Employers in Utah can fire their employees for any reason or no reason at all. There are limitations to this rule - you can't fire an employee, for example, based on race, gender, religion, or age, or if doing so would breach a contract. You also can't fire an employee if doing so would violate "public policy." This presentation walks through this third limitation on Utah's at-will doctrine, its scope and its pitfalls, and the ways to potentially avoid its traps.
Utah's Tort of Wrongful Termination in Violation of Public Policy
1. 27th Annual Parsons Behle & Latimer EMPLOYMENT LAW SEMINAR
UTAH’S TORT OF WRONGFUL
TERMINATION IN VIOLATION
OF PUBLIC POLICY
Zack L. Winzeler
Alan S. Mouritsen
Salt Lake City, Utah
TUESDAY, APRIL 28, 2015 | THE LITTLE AMERICA HOTEL
parsonsbehle.com
2. 2
As you probably already know, in Utah,
employment is at-will, meaning the
employer can fire an employee for any
reason or no reason at all, and the
employee can leave his or her job for any
reason or no reason at all.
At-Will
3. 3
Race (Title VII)
Sex (Title VII)
Pregnancy (PDA)
Disability (ADA)
Caring for family member (FMLA)
Veteran (USERRA)
Sexual orientation?
Exceptions
4. 4
Another exception with which you may be
less familiar
Wrongful termination in violation of public
policy
This is a tort, not statute-based
Brings into play punitive damages
Wrongful Termination
6. 6
Adverse Employment Action (usually but
not always termination)
“Clear” and “Substantial” Public Policy
Employee’s Conduct Implicates Policy
Adverse Employment Action Based on
Conduct
Four Elements
9. 9
Overarching importance
– No question as to its importance for the
promotion of the public good
– Much narrower than traditional notions of
public policy
– Maintain employer discretion
Does the statute merely “regulate conduct
between private individuals”?
“Substantial”
10. 10
Refusing to commit an illegal or wrongful
act
Performing a public obligation, such as
accepting jury duty
Exercising a legal right or privilege
Reporting to a public authority criminal
activity of employer
Implicates Public Policy
11. 11
The analysis under the wrongful-
termination tort follows the typical
McDonnell-Douglas framework
Plaintiff establishes “prima facie” case
Burden shifts to defendant to identify
lawful reason
Plaintiff attempts to show that defendant’s
reason is “pre-textual”
McDonnell-Douglas Framework
12. 12
Examples – Hudgens – Facts
Hudgens works at Prosper, Inc., a
“motivational coaching” company
His immediate supervisor, Christopherson,
uses interesting motivational techniques
– Mustache drawing
– Wooden paddles
– Pulling out chairs
13. 13
Christopherson challenges employees to
participate in “motivational exercise”
Christopherson leads Hudgens and others
to hill outside the office
Christopherson orders Hudgens to lay
down, with his head downhill
Hudgens is held down while a gallon of
water is poured over his mouth and nose
Hudgens – Facts
14. 14
Hudgens claims that he is constructively
discharged based on the waterboarding
Court holds that constructive discharge
based on waterboarding implicates “clear
and substantial” public policy
“physical and emotional integrity” of Utah
citizens
Hudgens – Policy
17. 17
Cathleen Rackley assists nursing home,
Fairview, with its efforts to comply with
federal and state law
The VA is expected to send one of
Fairview’s residents, Ms. Mellen, a check
for $720
Daughter-in-law tells Fairview to keep the
check a secret from Ms. Mellen
Rackley
18. 18
Rackley is upset with the secrecy, and
thinks that Ms. Mellen should use the
money to buy a new wheelchair
Rackley tells Ms. Mellen that her daughter-
in-law took the check
Daughter-in-law tells Fairview, and
Fairview fires Rackley
Rackley . . . continued
19. 19
Rackley says her conduct implicates a
clear and substantial public policy in favor
of residents managing their own money
She cites the constitution, statutes, and
administrative regulations
According to the court, only the regulations
say anything specifically about
management of money
Rackley – Policy
20. 20
The Court says that regulations do not
qualify to establish a clear and substantial
public policy because they are not
constitutions, statutes, or judicial decisions
Otherwise, the court explains, the tort will
be broadened beyond its basic purpose
and used to threaten employers who
follow the law
Rackley – Holding
22. 22
Person worked at a residential treatment
center facility for teenagers
State law required a staff-to-youth ratio of
at least one-to-four and facility bylaws
required residents to be separated
Person consistently complained about
understaffing and separation, but did not
mention the state-mandated ratio
Person – Facts
23. 23
Person identified a general policy that
such facilities must protect their residents
from harm
Person further pointed to regulations that
required such facilities to implement a
four-to-one staff-to-student ratio.
