VIEWPOINTS : Wrongful Dismissal Cases Will Still Have Their Days in Court : Recent ruling aside, workers can win at trial if they’ve been fired unfairly.

WILLIAM S. WALDO, <i> a management attorney specializing in employment issues, is a partner in the Los Angeles law firm of Paul, Hastings, Janofsky & Walker</i>

Many pundits declared that employers won a big victory last month when the California Supreme Court limited the damages that workers in most circumstances can claim in wrongful dismissal cases. Don’t believe it.

True, the court ruled that someone who is fired without good cause in violation of a company promise cannot sue for emotional distress or punitive damages--the ways by which some California employees have won jury verdicts of $10 million and more. That, in turn, will mean that there is less big money for lawyers to make in wrongful dismissal suits and thus less incentive to pursue weak cases.

But don’t count wrongful dismissal cases out in California--they will clog the court system and give employers headaches for a long time to come. For everyone involved--employers, employees and lawyers alike--the impact of the ruling probably will be limited.

Even if the curbing of emotional distress and punitive damages drastically reduces the number of multimillion-dollar jury verdicts, these remain big-dollar cases. Damage awards for out-of-pocket losses--the kind of losses that plaintiffs still can sue for under any circumstances--run into the hundreds of thousands, and at times millions, of dollars. That’s because these cases often involve well-paid executives who sue to recover salaries, bonuses, stock options, pensions and other benefits.


What if lower-paid workers want to sue? Their rights are well protected. Fired employees have long contended that they should be able to recover all of their out-of-pocket losses from the date of their discharge until the date they would have retired--normally age 65. On that basis, a terminated employee in his or her mid-40s earning $25,000 per year could ask the jury for a damages award exceeding $500,000.

In short, the stakes in wrongful discharge lawsuits will stay high enough to motivate discharged employees to bring them--even in cases when emotional distress and punitive damages aren’t available. And those with good cases should have no problem getting capable lawyers.

The odds of an employee winning a case remain high. Previous studies have suggested that employees in California win up to 80% of wrongful discharge trials. The major reason: Juries tend to identify with the discharged employee because nearly everyone works for a living or depends on someone who does.

Jurors look at the employee and think “there but for the grace of God go I.” The state Supreme Court’s ruling, in the case of Los Angeles executive Daniel D. Foley against Interactive Data Corp., did nothing to change this.

Another bit of encouragement for plaintiffs and their lawyers comes right from the Supreme Court’s ruling itself. For the first time, the court stated that many California employees have the right to sue their employers for wrongful discharge for violating an oral or implied contract calling for someone to be terminated only for “good cause” or “just cause.” Before, this right was assumed by plaintiffs’ lawyers but was by no means beyond challenge.

All this means that employers should be as careful as ever in terminating employees. Not only is the risk of losing a significant verdict high, but an employer’s cost of defending these lawsuits is virtually unchanged.

Wrongful discharge lawsuits are, by their nature, hard to develop. Everyone has his or her own version of the truth. Each lawsuit can require an employer to spend hundreds of thousands in attorneys’ fees and even more in the lost productive work time of supervisors and managers who have to help the lawyers and take the time to testify in depositions and at trial. The cost of a legal defense alone should make any employer who is tempted to fire an employee capriciously think twice about it.

We need only look to the track record of other states to know that wrongful discharge will not only survive but thrive. Before the Foley decision, only one state--Montana--ever permitted the recovery of emotional distress and punitive damages in wrongful discharge lawsuits outside of cases involving breaches of public policy. The absence of emotional distress and punitive damages in other states has never stopped these suits; thousands of new ones are filed each year.

Perhaps what is most overlooked in the aftermath of the Foley case is that emotional distress and punitive damages will continue to be available in many lawsuits where employees sue their employers.

Although the issue hasn’t been definitively resolved in California, some courts have held that such damages are in order for fired workers who are discriminated against on the basis of, among other things, age, gender and race. And in the Foley decision itself, the Supreme Court reaffirmed that employees who are discharged in violation of a “substantial public policy” (for example, someone who is fired for blowing the whistle on an employer that sells adulterated food or engages in illegal price fixing) can win emotional distress and punitive damages.

On top of that, in many wrongful discharge lawsuits, the wrongful termination itself is not the only issue. For example, what about the employee who is not only fired but who is also lied to by the employer about the reasons for the firing? Or consider the case of a manager who misrepresents why an employee was fired when someone calls for a reference check. Employees who are the victims of flagrant employer misconduct will try to sue not only for wrongful discharge but also for fraud, defamation or even intentional or negligent infliction of emotional distress. If the courts permit this, it means plaintiffs still can win emotional distress and punitive damages.

Consequently, the practical impact of the Foley decision on the California workplace should be slim. As Mark Twain might have put it, predictions about the demise of wrongful discharge are greatly exaggerated.