Category Archives: Employee Termination

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:

 

 

 

 

 

HOW TO DEAL WITH OFF-DUTY EMPLOYEE MISCONDUCT

Most employee handbooks state that employees may be disciplined or discharged for various types of misconduct within the workplace. But when, if at all, may employers terminate employees for misconduct outside the workplace? This edition of the HR Law Insider provides the answers.

FIRST THINGS FIRST: MAKE SURE YOUR EMPLOYEE HANDBOOK OR EMPLOYMENT CONTRACT ADDRESSES OFF-DUTY MISCONDUCT

All employee handbooks should contain language stating that off-duty misconduct may result in discipline up to and including discharge. Such provisions should provide the employer with maximum discretion to determine what types of off-duty misconduct qualify for discipline.

By way of example, the Standards of Conduct section of an employee handbook might include the following as a terminable offense: “Employee misconduct outside the workplace, including illegal, immoral, or offensive acts, which may, as determined in the Company’s sole discretion, reflect adversely upon the Company, impact the Company negatively, raise a safety concern, adversely affect the employee’s ability or credibility to fulfill the Employee’s job responsibilities, or adversely affect other employees’ job responsibilities or ability to do their jobs.”

If an employee handbook fails to include such a provision, it does not mean that the employer is unable to discipline or discharge an employee for off-duty misconduct — employers are still able to fire employees for such misconduct. However, in the absence of a provision for off-duty misconduct, the risk of a discrimination or other claim rises.

When an individual employment contract limits termination to only those circumstances where there is “good cause,” and off-duty misconduct is not listed as good cause to terminate, such a termination might constitute a breach of contract by the employer.

Thus, every handbook and every employment contract should include a provision covering employee misconduct outside the workplace.

DEALING WITH REAL WORLD SITUATIONS

 Here are common situations I have seen play out over the years:

* On Monday morning the spouse of an employee calls into work and says “John has been arrested and is in jail; it’s all a big mistake.”

* Employer hears through the grapevine that employee has been arrested for DUI or in a Sheriff Joe or other sting operation.

* Employer is tipped off to employee’s offensive social media posts.

* Employer learns that supervisor (usually male) and subordinate (usually female) are in a relationship and are having problems.

As with just about any situation, the first step for the prudent employer is to gather facts — to investigate. Sadly, it turns out that most arrests are not “all a big mistake.” However, employers should investigate with an open mind — letting the facts, not conjecture, guide their decisions.

Of course, an employee’s background with his or her company may greatly influence an employer’s ultimate decision: a 20 year employee with a spotless record who provides a great benefit to a company is typically given much more leeway than someone who is new to the job or a marginal performer. This is normal and appropriate, subject to setting a precedent which the company may need to follow into the future (see below).

In some instances it may be impossible to determine exactly what has happened. This may lead to a very difficult decision. The key for employers, who are not held to a standard of perfection but rather one of good faith, will be to demonstrate that (1) a fair and thorough investigation was conducted and (2) the employer’s decision was made for a bona fide business reason and not for an improper (e.g. discriminatory or retaliatory) reason.

RED FLAGS: WHEN DISCIPLINE OR DISCHARGE IS RISKY OR DOWNRIGHT INADVISABLE 

There will be times when terminating an employee for off-duty misconduct will get a company sued. For example:

* Terminating an employee for posting “offensive” material on Facebook about working conditions may result in a Section 7 Complaint under the National Labor Relations Act (see previous edition of the HR Law Insider).

* Terminating a minority or older employee for off-duty misconduct, when in the past non-minority or younger employees have not been terminated for such misconduct.

*In Arizona, terminating an employee for smoking pot away from the workplace when the employee has a medical marijuana card and is not impaired at work.

When making any employment decisions, business owners should always ensure their decisions cannot be challenged as treating employees differently based on following: race, color, religion, genetic information, national origin, sex (including same sex), pregnancy, childbirth or related medical conditions, age, disability or handicap, citizenship status and service member status.

In addition, federal law prohibits making employment decisions based on whether an employee has taken time off under the Family Medical Leave Act, made a safety complaint to OSHA, questioned overtime practices, or filed a charge of discrimination or harassment. 

THE FLIP SIDE: EMPLOYER LIABILITY FOR FAILING TO TAKE ACTION WHEN LEARNING OF OFF-DUTY MISCONDUCT

Failing to discipline, discharge, or otherwise deal with an employee who has engaged in off-duty misconduct may lead to a claim for negligent hiring, supervision, or retention against the employer. For example:

* An employer who learns that its employee has a DUI risks liability when it allows the employee to continue to drive a company vehicle.

* An employer who learns that its employee has been arrested or convicted of a violent crime or sex crime exposes itself to significant liability when it allows the employee to continue to interact with members of the public on behalf of the company.

CONCLUSION 

Employers confronted with off-duty misconduct must carefully balance the risk of discharging the employee against the risk of not acting. The risk of associated with discharging an employee can be minimized, if not eliminated, by a methodical investigation and decision making process. If an employer decides to retain an employee who it knows has engaged in off-duty misconduct, it should do so consciously — knowing that it may have created a precedent going forward — and in a way that mitigates potential liability.

