Involuntary discharge from employment often comes as a surprise to an employee. The question that arises in such circumstances is whether the employee has any legal recourse. Many employees who believe that they were unfairly terminated mistakenly assume that they have a right to reinstatement, and a remedy for consequential damages, including back pay. Whether such rights and remedies exist often depends on how the courts apply the well known but often-assailed at-will employment doctrine or one of its numerous exceptions.
The at-will employment doctrine basically provides that an employer may terminate an at-will employee at any time, for a good reason, for a bad reason, or for no reason at all. Wisconsin has followed this general rule since the nineteenth century case of Prentice v. Ledyard, 28 Wis 131 (1877). The logic is that unless otherwise agreed, all employment is presumed to be for an indefinite term, terminable at the will or whim of either the employer or the employee without advance notice. Each day constitutes a new agreement, neither creating rights nor duties from one party to the other.
There are many exceptions, so numerous that they almost, but not quite, swallow the rule. The exceptions fall into several categories.
Termination from employment is wrongful if it is in violation of federal or state anti-discrimination laws based on age, race, creed, color, handicap, marital status, sex, national origin, ancestry, arrest record, conviction record, membership in the national guard, state defense force or any reserve component of the military forces, or use or nonuse of lawful products off the employer’s premises during nonworking hours. See for example, Title VII of the federal Civil Rights Act of 1991, 42 U.S.C. 1981; the federal Age Discrimination Employment Act, 29 U.S.C. 621; the federal Americans with Disabilities Act, 42 U.S.C. 12111; and the Wisconsin Fair Employment Act, Wis. Stats. Section 111.321-111.395. See also statutes proscribing termination based on an employee’s union activities, National Labor Relations Act, 29 U.S.C. 158 and Wis. Stats. Section 111.06(1) (c)1; jury service, Wis. Stats. Section 756.25(1); wage garnishment, Wis. Stats. Section 812.235; refusal to submit to honesty testing, Wis.Stats. Section 111.37(4); being subpoenaed to testify at an OSHA proceeding, Wis.Stats. Section 101.595; or suffering a compensable worker’s compensation illness or injury, Wis. Stats. Section 102.35.
The assertion that an employer wrongfully discharged an employee because the employee made a worker’s compensation claim requires proof that the employer, without reasonable cause, refused to rehire an employee who was injured in the course of employment, even though suitable employment was available within the employee’s work restrictions. Such claims are usually quite difficult. The employee must prove the employment status at the time of the compensable work-related injury, the loss of time from work for any reason, an attempt to return to work, a medical release to return to work with or without restrictions, and the employer’s refusal to rehire the employee because of the injury. The employer has the burden of showing reasonable cause for discharge or lack of availability of suitable employment within the employee’s restrictions. See Great Northern Corp. v. LIRC, 189 Wis.2d 313, 525 N.W.2d 361 (Ct. App. 1994) (excessive absenteeism cannot include time off for work-related injury); Ray Hutson Chevrolet, Inc. v. LIRC, 186 Wis.2d 118, 519 N.W.2d 713 (Ct. App. 1994) (elimination of job during disability period was justified); Universal Foods Corp. v. LIRC, 161 Wis.2d 1, 467 N.W.2d 793 (Ct. App. 1991), cert. denied, 502 U.S. 921 (1992) (employer could not meet its burden that employee was unable to do the work and that no other suitable work was available). Other case examples follow: Dalco Metal Products v. LIRC, 142 Wis2d 595, 419 N.W.2d 292 (Ct. App. 1987) (Employee was injured, went to doctor, returned to work without restrictions, and third day later was fired allegedly for poor production– court held for employee); Link Industries, Inc. v. LIRC, 141 Wis.2d 551, 415 N.W.2d 574 (Ct. App. 1987)(Employee cut finger, obtained bandage, went to emergency room, returned to work next day, and took off the following day to see personal doctor. Employee was fired following day. Court held for employee); West Allis School Distr. v. DILHR, 116 Wis.2d 410, 342 N.W.2d 415 (1984) (Back injury. Prior to return to work, employer took steps to lay employee off. Employer had no intention of allowing employee to return to work indefinitely. Less than one month after return to work, employee was laid off permanently, and replaced by new worker. Court held that lay-off was in bad faith); L& H Wrecking Co. v. LIRC, 114 Wis.2d 504, 339 N.W.2d 344 (Ct. App. 1983) (Back injury. Termination during healing period. Firing based solely on existence of injury without benefit of competent medical opinion that injury would permanently prevent return to work. Court held for employee).
