expressed greater willingness to acknowledge clear public policies from judicial precedents. As an illustration, some courts have held that reporting a crime occurring at the business could implicate such a judicial public policy even if no constitutional provision or statute provided such protection or required reporting of the crime. Some courts have also recognized that interference with employees exercising free speech rights can in some circumstances implicate the public policy exception, even though constitutional protections on free speech apply only to governmental entities.
     
  2. Know the state-specific statutes providing additional employee rights. Courts have expressed increased willingness to recognize that a clear public policy exists when the state legislature has adopted statutes providing for express rules that protect employees. Statutory protections exist in many jurisdictions for employees experiencing a domestic abuse event who seek leave from work, exercising statutory privacy rights applicable to their relationship with their employer, and voting in an election. States where the legislature is active in passing new employment laws can present particular challenges for employers in keeping up with those laws.
     
  3. Pay attention to the timing of adverse employment actions. Some employment disputes arise because an employee perceives that conduct in which they recently engaged was the reason for the adverse employment action. If the passage of time between such conduct and the adverse employment action is limited, the risk of litigation typically increases for the employer. Accordingly, paying attention to the temporal proximity between such events and documenting the factual basis for an adverse action against an employee can help reduce litigation risk for the employer.
     
  4. Have the employee expressly acknowledge in writing their at-will status. One of the best protections an employer can have in a dispute with an employee over an adverse employment action is strong language detailing the employee’s at-will status. When the employee in writing affirms that they are aware of their at-will status and what is necessary for there to be any modification of that status, it helps both the employer and employee understand from the outset the nature of their relationship. For instance, it is always a good idea to expressly state that no verbal modifications of the at-will relationship are permitted and that a specific management position or corporate officer must authorize in writing any modification of that at-will status. Ideally, the employee provides such a written acknowledgment at the time of hire, although courts generally recognize the legal effect of such acknowledgments when signed at a later point in the employment relationship.
     
  5. Do not forget about the benefits of a severance agreement. A severance agreement can be a highly useful tool to help provide an employer and an employee certainty at the conclusion of an employment relationship. Obtaining a release of claims as part of a severance agreement is a key consideration for an employer, because absent a release of claims, the employee may still have the ability to pursue a variety of claims even if they have received compensation under a severance package. Federal age discrimination law and local state laws can require special language to secure a release of claims or may impose waiting periods to be observed that impact the enforceability of a release of certain types of claims.

If you have questions about the public policy exception, contact the author of this post or visit our Labor & Employment Practice page to find an appropriate lawyer within the firm for your jurisdiction.