Off-duty misconduct situations can be among the most difficult for employers. As such, employers should consult legal counsel when the inevitable “it’s all a big mistake” call comes in on that random Monday morning.

SEVEN STEPS TO EFFECTIVELY ADMINISTERING DISCIPLINE

 

Each situation requiring employee discipline is unique. However, the following guidelines will help employers ensure that discipline is meted out fairly and properly:

1.    Act timely

  • When information comes to your attention indicating that misconduct may have occurred, you should act promptly. You should begin to investigate the situation, and possibly even suspend the employee involved pending the investigation, immediately.
  • If management delays in taking action, it may be found to have condoned or tolerated the misconduct, and may thereby lose its ability to administer effective, and necessary, discipline. If there is delay, a potential plaintiff may also contend that the misconduct was not sufficiently serious to warrant discipline, because if it was so serious management would not have waited so long to take action.

2.    Know the Company’s Rules of Conduct, Policies, and Practices

  • Obviously, in order to determine whether misconduct has occurred and to determine whether discipline is warranted, you need to know the applicable policies and rules.

3.   Investigate, Investigate, Investigate

  • It is critical that all of the relevant facts be obtained before making a decision as to what discipline, if any, should be meted out. Making such decisions based upon incomplete facts is not fair to the employee involved, co-workers, or the Company.
  • Good, thorough investigations are also an important element in prevailing in lawsuits concerning discipline.

4.   Give the Accused Employee a Chance to Tell His/Her Story

  • Before deciding what discipline, if any, to impose, give the employee under investigation a chance to give his/her version of the events.
  • This should be done even when you believe there is nothing the employee can tell you that would affect the outcome. Talking to the employee insures that a fair investigation has been conducted and that all facts and viewpoints have been obtained.

5.   Be Consistent in Determining the Appropriate Discipline to be Imposed

  • You should be consistent in the discipline that is used. This means that similar situations should result in similar discipline. However, situations which on the surface appear to be similar often turn out not to be when all the details are known. Again, this is why a careful, thorough investigation is so important.

6.    Inform Employee of What Will Happen if Further Misconduct Occurs

  • With respect to discipline for future misconduct, generally it is appropriate to say something like the following: “Any future misconduct on your part will result in further discipline, including possibly discharge.”

7.   Document Warning and Disciplinary Discussions

  • You should note who was present during the discussion, when it occurred, and summarize what was said. This written record of the discussion should be made on the same day it occurs.
  • Such documentation will, if necessary, enable the Company to show that the employee was specifically informed as to what was expected of him/her and what the consequences would be if the employee failed to meet the Company’s expectations.

 

 

THE DARK SIDE OF EMPLOYEE DISCIPLINE

Pretext

ˈprēˌtekst/

noun

A purpose or motive alleged or an appearance assumed in order to cloak the real intention or state of affairs.

HR Law Insider’s most recent article discussed the benefits of employee discipline. Implicit in the discussion is that discipline must be legitimate and proportionate. This article discusses when discipline is pretext: a bogus reason to get rid of a good employee.

Earlier this year a Staples employee was awarded 26 million dollars by a jury after it concluded that Staples’ reason for firing him was pretext. It was the largest award of its kind in Los Angeles legal history. The jury appears to have been incensed by an employer that was looking for a reason to fire an employee with a perfect track record. Staples purportedly fired the employee for “theft.” The jury concluded that this was not the real reason the employee was fired.

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:

  • What is the employee’s past work record? If it is good, then the termination may be deemed pretext.
  • 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 contracts/clients, penalties, etc.)?

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

SUNK COST FALLACY: DO NOT COMPOUND A BAD DECISION WITH ANOTHER BAD DECISION

Staples compounded a bad decision – the discharge of the employee with the good work record – with a worse decision: defending the bad decision. Defending the bad decision cost Staples not only hundreds of thousands of dollars in its own attorneys’ fees, but a gigantic jury verdict and horrible publicity.

Staples was guilty of “sunk cost fallacy” thinking. This occurs when one (a) reasons that a further expenditure of time or money is warranted based on past expenditures or to defend past positions but (b) fails to take into account potential losses involved in the further investment.

Toughness is a virtue. There is, however, a fine line between bravery and stupidity. “Digging in” often deepens the hole of a bad decision or poor investment.  Once a business has made a decision or investment it cannot take back, it should determine the best way forward. Sunk cost fallacy thinking can be very expensive.

I WON’T BACK DOWN

This edition’s video was recorded 10 days after September 11, 2001. As sadness, anger, pride, and revenge occupied many of our of hearts and minds, Tom Petty and the Heartbreakers performed a song that fit the day: “I Won’t Back Down.” 13 years later we continue to grapple with the events of 9/11, the wars that ensued, and whether our politicians have engaged in sunk cost fallacy thinking.

