January 1996

Workplace Labor Update - A Management Guide to Understanding and Avoiding Wrongful Discharge – January 1996

11 min

Historically, it has been the province of Congress or a state legislature to define the public policies governing employer-employee relations and to prohibit employers from wrongfully discharging employees in violation of such legislatively expressed policies. Thus, the National Labor Relations Act, enacted in 1935, guaranteed employees the right to join unions and engage in other concerted activities and prohibited employers from discharging employees for such protected activities. Title VII of the 1964 Civil Rights Act guaranteed equality of employment opportunities regardless of race, color, religion, sex or natural origin, and prohibited the discharge of employees based on such considerations. Likewise, the Age Discrimination in Employment Act, enacted in 1967, and the Americans with Disabilities Act, enacted in 1990, assured equality of opportunity for persons over 40 and the disabled and prohibited employers from discharging employees because of these attributes. Similarly, the Occupational Safety and Health Act safeguarded the workforce from hazardous conditions and prohibited employers from discharging any employee for expressing safety complaints. A common feature of all of these laws is the creation of an administrative agency-the NLRB, the EEOC or OSHA-to issue regulations and guidelines explaining the law and to provide procedures and the administrative machinery for enforcing it.

In the 1970?s and 1980?s, many state courts, including the courts of Maryland, began to recognize that in addition to the protection given to employees by such statutes as Title VII, employees also should be protected against other types of ?wrongful discharge? if the employer?s motivation for the discharge violated some clear mandate of public policy. The courts further decided that if there were no legislatively created agency or procedure designed to remedy such wrongful discharge, the courts themselves would fill the gap by recognizing the right of wrongfully discharged employees to bring their complaints directly to court to contest the discharge. Such lawsuits, in contrast to complaints filed with the EEOC or NLRB, are known as claims of wrongful discharge.

A lawsuit claiming wrongful discharge places a substantial burden on the discharged employee not only to identify a clear mandate of public policy but also to prove that this policy was violated by the discharge. For instance, an employee in Maryland who claims that he was discharged for ?blowing the whistle? on his employer?s illegal activities generally must prove:

  • Specific action by the employer;
  • Which constitutes a violation of a specific provision of state or federal law or some other clear mandate of public policy;
  • Of which the employee notified his employer or a public official by objecting to such action;
  • and Which thereafter resulted in the employee?s discharge.

Although it is not easy for an employee to prove a wrongful discharge claim, such claim

subjects employers to substantial risks and potential damages that even exceed the relief that is available to most victims of discrimination. An employee suing for wrongful discharge can elect to have the lawsuit tried before an often unpredictable jury and can seek substantial damages not only for lost wages and benefits, but also for such subjective and ill-defined matters as pain and suffering and punitive damages. Although an employer?s exposure to damages in a wrongful discharge case obviously is dependent upon the peculiar facts and circumstances of each matter, awards by juries exceeding $1 million are not unheard of in this area.

The most befuddling aspect of lawsuits claiming wrongful discharge is the often difficult task of identifying the clear mandate of ?public policy? that purportedly was violated by the discharge. Unlike the relatively clear prohibitions against race or sex discrimination, ?public policy? is an amorphous concept that has been shaped by infinite streams of constitutional, statutory, administrative and common law and is not susceptible to any clear cut and workable definition. As the Maryland Court of Appeals has recognized, ?Inevitably, conceptions of public policy tend to ebb and flow with the tides of public opinion, making it difficult for courts to apply this principle with any degree of certainty.?

Mindful that public policy can be difficult to grasp and concerned that the use of this illusive concept could flood the courts with allegations of illegal terminations, Maryland courts have taken a cautious approach to such claims, indicating that this type of lawsuit would be entertained only with the utmost circumspection.

Wrongful Discharge Claims Rejected

The reluctance of Maryland courts to widely open their doors to claims of wrongful discharge based on imaginative or only arguable notions of public policy is reflected in the following decisions. In Beery v. Maryland M.D. Medical Laboratory, Inc., the plaintiff claimed that she was falsely accused of theft and unfairly discharged without the benefit of any investigation or hearing. Her lawyer claimed that the termination of a private employee for an alleged crime without the benefit of an investigation or any type of due process violated public policy. The trial judge not only rejected this claim, but also granted the defendant?s motion to sanction the plaintiff?s attorney for pursuing this claim without substantial justification. The court stated, ?firing on the basis of . . . unsubstantiated allegations, without proof and, indeed without fully investigating the matter, may very well have been improper-even foolish, but can hardly be said to contravene any clear mandate of public policy.?

The case of Lee v. Denro, Inc., illustrates the frequently difficult task of deciding whether the discharge of an employee improperly was motivated by the employer?s effort to conceal a purported breach of public policy or permissibly motivated by the employer?s concern that the employee contravened the employer?s standard procedure for complaining about some normal employer-employee grievance. Lee was employed as an engineer and assigned with a co-worker to test a communications system for air traffic controllers under a contract with the Federal Aviation Administration (FAA). She was informed by her supervisor that if there was any problem, it should be brought to his attention. Lee expressed to management concern over the competency of her co-worker, including the co-worker?s failure to follow testing procedures. She thereafter conveyed to an FAA inspector that such test procedures were not followed by her co-worker. When the company learned of this, she was promptly discharged for disputing the company?s test procedure in the presence of an FAA representative.

