Category Archives: Arizona Employment Act

WRONGFUL TERMINATION: EMPLOYERS CANNOT HIDE BEHIND THE AT-WILL DOCTRINE

I often hear the terms “at-will” and “right to work” used interchangeably and/or incorrectly.  The most common misuse:  “This is a right to work state, so I can fire an employee any time!”  Not so fast.

This article discusses what these common employment terms really mean.  Equally important, it  provides businesses with a user friendly guide to when they may — and may not — terminate employees.

“RIGHT TO WORK” HAS NOTHING TO DO “AT-WILL” EMPLOYMENT

Arizona is one of a number of states that has a “right-to-work” provision in its Constitution.  Article XXV of the Constitution states:

“No person shall be denied the opportunity to obtain or retain employment because of non-membership in a labor organization, nor shall the State or any subdivision thereof, or any corporation, individual or association of any kind enter into any agreement, written or oral, which excludes any person from employment or continuation of employment because of non-membership in a labor organization.”

This provision, effective since 1946, prohibits unions from requiring employers to hire only union employees. An Arizona statute restates this language verbatim.

Thus, “right to work” is a term that has little or nothing to do with “at-will” employment (described below).  It is a term that deals strictly with unions — restricting their ability to force employees to join and pay union dues.  Right to work laws are rarely invoked these days — particularly in Arizona, which has a relatively low union presence.

AT-WILL EMPLOYMENT:  EMPLOYERS HAVE SIGNIFICANT POWER IN FIRING EMPLOYEES, BUT LOSE THAT POWER WHEN THEY FAIL TO FOLLOW THE LAW 

“At-will” employment means that the employee may be terminated from employment at any time for any lawful reason or for no reason.  Similarly, at-will employees may resign at any time for any or no reason.

Despite the much heralded strength of the at-will doctrine, Arizona businesses are held liable for wrongful discharge if employees establish any one of the following:

  • Breach of a written contract
  • The termination was in violation of an Arizona statute
  • The termination was in retaliation for the employee’s reasonable disclosure of the employer’s violation of state law.  A retaliation claim requires (1) a reasonable disclosure of information, (2) that the disclosure be made to a supervisor with authority to investigate or the employee of a state entity, (3) that the employee believes that the employer is violating or will violate the Arizona constitution or Arizona statutes, (4) that the employee’s belief is reasonable, and (5) that the employer “terminated the employment relationship” because of the disclosure.
  • The termination was in retaliation for the refusal by the employee to commit an act or omission that would violate the Constitution of Arizona or the statutes of Arizona
  • The termination was in retaliation for the exercise of rights under the workers’ compensation statutes
  • The termination was in retaliation for service on a jury
  • The termination was in retaliation for the exercise of voting rights
  • The termination was in retaliation for the exercise of free choice with respect to non-membership in a labor organization
  • The termination was in retaliation for service in the national guard or armed forces

FEDERAL LAWS WHICH ALSO PROVIDE A VARIETY OF CLAIMS DESPITE THE AT-WILL DOCTRINE

There are many federal laws which also provide at will employees with claims for wrongful discharge.  I have brought and defended claims under the following laws, among others:
  • Title VII, which prohibits discrimination based on race, color, religion, sex, or national origin
  • The Age Discrimination in Employment Act of 1967 (ADEA), which protects individuals who are 40 years of age or older
  • The Americans with Disabilities Act of 1990, which prohibits employment discrimination against qualified individuals with disabilities
  • The Pregnancy Discrimination Act, which prohibits discrimination on the basis of pregnancy, childbirth, or related medical conditions
  • The Genetic Information Nondiscrimination Act of 2008, which prohibits employment discrimination based on genetic information about an applicant, employee, or former employee
  • The Family Medical Leave Act, which entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave
  • The Fair Labor Standards Act, which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards
  • The False Claims Act, which imposes liability on persons and companies (typically federal contractors) who defraud governmental programs
  • Sarbanes Oxley, which protects employees of public companies who ‘blow the whistle’ by reporting conduct that they reasonably believe constitutes a violation of federal law relating to financial, securities or shareholder fraud

PRE-TERMINATION QUESTIONS EVERY EMPLOYER SHOULD ASK

A business can always find a purported “reason” to fire an employee.  Before that decision is made, however, the business should consider:

  • Might the employee have damaging information regarding the company’s affairs, including knowledge of illegal, unethical, or otherwise improper conduct by ownership or management?
  • What is the employee’s documented past work record? If it is good — no written discipline coupled with raises and/or favorable reviews and comments —  then the termination may be deemed pretextual.
  • Is there any record of the employee complaining or uncovering improper conduct by the company? If so, the risk of a pretext finding rises dramatically.
  • What are the chances the now ex-employee will bring a lawsuit against the company? What sort of claims can be brought and what is the company’s potential exposure?
  • How will the ex-employee appear before a jury? Does he or she have an exemplary past?
  • How will your own employees and ex-employees appear? Do they uniformly support your position or will some provide evidence against you?
  • What will it cost in dollars, time, and bad publicity to defend a lawsuit?
  • Can there be collateral damage (lost sales, contracts, or clients; government investigations; penalties, etc.)?