A further discussion of anti-discrimination laws is beyond the scope of this essay.
GOVERNMENTAL EMPLOYEE LAWS
The law governing termination from governmental employment is different from the law governing termination from private, non-governmental employment. Certain constitutional and statutory provisions create property rights to continued employment that cannot be infringed without due process of law. See Cleveland Bd. of Education v. Loudermill, 470 U.S. 532 (1985); Board of Regents v. Roth, 408 U.S. 564 (1972); Arneson v. Jezwinski, 217 Wis.2d 288, 592 N.W.2d 606 (1999)
The discussion will be limited to contract and tort law. An outline of the law is provided so that parties may consider their rights.
The general principle underlying the employment at-will doctrine allows no remedy to the employee for discharge from employment. If the general rule applies, and no exceptions apply, the employer may terminate an employee with impunity and without advance notice. Likewise, an employee may quit the employment for any reason and without notice. There is no remedy to the aggrieved party in either case.
Despite the existence, ubiquity and notoriety of the general rule, there is much litigation regarding wrongful discharge. Express contracts and implied contracts can be created through employment handbooks, company rules and policy documents. When an employer assures the employee that the employee is employed for a definite period of time, the employee has grounds for a wrongful discharge claim if prematurely fired without “just cause.” Likewise, if an employer assures the employee that the employee will not be discharged unless just cause exists, such as violation of company policy or rules made apparent to the employee, the employer may be subject to a wrongful discharge cause of action for arbitrary termination of the employee.
In Ferraro v. Koelsch, 124 Wis. 2d 154, 368 N. W. 2d 666 (1985), the supreme court held that an employee handbook could modify an at-will employment relationship, and create a right to continued employment indefinitely, in the absence of just cause for discharge. The employee was hired as a hotel security guard on an at-will basis, but soon thereafter was asked by the hotel to sign a statement in an employee handbook that spelled out all the terms and conditions of employment, including discharge procedures. The employee handbook recited the policies and rules of the employment and Ferraro’s acceptance of those regulations as a condition of his continued employment. In addition, the handbook provided a layoff procedure based on seniority; distinctions between probationary and non-probationary employees, including disciplinary procedures; a progressive procedure for discipline based on the number and seriousness of rule violations; discharge only for “just cause”; and a promise from Ferraro that he would provide a two-week notice before leaving the employment.
In this case, the court held that the rules and procedures to which both parties had agreed in writing, and for which consideration was given, created an express contract between the parties. When Ferraro subsequently abused a hotel guest for a parking violation, the hotel interviewed the guest and other witnesses, determined that there were grounds for discharge, and fired the employee. Ferraro filed suit for wrongful discharge. The supreme court ruled in favor of the hotel, holding that although the handbook constituted an express contract between the parties that eliminated the at-will relationship, there was no credible evidence to show that the hotel breached that contract in any way. The hotel had followed the discharge procedure by performing an investigation of the act and had just cause to discharge the employee. This case is important for the landmark holding that an employment handbook may convert an employment at-will relationship into one that can be terminated only by adherence to contractual terms in the handbook.
Sometimes an employer will provide behavioral guidelines to employees that are presumed by some to create express contracts for employment. These usually are not enforced in court, however, unless the employer creates specific rules or procedures for discharge that create an agreed employment relationship made conditional on those terms.
In Bantz v. Montgomery Estates, Inc., 163 Wis.2d 973, 473 N.W.2d 506 (Ct. App. 1991), an employee claimed that a handbook outlining regulations and disciplinary procedures, an employee conduct policy statement, and a manual prescribing a schedule of progressive discipline converted an employment-at-will relationship to a contractual one that could not be terminated without just cause. The employee was fired from her position as cashier at a resort for allegedly failing to report a miscount in change. The court of appeals held that because the employer’s written publications were only “guidelines”, and not contractual promises, the at-will relationship endured, and the discharge was not required to be for just cause. Therefore, the employee had no remedy even if the discharge was arbitrary and capricious.
In Wolf v. F & M Banks, 193 Wis. 2d 439, 534 N. W. 2d 877 (Ct. App. 1995), an employee sued for wrongful discharge after he was fired for “poor performance.” Wolf claimed that his employment had been converted from an at-will relationship to one bound by the terms of a contract formed through a code of ethics document presented to him by the employer. According to the code, Wolf was entitled to an explanation of any alleged infraction. Wolf argued that this prevented him from being fired at-will. The court disagreed. The court ruled that an employer does not abandon an at-will relationship simply because an employee is given an explanation of subpar performance and an opportunity to plead his case. The court also noted that Wolf had signed an agreement for an at-will employment relationship and that the code included a clause explicitly stating that no express or other employment relationship or contract was created through the document. There were no specific rules or procedures, but rather, only guidelines in the code, and no express conditions for employment.
