COLUMN ONE : Job Loss Suits Take New Twist : Three years after damages were limited in wrongful termination cases, lawyers are finding ways around the state high court’s restrictions.

Joan Howard worked for Pacific Architects & Engineers for 18 years, rising to the level of assistant vice president and controller. In 1988, she was abruptly fired.

Three days earlier, her husband had quit the same Los Angeles firm to assume the presidency of a rival company. Although Howard was regarded as an exemplary employee, her bosses said they feared that she might disclose confidential information to her spouse.

Howard filed a lawsuit alleging that her firing by PAE, which manages government facilities, was an unfair and arbitrary breach of contract. She hoped to collect not only for lost earnings but also for the indignity she had suffered.

But then the law in California changed, limiting her potential damages to $75,000--the wages she lost until she was able to find another job. Howard and her lawyers felt she was entitled to more.

“We had to scramble to come up with another theory,” said Raymond Kolts of Pasadena, one of Howard’s attorneys. The lawyers found one. They argued that their client was a victim of marital status discrimination in violation of public policy. She had been hurt, they alleged, so the company could get back at her husband.

Last year, the case was settled for $390,000.

It has been nearly three years since a California Supreme Court case, Foley vs. Interactive Data Corp., sharply limited damages that non-unionized workers can claim when they feel they have been unjustly fired. Foretelling dire consequences, many lawyers specializing in representing employees predicted that they might have to find other work themselves.

The Foley decision has indeed kept a large class of workers out of court: lower-paid employees who would stand to recover a relatively small sum. By lowering the stakes, for lawyers as well as clients, the decision has dramatically cut down the number of cases that attorneys are willing to take.

Joseph Posner of Encino, a board member of the California Employment Law Assn., said many personal injury lawyers who used to handle employment cases shy away from them, leaving the field largely to specialists.

But wrongful termination is far from a lost cause in this state. As the Howard case illustrates, creative lawyers are finding ways to circumvent Foley’s restrictions. In fact, jury awards in unjust firing cases appear to have increased since the Foley case was decided.

Lawyers are alleging that clients were fired in violation of a public policy such as refusing to commit an illegal act--an exception permitted by Foley. Or they are claiming violations of existing laws such as whistle-blowing, race, sex or age discrimination, defamation or invasion of privacy. They are accusing companies of negligence for failing to take action to remove a supervisor when they knew or should have known he was causing harm.

Persuading a jury of one of these charges is usually harder than demonstrating wrongful termination. But if successful, the fired employee can be awarded damages in addition to loss of earnings.

“It’s old wine in new bottles,” said Joel Kelly, a Los Angeles-based management lawyer.

The most striking example occurred nearly a year ago, when a Los Angeles Superior Court jury awarded $45.3 million to three Lockheed employees who were fired after telling management that the firm’s C-5B aircraft appeared defective and unsafe.

The Lockheed workers successfully contended they were terminated in violation of a public policy. (The judge later set aside the verdict after discovering that one of the jurors had failed to disclose a felony record; that decision is being appealed.)

Employee lawyers also were buoyed by a $17.6-million verdict earlier this month in a discrimination case against Texaco. Janella Sue Martin, a credit supervisor, was not fired, but she persuaded a jury that she endured considerable emotional pain when she was passed over for promotions.

Among the other recent winners in wrongful firing cases in California were:

* Jeffery Collins, fired by Shell Oil after a secretary found a copy of an invitation to a gay party containing “house rules” for safe sex that Collins had inadvertently left in the duplicating room. The company said Collins, a 19-year veteran, was dismissed for poor work performance, but an Alameda County Superior Court judge concluded the true reason was “private homosexual conduct occurring away from his employment.”

He was awarded $5.3 million in what was described as the largest verdict ever handed down in a wrongful termination case involving sexual orientation.

