Chapter 12 - § 12.3 • MARTIN MARIETTA V. LORENZ — THE TORT AND ITS ELEMENTS

• Jurisdiction: Colorado

§ 12.3 • MARTIN MARIETTA V. LORENZ — THE TORT AND ITS ELEMENTS

§ 12.3.1—The Lorenz Decision And The Rationale For The Cause Of Action

Given the progression in Colorado case law from Lampe to Cronk I, it came as no surprise that the supreme court recognized a claim for public policy wrongful discharge in Martin Marietta Corp. v. Lorenz, 823 P.2d 100 (Colo. 1992). Reversing a directed verdict for the employer, the court held that the plaintiff stated a claim where he alleged that he was fired for refusing to participate in his employer's fraud in its performance of a contract with NASA. He relied on the general federal fraud statute, 18 U.S.C. § 1001. Lorenz contains the most extensive discussion of the tort by the supreme court, which discussed at length the underlying legal and policy bases for this type of wrongful-discharge claim.

The court first compared public policy wrongful discharge to the well-settled doctrine that contracts violative of public policy cannot be enforced. "In light of Colorado's long-standing rule that a contract violative of public policy is unenforceable, it is axiomatic that a contractual condition, such as the terminability condition of an at-will employment contract, should also be deemed unenforceable when violative of public policy." Lorenz, 823 P.2d at 109. Having disposed of the conflict between public policy wrongful discharge and the employer's rights under the at-will doctrine, the court went on to explain that "[a] corollary of this policy is that an employee, whether at-will or otherwise, should not be put to the choice of either obeying an employer's order to violate the law or losing his or her job." Id.

The court then focused on the context of public duties such as jury service and job-related rights such as filing a workers' compensation claim. According to the court, extending the tort to these situations "is entirely consistent with its underlying rationale, which is to prohibit an employer from placing an employee in the position of keeping a job only by performing an illegal act, foresaking a public duty, or foregoing a job-related right or privilege." Id.⁵

The court in Lorenz recognized that employers have legitimate concerns with employee insubordination. To balance the parties' rights, it added a new requirement not previously imposed by the court of appeals: actual or constructive knowledge by the employer that the employee's refusal was based on a reasonable belief that the act would be unlawful. Id. at 109-110.

§ 12.3.2—Elements Of The Tort — As Applied Before, In, And Since Lorenz

The supreme court in Lorenz declared that, to establish a prima facie case of wrongful discharge, the employee must prove:

that the employer directed the employee to perform an illegal act as part of the employee's work related duties or prohibited the employee from performing a public duty or exercising an important job-related right or privilege; that the action directed by the employer would violate a specific statute relating to the public health, safety, or welfare, or would undermine a clearly expressed public policy relating to the employee's basic responsibility as a citizen or the employee's right or privilege as a worker; and that the employee was terminated as a result of refusing to perform the act directed by the employer. To these elements we add the additional requirement that the employee present evidence showing that the employer was aware, or reasonably should have been aware, that the employee's refusal to comply with the employer's order or directive was based on the employee's reasonable belief that the action ordered by the employer was illegal, contrary to clearly expressed statutory policy relating to the employee's duty as a citizen, or violative of the employee's legal right or privilege as a worker.

Id. at 109. The Lorenz elements have been incorporated into the Colorado Jury Instructions. See CJI-Civ. 31:12 (refusal to commit an unlawful act); 31:13 (exercising a right or duty) (CLE ed. 2014). The claim is not cognizable against an individual officer acting within the scope of employment in terminating the employee. Ayon v. Kent Denver School, 2013 U.S. Dist. LEXIS 59925 (D. Colo. April 26, 2013); Spaziani v. Jeppesen Sanderson, Inc., 2015 WL 5307971, at *3 (D. Colo. Sept. 11, 2015).

