Punitive Damages in Wrongful Discharge Cases
| Publication year | 1986 |
| Pages | 658 |
1986, April, Pg. 658. Punitive Damages in Wrongful Discharge Cases
Punitive damages are a substantial risk to the employer in wrongful discharge cases. Gone are the days when the employment relationship was considered a relationship of status. A relationship that used to be terminated at will now poses a number of problems for the discharged "servant." The courts and the legislature have recently rallied to the defense of the employee, and modified what both apparently have determined as the inequities associated with arbitrary dismissal.
Nearly every state has placed some legislative limitations on the power of an employer to discharge an at-will employee. Many limitations are well known to attorneys practicing employment law and include prohibiting discrimination based on religion, sex, age, race, political affiliation and union membership. Many states have prohibited discharge of employees for refusal to work under unsafe conditions. Moreover, "whistle blower" protection statutes exist which prohibit discharge of employees for reporting the violation of laws and for filing worker's compensation claims.
Several approaches have been used by the legislature and the courts to modify the at-will rule. These approaches generally fall into three categories: the public policy exception, breach of covenant of good faith and implied contract rights. There are also the more traditional torts including intentional infliction of emotional distress, contract interference, fraud, defamation and invasion of privacy. This article discusses remedies available to the at-will employee in wrongful discharge cases.
Courts generally prohibit discharge of an at-will employee if such a discharge violates public policy.(fn1) A clear example was a case in which there was an attempt to discharge a union employee for refusing to commit perjury before a legislative committee.(fn2) In Colorado, the Colorado Court of Appeals has withheld recognition of the public policy exception on two occasions.(fn3) However, an appropriate set of facts may have resulted in a different holding. The Court of Appeals indicated that a set of facts involving "specifically enacted rights and duties," as opposed to "broad general statements of policy," might lead to a recognition of the public policy exception.(fn4) Additionally, although making no specific reference to a public policy exception, the U.S. District Court for the District of Colorado held in an age discrimination case that there was a private right of action in spite of a provision for administrative remedies.(fn5)
Recognizing the public policy exception to the at-will rule, many courts hold that a wrongful discharge case sounds in tort or in both tort and contract. This is significant to the measure of damages, since courts holding that a wrongful discharge case sounds in tort allow for recovery of punitive damages upon a finding of malice, fraud or recklessness. Punitive damages are seldom available in contract cases, although Colorado may cross new frontiers concerning punitive damages in such cases (see below).(fn6)
The Restatement (Second) of Contracts(fn7) states that every contract imposes on each party a duty of good faith and fair dealing in the performance and enforcement of the contract. Many claims are currently filed with courts claiming bad faith dealing when one party claims it was unfairly injured. Until recently, a defendant's exposure has been liability for only contract-measure of damages. The law had its inception in insurance cases. However, a breach of the covenant in employment cases may now constitute a tort exposing a defendant to punitive damages.
Colorado appears not to have adopted the doctrine that termination in bad faith of an at-will employee results in compensatory damages as well as punitive damages. However, without applying a bad faith analysis, Colorado courts have required that if an employee is to be discharged, it must be for cause.(fn8) This is not to say that every at-will employee who is discharged without cause subjects an employer to a damage suit; it merely means a claim may result from a wrongful...
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