* Ronald Kaufman, dismissed from his $40,000-a-year job as an internal auditor for Summit Health Ltd. Kaufman charged that he was fired after noticing irregularities in the figures the company was using for its financial projections. The company denied that any improprieties occurred. He was awarded $2.6 million. (After the verdict, the parties agreed to settle the case for an undisclosed amount.)

* Michael Hughes, fired as director of the St. Katherine Home for Boys and Girls in Norco, a group home for disturbed children supported mainly by public funds. He contended that he was dismissed after he objected to his boss’s conduct in setting aside $30,000 of the home’s general account to launch a separate, commercial school. Guadalupe Homes, operators of St. Katherine, said Hughes was fired for poor performance. He was awarded $1.2 million.

In the two years since the Foley decision, 20 people were awarded employment-related verdicts of more than $1 million, according to a survey conducted by Angel Gomez III, a Los Angeles-based employers’ lawyer. Using a variety of sources, Gomez examined 62 plaintiffs’ victories, with an average award of $1.6 million and a median award of $405,000.

Two earlier studies, conducted before the Foley decision, had reported average awards ranging from $450,000 to $650,000. Median awards ranged from $135,000 to $175,000. The figures do not take into account the reductions frequently imposed by trial judges.

Employees’ lawyer Leroy S. Walker of Los Angeles dismisses this survey as skewed because post-Foley cases are likely to involve a smaller and better-paid class of plaintiffs. “That’s mathematically going to distort it,” he said.

The Foley decision was handed down when the business community was in an uproar over trends in employment law. Until the 1980s, employees in non-union jobs were regarded as serving at the will of their employers.

But subsequently, courts in California and a few other states began recognizing that employees may have a contractual right to their jobs, even if nothing is spelled out in writing. A body of case law was developing that expanded the rights of workers to collect a full array of damages when employers breach the contract, if there is one, or when they act in bad faith, even if there is no contract.

Wrongful termination suits skyrocketed, according to a 1988 study by the RAND Corp.

Then, in one stroke, the state Supreme Court changed all that, saying that employees filing for breach of contract or bad faith are entitled to sue only for lost earnings. No longer could juries compensate them for intangible emotional injuries or award punitive damages.

The court sent out a strong message that most of the time, getting fired is the equivalent of a ruptured business relationship, not a personal trauma.

The Foley case had immediate repercussions. Suddenly, employee lawyers, who get paid a percentage of the client’s award, began calculating potential loss of earnings and turning down clients if the figure came up too low to compensate them for the high costs of litigation.

The hardest hit were low-income workers with good records who said they were fired because of a personality conflict with the boss. “We’re not seeing the clerk at the grocery store or the teller at the bank,” acknowledged Los Angeles management lawyer Paul Grossman.

Also virtually shut out of the system are younger workers who can expect to find new jobs before their lost earnings mount up. “If (a client’s economic losses are) in the $30,000 range, I’m already wrinkling my nose,” said Los Angeles employees’ lawyer Carla D. Barboza.

No figures are available for comparing the number of wrongful termination cases filed before and after Foley, and no one knows how many cases are rejected. But, Walker said, “We’re taking half the cases we would have taken before.”

After 4 1/2 years on medical leave with a brain tumor, George Johnson returned to work as a TWA reservation clerk. As a result of his illness, the right side of his face drooped, his mouth curved downward and he no longer had complete use of one of his arms. The airline said he was no longer capable of lifting heavy suitcases and would have to be reassigned.

Johnson contended that he was still strong enough to do his job. He also alleged that TWA never made a serious effort to reassign him. TWA attorney James M. Derr said Johnson refused other positions that were offered to him. Six months later he was fired.

Johnson sued for wrongful termination and discrimination on the basis of physical disability, saying that the airline simply did not like the way he looked. The jury did not accept the discrimination allegation, but it awarded Johnson $500,000 in damages for wrongful discharge.

As a result of the Foley ruling, however, the verdict was reduced to $50,000. “I got paid $5 an hour for what I did,” said Johnson’s attorney, Robert I. Cooper of Torrance. Johnson returned to TWA while his case was pending and now handles reservations over the telephone.