Directing the Commission of an Illegal Act

Following Lorenz, the supreme court offered further explanation of a claim based on direction to perform an illegal act in Rocky Mountain Hospital & Medical Service v. Mariani, 916 P.2d 519 (Colo. 1996). There, the plaintiff, an accountant, alleged that she had been fired because she refused to falsify financial information. The employer asserted that it had given no specific illegal directive. The court disagreed, finding that the plaintiff's supervisor had told her to identify benefits of a proposed merger between the defendant (a health insurance carrier) and other carriers in Nevada and New Mexico. When the plaintiff explained to her supervisor that she could find no benefits to the merger, the supervisor replied that she should not be working for the company. Taken in the light most favorable to the plaintiff, the court held this evidence could persuade a jury that she was directed to identify (nonexistent) benefits of the merger or face termination. Thus, Mariani supports the proposition that an illegal employer directive can be inferred from communications between management and the employee. See also Jones v. Stevinson's Golden Ford, 36 P.3d 129, 133 (Colo. App. 2001) (illegal directive could be inferred where employee testified that his supervisor expected him to "upsell" fuel injector flushes on every car he serviced, even when this wasn't necessary, in violation of the Motor Vehicle Repair Act).

The Mariani court also addressed what an employee must do in refusing to perform an illegal directive. No outright refusal is required. A plaintiff satisfies the refusal component of Lorenz if the plaintiff objects to illegal practices and then by inaction declines to participate. See also Jones, 36 P.3d at 133. However, Mariani did not address whether an employee's mere objection to illegal practices — i.e., "whistleblowing" — satisfies the second and third elements of Lorenz.

Prohibiting Exercise of a Public Duty or Work-Related Right or Privilege

Lorenz does not require a plaintiff to prove an employer directive in cases involving the exercise of a public duty or a work-related right or privilege. Instead, the court, without further explanation, stated that an employer could not prohibit the plaintiff from exercising the duty or privilege in question. 823 P.2d at 109. In the typical case, this element will be inferred from an employer's firing of a plaintiff after the employee exercises the duty or privilege, e.g., files a workers' compensation claim. The Colorado Jury Instructions, in fact, merge this element with the causation requirement and simply require the plaintiff to prove discharge because of engaging in protected activity. CJI-Civ. 31:13, Notes

on Use (CLE ed. 2016).

In some instances, the public-duty theory overlaps with claims based on an employee's refusal to violate the law. Employees in these cases contend that they are under a duty to oppose their superiors' unlawful conduct and that they need not prove that the employer expressly directed them to violate the law. For example, in Cronk II, the plaintiffs contended that a criminal statute imposed on them a duty to oppose illegal favoritism by their employer. Cronk v. Intermountain Rural Elec. Ass'n, 1992 Colo. App. LEXIS 228 (Colo. App. 1992). The court of appeals, in an opinion not selected for official publication, upheld a jury verdict for the plaintiffs. The court pointed out that the jury had been instructed to find for the plaintiffs only if they were fired for exercising a statutory right or duty. Under these circumstances, the jury verdicts "necessarily subsume[d] findings that . . . a statutory duty was implicitly prohibited by IREA, thus comporting with Lorenz." Id. at *13. See also Webster v. Konczack Corp., 976 P.2d 317, 320 (Colo. App. 1998) (upholding a claim based on a state regulation requiring casino employees to report "suspected" violations of the statute to the Division of Gaming).

Recognized Public Policy

The public policy relied on by an employee must both derive from an acceptable source and affect the public interest.

Statutes are the most commonly cited source of public policy. The supreme court in Mariani stated in dicta that "public policy must be clearly mandated such that the acceptable behavior is concrete and discernible as opposed to a broad hortatory statement of policy that gives little direction as to the bounds of proper behavior." Mariani, 916 P.2d at 525. The court in Lorenz recognized — and it is often reiterated by the court of appeals — that a general statutory pronouncement does not support a claim. 823 P.2d at 110. Applying this standard, the plaintiff in Lorenz successfully invoked 18 U.S.C. § 1001, a federal criminal statute that prohibits the submission of fraudulent reports to the government. 823 P.2d at 110-11.⁶ See also Boone v. MVM, Inc., 2007 U.S. Dist. LEXIS 11178 (D. Colo. Feb. 15, 2007) (defense contractor employee stationed in Iraq refused to prepare a false report, invoking 18 U.S.C. § 1001(a)). Similarly, the court of appeals in Cronk I approved a claim based on three statutes: C.R.S. § 40-6-103(2), which requires testimony under penalty of perjury before the PUC; C.R.S. § 40-7-106, which prohibits employees from aiding and abetting the violation of any public utility statute; and C.R.S. § 40-3-106, which prohibits utilities from awarding preferences to developers. 765 P.2d at 622.

A public policy claim also can be based on an overall statutory scheme, as opposed to any particular provision, as long as the statute as a whole clearly mandates certain behavior. Thus, in Lathrop v. Entenmann's, Inc., the...