An implied contract for continued employment in the absence of just cause for discharge may be created by the mutual intent of both parties. In Garvey v. Buhler, 146 Wis2d. 281, 430 N.W. 2d 616 (Ct. App. 1988), Garvey sued Open Pantry for wrongful discharge on the basis of breach of implied contract, created between Open Pantry and Garvey through a combination of documents, including a liquor sales policy, company rules, employee manuals, and her understanding of a warning policy. Garvey claimed that there was a pink slip warning procedure providing that an employee could be fired only after three pink slips, and that she had not been afforded that leniency. She also claimed that the employee manuals and policy guidelines created an implied contract that she could not be discharged at-will. The court held that only the pink slip procedure would have created an implied contract, but the facts regarding the matter were in dispute, so summary judgment was inappropriate. No express contract were formed through the handbooks or sales policies, but an implied contract, if proven, would be just as enforceable.
If the fired employee cannot prove the existence of a contract and its breach by circumstantial evidence, the alternative approach is to argue a violation of tort law.
An employer’s violation of public policy in terminating an employee may give rise to an actionable wrongful discharge claim. The courts will not allow an employer to fire an employee for refusing to break the law. This can be referred to as the public policy exception to the at-will doctrine of employment. There have been many cases where the court’s decision rests on the definition of public policy and how it pertains to the employment situation. Employees may be awarded reinstatement and back pay if they can show that they were discharged for refusing to violate a public policy. However, as explained in Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N. W. 2d 834 (1983), the public policy in question must be well defined and supported by statutory or constitutional law.
In Brockmeyer, the court narrowed the scope of public policy to existing law and decided that wrongful discharge could not be based on a bad faith claim. Brockmeyer was having an open affair with his secretary, who, after being caught, was then asked to find work elsewhere in the company. After no alternative positions in the company were found, the company asked for and obtained her resignation. The former secretary filed a sex discrimination claim against the company. Dun & Bradstreet then asked Brockmeyer to submit a report about the events that led to the secretary’s discharge. Brockmeyer refused and was fired, just days after a settlement with the secretary. Brockmeyer sued for wrongful discharge on the grounds that the employer had a bad faith motivation for his discharge. The court rejected his claim, holding that good faith is not required in employment termination decisions. The court also clearly defined a public policy exception to the rule permitting an at-will employment to be terminated without a good reason. The Wisconsin Supreme Court ruled an employer may not discharge an at-will employee if the discharge violates a clearly defined, fundamental public policy of the state. In this particular case, Dunn & Bradstreet’s actions did not violate any clearly defined public policy.
This narrow exception to the at-will rule was devised in order to allow management to maintain control over its business and to avoid frivolous lawsuits. The employee making the claim for wrongful discharge has the burden to identify a specific provision of law that was violated by the employer in consummating the discharge. The burden then shifts to the employer who must prove just cause for the termination. In this case, Brockmeyer failed to show there was a violation of a fundamental public policy.
In Wandry v. Bull’s Eye Credit Union, 129 Wis. 2d 37, 384 N.W. 2d 325 (1986), the court provided a guide for wrongful discharge claims premised upon a violation of public policy. Wandry was discharged for not reimbursing her employer the amount of a stolen check she had mistakenly cashed for a customer. In order to win on a wrongful discharge claim, Wandry had to prove she was protected by public policy from such a dismissal. Wandry had to look at the Brockmeyer case and follow some crucial steps to win. First, she was required to identify a fundamental and well-defined public policy backed by statutory or constitutional law. Second, she had to prove that there was a violation of that policy in the discharge. Wandry found a provision in the state statutes, section 103.455, Wis. Stats., that protects employees from employers who seek reimbursement for work-related losses, though the exact wording of the statute did not match Wandry’s case. The court held that an employee who was discharged for refusing to allow her employer to deduct a business loss from her paycheck had a valid cause of action for wrongful discharge.
The court narrowed this public policy exception in Bushko v. Miller Brewing Co.,134 Wis.2d 136, 396 N.W. 2d 167 (1986). In this case, Bushko complained numerous times to management about the company’s alleged unlawful acts of hazardous disposal, safety policies, and record keeping. He subsequently was fired and sued for wrongful discharge under the public policy exception. The court ruled that the exception did not apply in his case because he was not asked or encouraged to act or participate in the alleged illegal acts. The court referred back to the Brockmeyer case, noting that the public policy exception applies only if the employer demands that the employee contribute to an illegal act, and where that participation is a condition of continued employment. In this case, Bushko was merely obeying the law and though his actions were praiseworthy, he never was asked to partake in the alleged misconduct.