Person – Policy
24. 24
As to resident separation, the court held
that it was a matter of internal policy “not
directly mandated by legislation or
regulations”
As to staff-to-resident ratio, the court held
that Person’s conduct did not implicate
that policy because his general complaints
did not reference state requirements
Person – Holding
26. 26
Ryan is hired as a pharmacist at Dan’s
Foods
Ryan routinely reports to his employer
prescriptions that he considers invalid or
illegitimate
Complaints are made about Ryan’s
conduct as a pharmacist
Ryan is fired
Ryan – Facts
27. 27
Ryan says that public policy requires him
to verify the legitimacy of prescriptions
Ryan’s first source of public policy
prohibited pharmacists only from
knowingly filling an improper prescription
and did not apply to Ryan’s conduct
Ryan – Policy
28. 28
The court did note that the reporting of
criminal conduct typically gives rise to a
viable wrongful termination claim
The court held that Ryan’s claim could
survive if, and only if, his reports as to
allegedly fraudulent prescriptions were
reports he was required to file because it
involved suspected criminal activity
Ryan – Holding
30. 30
Vice-President of Bank discovers
overstatement of Bank’s income
He complains to his superiors about the
problem and demands immediate
resolution
Bank required $1M-$2M to fix problem
Bank decides to fix problem over time,
through installment payments
Heslop – Facts
31. 31
Bank hides the deficiency from the
regulators and issues false call reports
(financial statements issued to the public)
The deficiency is discovered and an
investigation ensues resulting in audit of
Bank
Bank hires new management, who demote
Heslop to agricultural loan specialist
Heslop – Facts
32. 32
Bank later decides not to do agricultural
loans and removes Heslop’s lending
authority
Bank later forces Heslop’s resignation
over purported violation of Bank policy
Heslop sues but the trial court dismisses
Heslop’s claim for wrongful termination in
violation of public policy
Heslop – Facts
33. 33
The Utah Supreme Court reversed, finding
that Utah Financial Institutions Act
established public policy:
– It requires banks to issue accurate call reports
to the public
– It contains criminal penalties for violation of its
provisions
Heslop furthered public policy by internally
reporting Bank’s violation of the Act
Heslop – Holding
34. 34
Fox observed sales practice of account
churning – making existing accounts
appear as new accounts for commissions
She reported the practices to MCI’s
management, who told her to “mind her
own business”
Fox is terminated one week after company
completes its investigation into churning
Fox v. MCI Communications
35. 35
Issue: Is termination in retaliation for
internal reporting of co-workers’ criminal
violations in violation of public policy?
No claim for wrongful termination in
violation of public policy where employee
reports criminal violation to an employer,
rather than to public authorities
The account churning created harm to
MCI, not to the public
Fox – Holding
37. 37
Three off-duty AOL employees in Ogden
meet in AOL parking lot to go target
shooting at gun range
AOL’s security cameras capture two
employees transferring their firearms to
the third employee’s car
Employees are terminated for violating
AOL policy that prohibited from carrying
firearms in AOL parking lot
Hansen v. AOL
38. 38
Court is required to balance two
competing public policy interests:
– Employer’s right to regulate the workplace to
promote productivity, security, etc.
