More Workers Go to Court to Challenge Job Dismissals
By his account, Daniel Foley was only doing the right thing when he told his superiors in 1983 that he had heard that his new boss had been fired by a previous employer and was under investigation for embezzlement here.
But rather than winning their gratitude, Foley was later told that he was being dismissed--despite seven years of unblemished service, in which he rose to be manager of his firm’s Los Angeles branch at a yearly salary of $56,164.
In years past, Foley might have quietly cleaned out his desk and left. Instead, he sued his employer for wrongful termination, joining a growing number of employees who are choosing to challenge their dismissals in court.
The Foley case is now before the California Supreme Court and could result in a landmark ruling later this year that would place far-reaching limitations on an employer’s long-held prerogative to dismiss workers “at will.”
The dispute has emerged as the century-old legal doctrine--allowing a worker to be fired for good reason, bad reason or no reason at all--is being steadily eroded.
New Protections
Courts in California and around the country are establishing new protections for employees against wrongful discharge, beyond those included in collective bargaining agreements or anti-discrimination and Civil Service laws.
“Employees these days are much more willing to stand up and protest,” said Stanford University professor William B. Gould, an authority on employment law. “It used to be there was little protection against unjust dismissal and no way to attack it in court. Now, there is.”
The Foley case is being watched closely by employer groups, trial lawyers and civil libertarians--all of whom have a stake in the case.
Among the issues before the court is whether an employee like Foley can sue for being dismissed in “bad faith”--defined in previous court cases as action taken dishonestly and deceitfully--and in violation of an unwritten but implied promise to terminate only for good cause.
The justices are also being asked to expand their milestone 1980 ruling establishing a so-called “public policy” exception to at-will employment, holding that an employee can sue if fired for refusing to violate the law.
In Foley’s case, the question is whether he can sue and collect damages for being dismissed for what he says was an act of loyalty to his employer that, even though not required by law, was nonetheless good “public policy.”
Foley’s employer, Interactive Data Corp. of Waltham, Mass., contends that it had already known of the alleged previous activities of Foley’s new boss, Richard Kuhne but had decided to give him a second chance with the company. The firm said further that Foley was to be replaced for “performance reasons” and that he was dismissed for refusing to accept transfer to another job.
Foley claimed he was being fired because he “knew too much.” He had told his superiors about Kuhne because he thought the firm, which provides financial data to banks and other institutions, should know about such activity. (Kuhne later pleaded guilty to a charge of misapplication of funds.)
A trial court dismissed Foley’s suit, and the state Court of Appeal in Los Angeles affirmed the dismissal in a sharply worded opinion by presiding Justice Lester W. Roth, who assailed attempts to upset what he called the “solid and settled” common-law principle that enables either an employer or employee to sever ties with the other “at will.”
The concept--originally developed as a way to prevent employers from subjecting workers to the equivalent of enslavement--emerged in this country in the late 19th Century. A statute recognizing the at-will doctrine has been in effect as part of California’s Labor Code since 1937.
Important Balance
Roth asserted that a critical balance between employer and employee is upset when only the employee can end the relationship “at will.” That leaves only the employer “at risk,” investing training and other resources into workers who can leave at a moment’s notice with no obligation to the employer, he said.
But Roth’s ruling last December in the Foley case contrasted sharply with a series of other state appellate rulings in recent years upholding employee claims of wrongful discharge.
Two years ago, an appeals court upheld a suit by an employee fired because of her social relationship with a business competitor’s employee, finding that the employer had been guilty of dealing in “bad faith” with the worker.
In 1981, an appeals court held that a candy company executive who had worked for his firm for 32 years had the right to sue because of an implied contract--based on his longevity and his employer’s lack of criticism--that indicated he could be fired only for good cause.
And in a 1980 decision, an appellate court said an airline employee with 18 years service could sue on the grounds that the dismissal did not follow established company policy.
Widespread Trend
The trend toward granting workers new protection extends well beyond California, with an estimated half of the states now operating under laws that create at least some exceptions to the at-will doctrine, according to lawyers in the field.
The Arizona Supreme Court ruled last year that while an employee can be dismissed for good reason or no reason, he cannot be fired for a bad reason. Similarly, the Montana Supreme Court held in 1984 that an employee could sue for being dismissed without just cause.
An attorney for Foley, Robert W. Gilbert of Beverly Hills, regards the exceptions to at-will employment as a “wholesome development.”
“What’s really happening in California and other states is that we’re correcting an error in the law,” Gilbert said. “No one suggests that all employees have an absolute right to employment regardless of circumstances. We just say that dismissal has to be fair.”
But Robert V. Kuenzel of Los Angeles, a lawyer for Interactive Data Corp., defends the at-will principle as “both long-established and sound law.” He warns that as erosion of the doctrine takes place, employers are being unfairly deterred from making justifiable dismissals.
‘Haven’t Done the Job’
“There are numerous employees in California who employers believe just haven’t done the job, who are still on the job because of the employers’ fear of liability and the cost of litigation,” Kuenzel said. “There is a chilling effect on the workplace.”
In some cases, awards for compensatory and punitive damages for wrongful dismissal have run into millions of dollars. One recent study by a San Francisco law firm showed plaintiffs winning 100 of 152 wrongful discharge suits, with an average award of $450,000.
The Foley case has attracted interest from such diverse groups as the American Civil Liberties Union of Southern California, the California Trial Lawyers Assn. and the California Manufacturers Assn., each of which filed “friend of the court” briefs in the dispute.
The ACLU contends that Foley’s report to his supervisors about his new boss is constitutionally protected free speech and that employees cannot be disciplined for exercising that right. Further, a worker has the right to sue when an employer violates an implied agreement to deal fairly, the organization said.
Many Not in Union
Fred M. Blum of Los Angeles, one of the attorneys representing the ACLU, observes that the issue of wrongful termination takes on added significance when only a relatively small portion of the work force is protected by union contracts or Civil Service laws.
According to authoritative estimates, only about a third of American workers are covered by collective-bargaining agreements or Civil Service laws. Other laws are limited to barring dismissals based on discrimination by race, age, sex, religion or national origin.
“With all the screaming you’re hearing from employers, the fact is that employers for the most part still have almost unfettered discretion to terminate at will,” Blum said.
Michael J. Breining, a lawyer for the California Manufacturers Assn., contends that discretion is important to employers, particularly in hiring and firing at the executive level.
Recent Developments
But he points out that in recent years, employers increasingly are adopting new policies and procedures aimed at giving employees earlier notice of unsatisfactory performance and better opportunities to resolve disputes with superiors.
“We’re encouraging employers to clearly state in advance what it takes before an employee can be removed,” Breining said. “There should be adequate notice if an employee isn’t doing well . . . so that there is time to correct the problem.”
The trial lawyers’ group, in a brief signed by several prominent plaintiffs’ lawyers, argues that the time has come for the court to flatly prohibit dismissals that are dishonest or deceitful and thus made in bad faith.
The lawyers acknowledge that firings in good faith justifiably “weed the economic garden” but that a bad-faith dismissal chills initiative, wastes training and expertise and causes economic hardship on employees.