It was well established in the above cases that an employee could not be fired for refusing to violate the public policy of this state, as it appears in the state constitution or a statute. An unresolved question existed until 1992, as to whether an employee could be fired for refusing to violate an administrative procedure that appears in the Wisconsin Administrative Code. The public policy definition was expanded to include administrative provisions as well, in Winkelman v. Beloit Mem. Hosp., 168 Wis. 2d12, 483 N.W. 2d 211 (1992). Winkelman was a nurse who had spent 16 years in the maternity ward when she was unexpectedly ordered to “float” to another department of the hospital unfamiliar to her, where additional staffing was needed. She refused to work in that area, believing that she was unqualified to do work outside the maternity ward, and went home. She was later informed that her leaving constituted a voluntary resignation, from which she could not be reinstated. She sued for wrongful discharge, claiming the public policy exception to the at-will employment relationship, and cited a Wisconsin Administrative Code section as support for her recalcitrance. The cited section provided that a registered nurse could be disciplined by the licensing authorities for performing services for which the nurse was not qualified, and that such conduct constituted negligence. The court upheld her refusal to accept the transfer to an alien department for which she was untrained and incompetent, and ruled that her discharge for that reason was wrongful, in violation of administrative code. The significance of the case is the holding that where a fundamental and well-defined public policy is evidenced by an administrative rule, a discharge for refusal to violate that public policy is actionable.
The whistle-blower act of an employee, as in Bushko, is a very narrow exception to the at-will employment doctrine. The court in Hausman v. St. Croix Care Center, 214 Wis. 2d 654, 571 N.W. 2d 393 (1997), distinguished its ruling from the holding in the Bushko case in whistle-blower situations. Hausman was a nurse at a nursing home. She notified the administrators numerous times of apparent neglect and abuse of patients. After the management took no action, Hausman informed a state official in charge of investigation of nursing home practices, in accordance with several statutes regarding abuse and neglect in nursing homes. According to the statutes, nurses were obligated to inform the state or local officials in case of any such abuse. Moreover, a nurse’s failure to do so could result in criminal sanctions or penalties. Hausman was fired for having turned in her employer to the state. She sued for wrongful discharge, claiming the public policy exception. The court distinguished this whistle-blowing case from the Bushko case, noting that Hausman’s conduct went beyond being merely praiseworthy, but was the performance of a duty imposed by several statutes, the avoidance of which would have subjected her to criminal prosecution. The court decided that compliance with legal obligations is protected under the public policy exception.
Wrongful discharge claims based on tort protect the employees and promote good public policy. The courts have warned companies that they may no longer fire employees for any reason, namely those violating public policy. In Kempfer v. Automated Furnishings, Inc., 211 Wis. 2d 100, 564 N.W. 2d 692 (1997), the employee was fired after refusing his supervisor’s order to drive a truck without a commercial driver’s license. Kempfer had driven it once before but had been advised by police not to drive it again without the proper license. When he informed his supervisor of the importance of the license, his supervisor ignored the warning and proceeded to demand that Kempfer drive illegally. When Kempfer refused, he was fired. He sued for wrongful discharge. The court ruled that his case was within the protection of the public policy exception set forth by Brockmeyer, so he was awarded back pay and reinstated.
In Tatge v. Chambers & Owen Inc., 219 Wis.2d 99, 579 N.W.2d 217 (1998), the supreme court held that an employer was not liable for wrongful discharge when it fired an employee because of the employee’s refusal to sign a non-compete agreement. The employee claimed that the non-compete agreement was void, as an illegal restraint of trade, pursuant to Section 102.465, Wis. Stats., in that it did not contain any geographical or durational limitations as required by the statute. The court did not believe that the statute created a fundamental, well-defined public policy of the state. Therefore, the employer was justified in discharging the employee for his refusal to sign the non-compete agreement, even though the agreement was inconsistent with the statute. In order to avoid making all restrictive covenant cases wrongful discharge cases, the court allowed the discharge for the employee’s refusal to sign, but commented that he could have litigated the validity of the covenant if the employer ever was sought to enforce it.
Contract and tort laws have weakened the once strong employment at-will doctrine to one that is now more reasonable and fair to employees. These cases and others have set forth the exceptions to the rules while still upholding the employer’s right to maintain control over the company.