Lee filed a wrongful discharge suit claiming that her discharge violated a public policy calling for the promotion of maximum achievable safety in air transportation. More specifically, Lee grounded her claim on two criminal statutes, one that protected a federal agency from false statements that were tantamount to fraud or deceit, and a second that prohibited the obstruction of any witness in a federal proceeding. The court found that the allegations in the complaint fell short of satisfying the elements of either criminal statute and essentially amounted to nothing more than a private dispute over the employer?s internal management practices. In dismissing the complaint, the court observed:

When a plaintiff fails to demonstrate that his or her grievance is anything more than a private dispute regarding the employer?s execution of normal management operating procedures, there is no cause of action for abusive discharge . . . . [A]n employee who is dismissed for raising objections to the employer?s business, management or safety practices, even if correct in his or her allegations, does not state a cause of action for abusive discharge.

The Lee decision represents the prevailing view of Maryland courts that, unlike liberally construed civil rights laws, the tort of wrongful discharge is a narrow exception to the employment-at-will doctrine and should be restrictively applied to demonstrably real, as opposed to only arguable violations of public policy.

In McKelvey v. Canteen Corp., the plaintiff alleged in his complaint that the company was overcharging its customers which was tantamount to stealing; that he brought these fraudulent business practices to the attention of the company?s chief operating officer; and that he subsequently was discharged for expressing these concerns. The complaint further alleged that the company?s practice of overcharging clients amounted to a violation of state and federal criminal law. Like the decision in Lee v. Denro, supra, the court dismissed the complaint stating that the complaint failed both to specifically identify which Maryland criminal laws were violated and to state specifically how such laws were violated. The bold assertion that the conduct violated criminal law was too general to satisfy the need to plead a prima facie violation of public policy. The court went on to find that the employee:

[E]njoyed no protected right to criticize how Canteen performed under the service contracts it entered into with third parties . . . . In essence, McKelvey?s criticisms of Canteen?s alleged practice of inflating its food and supply costs, and the concomitant exploitation of Canteen?s unwilling clients, constituted an individual employee?s dissatisfaction with the way in which his employer chose to do business . . . . While Canteen?s clients may have viable breach of contract or fraud claims against Canteen arising out of its alleged cost inflation scheme, McKelvey enjoyed no protected right to challenge what he perceived to be the dishonest way in which Canteen dealt with those clients. As an employee-at-will, McKelvey had the unilateral ability to alleviate his dissatisfaction: he could have quit.

Decisions Recognizing Wrongful Discharge Claims

Notwithstanding the aforementioned cases in which wrongful discharge claims were dismissed, Maryland courts have recognized that it is wrongful to discharge an employee based on the following three reasons: (1) the employee?s refusal to commit an unlawful or wrongful act; (2) the employee?s performance of an important public function; or (3) the employee?s exercise of a statutory right or privilege.

The law is clear that an employer cannot direct an employee to commit an unlawful act and then discharge the employee because of the employee?s refusal to do so. For example, the firing of an employee for refusing to give false testimony at a trial or administrative hearing clearly would amount to a wrongful discharge. In Kessler v. Equity Management, Inc., the Court of Special Appeals held that the discharge of a resident manager of an apartment complex for refusing to violate the privacy rights of tenants amounted to a wrongful discharge. In this unusual case, the plaintiff was directed by the company to surreptitiously enter the apartments of tenants and to snoop through their private papers in order to obtain information that might be helpful to the owner in collecting overdue rents. In holding that the discharge amounted to wrongful termination, the court emphasized that the misconduct in this case amounted to a ?grievous wrong? which violated the constitutionally protected and ?treasured right? of privacy. The court?s view that the defendant?s conduct violated a clear mandate of public policy was ?based upon the belief that the constitutionally protected right of privacy, the right to be free of others? snooping, spying, rummaging, or searching through one?s personal and private papers, is such a fundamental right that no employer may require an employee to violate it as a condition of employment.? Although the court in Kessler extended the concept of wrongful discharge to discharges for refusing to engage in tortious misconduct, it did so with caution and restraint, highlighting the unusual nature of this case.

Public policy also is violated by the discharge of an employee because he or she performed an important public obligation. For instance, in Bleich v. Florence Crittenton Services, the plaintiff was employed as a teacher at a non-profit agency, licensed by the state, that provides residential and educational programs for adolescent females in personal crisis. The plaintiff expressed to the agency?s management that some residents had physically assaulted others and that there was a dangerous environment at the facility. When there was no response to these concerns, the plaintiff wrote a letter to a state licensing specialist and requested an immediate investigation. On the same day, the plaintiff was discharged. She brought suit contending that her discharge violated the public policy protecting the health and safety of children. The court found that Maryland statutory law evinces a clear public policy protecting children from abuse, that the plaintiff?s actions in protesting child abuse to government officials was specifically protected by Maryland law, and that the complaint specifically referred to this public policy. The court found that the complaint created a cause of action for wrongful discharge based on the statutes and regulations which call for and protect complaints to public officials about child abuse.

The third category of cases of wrongful discharge involves the discharge of an employee for exercising a legal right or privilege. Most of the reported cases in which a court held that the employee?s discharge was wrongful fit within this category. For instance, the discharge of an employee solely for filing a worker?s compensation claim or for refusing to take a lie detector test would violate public policy and constitute a wrongful discharge.

Avoidance Strategies

To avoid wrongful discharge lawsuits, employers should take the following five steps:

  • Promulgate an internal complaint procedure which enables employees, freely and without fear of retaliation, to express in writing any complaint about company policies or practices, including discipline and discharge, and which establishes a procedure for promptly and fairly investigating such complaints;
  • Document all such complaints, the company?s investigation of the complaints, and any action taken by the company to remedy the complaint;
  • Prior to acting on any recommendation to discharge an employee, interview the employee to obtain the employee?s side of the story and to ascertain whether the employee contends that the motivation for the discharge is contrary to law or public policy;
  • Consult with legal counsel about any discharge decisions which arguably might conflict with public policy; and
  • Review all personnel policies to make sure that they are not contrary to any public policy.