 

HISTORICAL POSTSCRIPT:  REMEMBER THE CONCORDE JET?

The sunk cost fallacy is sometimes known as the “Concorde Fallacy.” It refers to the British and French governments’ continued funding of the Concorde jet even after it became apparent that there was no longer an economic case for the aircraft. The project was regarded privately by the British government as a “commercial disaster” which should never have been started, and was almost cancelled, but political and legal issues made it impossible for either government to pull out.

 

 

 

THE FORMULA FOR MAKING GOOD HR DECISIONS

Employment lawyers routinely field calls from business clients asking for help assessing whether they are “safe” terminating particular employees. No two fact scenarios are identical. Thus, there is no precise methodology to guide such decisions.

There is, however, a solid and time tested general formula I have developed for helping businesses make good workplace decisions. It derives from a 1944 case that is required reading for all first year law students. In Carroll Towing, a flour filled barge in New York Harbor broke loose and crashed into a number of other ships, causing lots of mayhem – and damages.

What does a 1944 runaway barge case have to do making workplace decisions in 2014? Plenty. The judge’s reasoning in Carrol Towing applies to workplace decisions as well:

Since there are occasions when every vessel will break from her moorings, and since, if she does, she becomes, a menace to those about her; the owner’s duty, as in other similar situations, to provide against resulting injuries is a function of three variables: (1) The probability that she will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions. Possibly it serves to bring this notion into relief to state it in algebraic terms: if the probability be called P; the injury, L; and the burden, B; liability depends upon whether B is less than L multiplied by P: i.e., whether B < PL.

Substitute “employee” for “vessel” and let’s walk through dealing with a problem employee. In deciding whether to discipline the employee you should consider (1) the possibility of further infractions, (2) the gravity of harm if the employee continues to misbehave, and (3) the burden of disciplining the employee or of other preventive action.

Prudent employers recognize that in most cases the “burden” of disciplining employees is slight when compared to downside of doing nothing. Two separate risks arise when employers do nothing in the face of workplace infractions or nonperformance. First, the risk of further infractions and ongoing nonperformance rises. These problems in turn hurt the company’s productivity and can cause safety and  morale problems, among others.

Second — and arguably far worse — failing to timely discipline an employee causes increases the risk of a successful wrongful discharge lawsuit. This occurs because the employer has either (a) allowed a misbehaving employee to continue unabated or (b) terminated an employee with a seemingly clean work record.

Let’s apply Carroll Towing to two hypothetical situations and watch it work against imprudent employers:

Hypothetical I: Company A has a high revenue producing male employee who enjoys harassing female employees. This creates a high probability that there will be a claim of sexual harrassment.   It is also likely that the company will be in a lawsuit and exposed to damages and bad publicity. The gravity of the resulting injury is high – like that of a runaway barge.

Company A, however, does nothing because it (1) is willfully ignorant of the probability and gravity of a discrimination lawsuit and (2) perceives the burden of disciplining the large revenue producer to be too great. Company A may likely get what it deserves: protracted legal proceedings, lots of wasted time, and multiple checks written to attorneys and plaintiffs.

Hypothetical II: Company B has a poorly performing employee that is over 40, in a minority group, and has a physical disability. The employee is not performing well and is frequently late to work (unrelated to the disability). The employer fails to understand the risk and gravity of ongoing nonperformance and fails to take the simple act of disciplining the employee.

Company B “wakes up” at some point and realizes it must terminate the nonperforming employee, who is crushing morale and productivity and can be replaced by a newfound superstar candidate. But it is too late.  The company should long ago have realized the possibility and the gravity of a Title VII charge of discrimination if it terminated the employee before there was any written record of the employee doing anything wrong.

By failing to take the simple step of disciplining the employee, Company B is now stuck on the horns of a dilemma: either fire the employee and risk a discrimination lawsuit because there is no record of nonperformance, or retain a lousy employee.

Understanding the probability and gravity of workplace problems allows businesses to take reasonable precautions to avoid them. It’s a simple formula to understand and apply.  The next time your business confronts a problem employee, evaluate:  what can the company do to reduce or eliminate the potential and magnitude of future problems.

SIDE STORY:  Back in the day — the Big 80s — I was an ocean lifeguard on Hollywood Beach, Florida.  The potential for drownings was high when weighed against the precaution of carefully watching my section of the beach/surf.

Ironically, the best lifeguards on our beach had the fewest saves.  Why?  Because a good guard quickly sees and understands a problem swimmer or bad surf or wind conditions.  This enables the guard to takes measures — moving a swimmer away from a rip current — before a rescue becomes necessary.  When company managers have the training and smarts to identify “rip currents” among employees, they too will prevent crises before they occur.

Carroll Towing applies to any number of situations in life. This week’s video pays tribute to the 29 men who died on November 10, 1975, aboard the Edmund Fitzgerald in Lake Superior. You’ve likely heard the great ballad by Gordon Lightfoot which chronicles the disaster. If you like the song, you will love this touching video (turn up the volume):