– Employee’s right to exercise constitutional
rights within the workplace (i.e., right to bear
arms)
Court recognizes that both public policies
are “clear and substantial” under Utah law
Hansen – Holding
39. 39
Court holds that, despite right to carry
firearms being clear and substantial policy,
that policy cannot supplant the right of
employer to regulate firearms in the
workplace
Dismissal of employees’ claims for
wrongful termination in violation of public
policy upheld
Hansen – Holding
41. 41
Termination of employee in retaliation for
filing a workers’ compensation claim
violates the public policy of Utah
Employee who suffers only harassment or
discrimination for filing workers’
compensation claim does not have claim
for wrongful termination in violation of
public policy
Touchard v. La-Z-Boy
42. 42
Employee terminated in violation for her
opposition to employer’s treatment of other
employees who are entitled to claim
workers’ compensation benefits does not
have claim for wrongful termination in
violation of public policy
Touchard – Holding
43. 43
Terminating employee in retaliation for
acts that fall short of filing a workers’
compensation claim violates public policy:
– Preparing to file workers’ compensation claim
– Notifying the employer of intent to file workers’
compensation claim
– Discussing the potential workers’
compensation claim with co-workers
Stone v. M & M
44. 44
Bank manager is victim of phishing scam
and sends $200K in wires to fraudsters
Bank terminates manager’s employment
for failing to follow Bank’s policies in
verifying identity of wire requester
Bank manager claims (after wire loss but
prior to termination) that Bank’s policies
are confusing and inconsistent
Termination in violation of public policy?
Hypothetical #1
45. 45
Wal-Mart employees detain a man for
shoplifting
They notice the shoplifter is carrying a gun
The employees grab the gun and restrain
the man until police arrive
Wal-Mart fires the employees for violating
internal policy against violence
Is their termination in violation of public
policy?
Hypothetical #2
46. 46
Understand and investigate the
circumstances surrounding the proposed
termination
– Evaluate whether termination or employment
history could possibly implicate a clear and
substantial public policy
Clearly document reasons for termination;
reasons given at time of termination will
govern in wrongful termination lawsuit
Recommendations
47. 47
Treat similarly-situated employees alike to
avoid claims of pretext (i.e., if certain
action results in termination for one
employee, it should for the next employee)
Obtain, where possible and necessary,
releases for all employment-related
claims, including claims for wrongful
termination in violation of public policy
Recommendations (cont.)
48. 48
Zack L. Winzeler
801.536.6650
zwinzeler@parsonsbehle.com
Alan S. Mouritsen
801.536.6927
amouritsen@parsonsbehle.com
Thank You
Editor's Notes
Ms. Mellen is going to use the money to move out of Fairview.
The Act regulates bank conduct and ensures the safety of financial institutions in the state. The Act serves a substantial public policy because it protects the public as well as regulates the institutions themselves. The Act, therefore, does not merely regulate the relationship between private individuals such as employer and employee.[13] The public purpose of the Act is further evidenced by the penalties enforced for its violation. Section 7-1-318 makes failure or refusal to submit accurate and timely call reports a third degree felony
While the question of causation in this case is close, we believe that plaintiff presented enough evidence of resentment toward him as a result of his defense of public policy that the question of whether that policy was a substantial factor in his termination should have been presented to the jury for determination.
However, if an employee reports a criminal violation to an employer, rather than to public authorities, and is fired for making such reports, that does not, in our view, contravene a clear and substantial public policy. In the instant case, the employer did not require plaintiff to engage in a criminal act or to violate her public duty to disclose criminal conduct. The conduct that plaintiff's co-workers engaged in was dishonest, but it did not cause harm to any of MCIT's customers; no customer was overcharged or defrauded as a result of the dishonest practices of MCIT's employees. The churning and creation of "new" accounts, while clearly intended to produce higher pay for the employees, was a practice defendant knew about and, by tolerating it, acquiesced in. For that reason, the corporation was not defrauded.
Although employees may have a duty to disclose information concerning the employer's business to their employer, that duty ordinarily serves the private interest of the employer, not the public interest. Foley v. Interactive Data Corp., 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, 380 (1988). Nothing in this case affects the public interest in any significant way. The conduct of plaintiff's co-workers may have resulted in increased costs of the corporation's products and services and thereby adversely affected the corporate shareholders to some minor degree, but that does not violate a clear and substantial public policy.
Ray v. Wal-Mart Stores – still waiting for Utah Supreme Court’s decision on question certified by the U.S. District Court for Utah.