While regarded as a defeat for employees, the Foley decision did not go entirely against them. For one thing, the court made it clear that the contract between worker and employer could be oral or merely implied, and that job security did not have to depend on long years of service.

Strengthening of the concept of an implied contract made it easier for Joseph Tashjian to recover lost earnings from the plastics manufacturing company that had employed him for nearly six years, according to his lawyer, Steven R. Pingel of Seal Beach. Generous raises, bonuses and a profit-sharing plan had brought Tashjian’s monthly income as operations manager to $7,635 a month, but he had no written agreement with his employer.

The company, Deft Inc., accused him of safety violations, but Pingel was able to persuade a jury that his client was the victim of a grudge. He was awarded $318,000.

The award included compensation for the following: three months’ lost wages, his reduced salary at subsequent jobs until last year, when his earnings matched their previous level, loss of company-paid health insurance premiums, car allowance and profit-sharing benefits.

Foley also benefited employees by reaffirming an earlier ruling that allowed damage awards for violations of “fundamental public policy.”

In a lawsuit filed last summer, commodities broker Kathy Kelly alleged that supervisors at the Los Angeles offices of Siegel Trading Co., where she had worked since 1982, began harassing her, eventually forcing her to quit. Among other things, she had antagonized her bosses by complaining to the city attorney about being forced to sit too close to the smokers in the office.

Relying on a 1982 Supreme Court decision, Kelly accused the company of violating public policy requiring a safe, smoke-free working area. (She also accused the company of three other policy violations, including discrimination against her because she is a lesbian.)

The company’s lawyer, Thomas F. Burke of Chicago, declined to discuss Kelly’s allegations. “The case will be handled in the courts,” he said.

Other public policy violations cited in employment cases include race or age discrimination or retaliation for whistle-blowing. Some defense lawyers say that such cases are increasing.

Asked if last-minute whistle-blowing is common, Walker said, “Anything can be trumped up. But how far are you going to get if you have no proof?”

A discharged worker can also collect damages if it can be shown that the employer spread lies about the worker outside the protected confines of the company. For this reason, lawyers say, managers are advised not to divulge information about former employees. (Similarly, to avoid suits for invasion of privacy, employers are also being told to notify employees that they have no right of privacy for internal communications such as electronic mail.)

But the courts have found that defamation can also occur when a fired employee is obligated to repeat false charges at job interviews. Patricia Monasterio had worked for Cal Fed Insurance Agency for six years when she was fired for allegedly falsifying time sheets. Even though she said the charges were untrue--and a jury later agreed with her--Monasterio kept having to disclose them.

“It was a terrible thing to follow a person,” said her attorney, Joseph Posner. Monasterio won a total of $238,000, the bulk of it as punitive damages on the defamation claim. (However, the judge recently ordered a new trial on the defamation portion of her suit.)

Not surprisingly--since the wrongful termination law is only a decade old--several aspects remain unsettled. It is not certain, for example, whether a fired worker can sue the employer for negligence if it fails to fire a supervisor with a propensity for violent or otherwise damaging behavior. The appellate courts have also issued conflicting rulings on whether an employee who is terminated for refusing to submit to drug testing has a public policy claim for violation of privacy.

Another cloudy area is whether a company may be sued for intentionally causing emotional distress or whether such claims must almost always be handled through workers’ compensation.

And despite the creative lawyering that sometimes results in surprisingly large verdicts, plaintiffs’ attorneys stress that most aggrieved employees will have no recourse.

“I think it’s kind of sad,” said Kathlene Kolts, one of the attorneys who successfully argued a marital status discrimination claim in the Howard case. “There are a lot of people out there hurting.” Angel Gomez, the management lawyer, sees it differently. “In most recent cases, judges have raised additional hurdles for employers,” he said. “Employee rights have increased dramatically.”