Failing to identify and correctly answer these questions can result in massive pain.

CONCLUSION

The “at-will” doctrine affords employers with a great deal of autonomy in making employment decisions.  However, there are limits to an employer’s power — limits that are well-defined in state and federal laws.

Businesses should at least know of the existence of laws that can be applied against them; then, they will be able to make informed, logical, and defensible employee decisions (please see The Dark Side of Employee Discipline for a discussion of common employer mistakes).

Management training is critical when it comes to knowing the law.  Ensure that your managers are trained by legal counsel on an annual basis.  This preventive maintenance will enable management to (1) know current laws and (2) spot potential issues as they arise.  No one wants to learn the law only as the result of an EEOC charge or whistleblower lawsuit.

In sum, businesses can easily avoiding creating their own pain by knowing the law and following it.  This week’s video — “My Own Prison” by Creed — evokes the type of pain that can be felt by as a result of poor employment decisions:

 

 

 

 

 

TERMINATING A BUSINESS PARTNER: MAKING THE BEST OF A BAD SITUATION

A significant portion of the Bourque Law Firm’s practice is devoted to litigating business disputes, including shareholder and contract disputes. This edition of the HR Law Insider discusses the all too frequent situation where owners of a business clash and a decision is made to terminate a co-owner’s employment.

THE HARDEST DECISION:  TO END A RELATIONSHIP

One of the toughest decisions a business owner can make is to terminate a co-owner’s employment.  Making such a decision will not only end someone’s job, it will likely fracture or destroy a relationship.  Given the rights afforded to minority business owners, the decision to relieve a co-owner of his or her job should be carefully thought out.

ARIZONA IS AN “AT-WILL” EMPLOYMENT STATE

Absent an agreement providing for a definite term of employment or  mandating termination only for cause, employment in Arizona is terminable at-will.

Under the Arizona Employment Act, an employee has a claim against an employer for termination of employment ONLY if one or more of the following circumstances have occurred:

(a) The employer has terminated the employment relationship of an employee in breach of an employment contract.

(b) The employer has terminated the employment relationship of an employee in violation of an Arizona statute.

(c) The employer has terminated the employment relationship of an employee in retaliation for certain conduct.  For example, it is unlawful to terminate an employee for:

  • The refusal by the employee to commit an act or omission that would violate the Constitution of Arizona or its statutes.
  • The disclosure by the employee in a reasonable manner that the employee has information or a reasonable belief that the employer, or an employee of the employer, has violated, is violating or will violate the Constitution of Arizona or an Arizona statute to either the employer or a representative of the employer who the employee reasonably believes is in a managerial or supervisory position and has the authority to investigate the information provided by the employee and to take action to prevent further violations of the Constitution of Arizona or  an Arizona statute.

Thus, employees in Arizona have very limited rights to bring wrongful discharge claims (in addition to any potential claims under federal law).

DOES THE AT-WILL DOCTRINE APPLY TO CO-OWNERS? 

The at-will doctrine does indeed apply to co-owners of a business.  Absent an agreement that entitles a minority co-owner to continued employment, the co-owner’s employment is terminable at-will.

Before deciding whether to terminate a co-owner’s employment, a majority owner(s) should consider:

*  Is there a potential agreement which gives the co-owner employment rights, such as an employment agreement, a shareholder’s agreement, a buy-sell agreement, or company bylaws?

*  Would termination potentially violate any Arizona statute?

*  Would termination potentially violate any federal statute?

*  Would termination arguably be in retaliation for the employee’s protected conduct?

*  What corporate formalities, if any, need to be followed?

BE PREPARED FOR THE AFTERMATH

In the “typical” employee discharge situation, the relationship ends and the parties go their separate ways.  This is not the case when the parties remain co-owners — still attached at the proverbial hip.

Terminated co-owners are often very unhappy.  When terminating a co-owner’s employment, assume that the fired co-owner will vigorously and aggressively exercise his or her rights.  It is therefore critical to treat co-owners fairly, comply with all agreements, and to follow corporate formalities.  In short, be prepared beforehand.

THE CORPORATE LAW INSIDER

Arizona has a number of statutes that protect corporate shareholders and members of limited liability companies.  Visit http://corporatelawinsider.com/ for one such example:  corporate shareholders  — whether employees or not — are entitled to obtain substantial documents and information about the corporation’s financial and business affairs.