Fired Workers’ Right to Sue Limited : State Supreme Court Cites Need for ‘Commercial Stability’
In a major victory for business, the state Supreme Court today restricted the right of fired workers to sue their employers on the grounds that a dismissal broke a promise of continued employment.
The conservative-dominated court ruled 4-3 that a worker who is fired without good cause, in violation of a company’s express or implied promise, can sue only for reinstatement and back pay, and not for emotional distress and punitive damage awards that often are much larger.
Citing the need for “commercial stability,” Chief Justice Malcolm M. Lucas wrote that it was “important that employers not be unduly deprived of discretion to dismiss an employee by the fear that doing so will give rise to potential tort recovery (for additional damages) in every case.”
The court allowed employees to seek the additional damages when their firings allegedly involved violations of public policy, such as a worker’s refusal to violate a law. But Lucas placed new limits on such suits, saying the policy involved must serve the public and not merely the employer’s interests.
One pro-employee aspect of the ruling was the court’s willingness to allow suits to proceed based on an oral promise of continued employment.
Justice Allen E. Broussard, who wrote one of three separate dissenting opinions, accused the majority of “a radical attempt to rewrite California law in a manner which . . . will leave the wrongfully discharged worker without an adequate remedy.”
The ruling reinstates but sharply limits a suit by Daniel Foley, who was fired from his $56,164-a-year job as Los Angeles branch manager of Interactive Data Corp. in 1983, after telling the company that his boss was being investigated by the FBI for embezzlement from a former employer.
The boss later pleaded guilty to embezzlement. Foley, who had a spotless record in nearly seven years of employment, refused a transfer to another office and was fired two days after he got a merit bonus of $6,762.
His lawsuit, still in the pretrial stages, contends the firing violated a promise by the company of continued employment and was a pretext for covering up wrongdoing, in violation of public policy.
In today’s ruling, the court said Foley could not sue for violation of public policy, because his alleged duty to report misconduct to his employer did not serve the public. The ruling allowed Foley to proceed with his breach-of-promise suit but limited his potential damages to lost salary payments.
Justices Edward A. Panelli, David N. Eagleson and John A. Arguelles joined Lucas in the majority opinion. Separate dissents were filed by Broussard and Justices Marcus M. Kaufman and Stanley Mosk.
The ruling by the conservative-dominated court moves away from the course the California judiciary has taken since 1980, when a court then controlled by liberals allowed a suit by an employee who was fired after he refused to help his employer fix prices.
