High Court to Decide Crucial Non-Union Dismissal Case

The California Supreme Court would surely have ruled for workers if a highly significant “wrongful discharge” case had been decided when the court was led by Chief Justice Rose Elizabeth Bird.

A decision on just such a crucial case is expected soon from the court, now without Bird and dominated by five appointees of Republican Gov. George Deukmejian.

The odds are that under the much more conservative Chief Justice Malcolm Lucas, the court will reverse the progress made in recent years to protect non-union workers from being fired unfairly by their bosses.

Under their contracts, union workers are guaranteed a hearing before a neutral arbitrator if they believe that they have been fired without good cause. A union member can win reinstatement and back pay, but nothing more, if the arbitrator decides the boss had no legitimate reason for the dismissal.

Until a few years ago, non-union workers had no such protection against capricious firings by employers. But since the early 1980s, these workers, too, have had protection under new interpretations of the law that sharply limit the once unfettered “fire-at-will” privileges of employers.

Like union workers, they can get reinstatement and back pay. But they can also collect money both for the emotional suffering caused by their dismissal and from punitive damages imposed on their employers.

Thousands of non-union workers around the nation have won millions of dollars from employers found guilty in the courts of wrongful discharges.

Failing to get much help from state legislatures, employers are now pinning their hopes on the increasingly conservative courts to give them back their cherished right to get rid of workers for any reason, rational or not.

California may well turn out to be the most clear-cut example of this disturbing prospect. The state’s laws and rulings on the issue have been among the most progressive in the country.

It could all change, however, if California’s high court rules against a man named Daniel Foley in a long-awaited decision that could bring joy to employers.

What is expected to be a landmark case began in 1983 when Foley was fired for “spreading rumors” when he told top management at Boston-based Interactive Data Corp., a Chase Manhattan subsidiary that provides securities pricing information by computer, that his own new supervisor had been dismissed by a previous employer and was being investigated for embezzlement.

Foley, Interactive Data’s Los Angeles district manager, failed “to achieve the performance expectations of management,” according to company attorney James Snyder, even though he had recently received a $6,700 merit bonus. And Foley’s supervisor actually pleaded guilty to embezzlement six months later.

Foley’s seven years of meritorious service and the truth of the rumor didn’t save his job so he sued the company for loss of pay and millions of dollars in punitive damages for wrongfully discharging him.

Attorneys for employer groups are counting on Deukmejian’s high court to sustain a lower court ruling against Foley and to go further by making it clear that once again employers have an almost unlimited right to decide which non-union workers to fire.

The company’s attorneys expect the court to eliminate use by discharged workers of what is known as the “covenant of good faith and fair dealing.”

The covenant means there is an implied legal obligation of companies to deal fairly and in good faith with their workers and not fire them without good reason, especially those with long, loyal, competent service.

Charles Bakaly Jr., a prominent management attorney with the Los Angeles law firm of O’Melveny & Myers and one of the nation’s top experts on the issue, argues that employers should have considerable discretion in firing workers for “legitimate business reasons” that can be determined, even subjectively, by the companies.

In other words, management should not have to prove it fired a worker for misconduct or inadequacy, but just for what the bosses decide is for the good of the company. And certainly, Bakaly says, such managerial decisions should not be given to judges or juries not familiar with the needs of companies.

Bakaly concedes employers should not be allowed to fire workers because of their race, sex, religion or national origin. But that would be against the law anyway.

Also, he says, a company should not be allowed to fire employees who refuse to commit perjury or who report illegal acts of a company to authorities. In other words, they cannot be fired for refusing to commit a crime.

But that limit should not protect Foley, he argues, because Foley, the spreader of a rumor that turned out to be true, was not asked to commit a crime by his employer.

However, Foley’s attorney, Steven Kaplan, notes that his client was working for a firm associated with banking, and he wisely let his supervisors know that they had hired a man being investigated for embezzlement from a bank.

After that, it was up to the supervisors to decide what to do with that interesting information--which became even more interesting when the man pleaded guilty to the charge.

In any event, what a strange reason for firing Foley.

Employer attorneys hope that the California high court will, at a minimum, rid companies of the burden of having to pay often substantial sums to workers who prove that they have been fired unfairly. After all, they argue, even union workers get only their jobs and back pay if an arbitrator rules in their favor.

But union workers do have the probability of quick action on their cases by neutral arbitrators and at little cost to them. A non-union worker often must pay thousands of dollars for an attorney and wait years for a final court ruling.

Stanford law professor William Gould and others have been trying without success so far to get California’s Legislature to set up a system of arbitration for non-union workers who claim that they have been unjustly fired. That would give an alternative to the majority of workers who cannot afford the time or money to resort to the courts.

A better idea would be to use arbitrators, as Gould suggests, in both union and non-union wrongful discharge cases, but to let union workers, as well, collect punitive damages and money for their suffering caused by capricious employer decisions.

Shugrue May Help Continental Workers

It isn’t likely, but Continental Airline’s new president, Martin R. Shugrue Jr., just might soften hard-nosed Frank Lorenzo, one of the nation’s most notorious anti-union executives who is chairman and chief executive of both Continental and its parent, Texas Air.

More likely, Shugrue will accept, if not admire, Lorenzo’s combative approach to labor relations. After all, when Shugrue was vice president of Pan Am Corp., he accepted the policies of that company’s then-chairman, C. Edward Acker, who was only a little less hard-nosed in labor relations than Lorenzo.

Acker’s reputation among Pan Am workers can be measured by the demand of their unions that he be booted out as chairman before they would agree to $180 million in annual contract concessions.

Shugrue left Pan Am on Jan. 20, along with Acker and other company officials.

But Shugrue was not one of those blamed for Pan Am’s labor troubles. He was generally admired by Pan Am workers and their unions and some unionists liked his style so much that they even proposed that he replace Acker.

Lorenzo’s relentless battles with his employees have put their wages and benefits where he wanted them: at the bottom of the airline industry. But all isn’t well yet despite his successful battles against workers at Continental and his hoped-for victories against them at Eastern Airlines, which is also owned by Texas Air.

The parent firm’s stock is depressed, and the company lost $466 million last year. And under him, Continental has done almost nothing to improve its record for generally shoddy service and unreliable maintenance.

Maybe Shugrue, with his reputation as a good guy, can persuade Lorenzo to improve relations with the company’s workers, an essential first step toward making a better airline.

Don’t bet on it, though. Lorenzo doesn’t seem ready yet to make peace with his employees.