Fall 2008 - #11. The Public Policy Exception to At-Will Employment.

Author:by Herbert G. Odgen, Esq.

Vermont Bar Journal


Fall 2008 - #11.

The Public Policy Exception to At-Will Employment

The Vermont Bar Journal #175, Volume 34, No. 3 FALL 2008

The Public Policy Exception to At-Will Employmentby Herbert G. Odgen, Esq.

Public Policy and At-Will Employment

Definition of Public Policy

In Vermont, employers cannot fire workers in violation of public policy. Our Supreme Court adopted the following definition of public policy in 1986:

In substance, [public policy] may be said to be the community common sense and common conscience, extended and applied throughout the state to matters of public morals, public health, public safety, public welfare, and the like. It is that general and well-settled public opinion relating to man's plain, palpable duty to his fellow men, having due regard to all the circumstances of each particular relation and situation.

Sometimes such public policy is declared by Constitution; sometimes by statute; sometimes by judicial decision. More often, however, it abides only in the customs and conventions of the people-in their clear consciousness and conviction of what is naturally and inherently just and right between man and man. It regards the primary principles of equity and justice and is sometimes expressed under the title of social and industrial justice, as it is conceived by our body politic. When a course of conduct is cruel or shocking to the average man's conception of justice, such course of conduct must be held to be obviously contrary to public policy, though such policy has never been so written in the bond, whether it be Constitution, statute, or decree of court. It has frequently been said that such public policy, is a composite of constitutional provisions, statutes, and judicial decisions, and some courts have gone so far as to hold that it is limited to these. The obvious fallacy of such a conclusion is quite apparent from the most superficial examination. When a contract is contrary to some provision of the Constitution, we say it is prohibited by the Constitution, not by public policy. When a contract is contrary to a statute, we say it is prohibited by a statute, not by a public policy. When a contract is contrary to a settled line of judicial decisions, we say it is prohibited by the law of the land, but we do not say it is contrary to public policy. Public policy is the cornerstone-the foundation-of all Constitutions, statutes, and judicial decisions; and its latitude and longitude, its height and its depth, greater than any or all of them. If this be not true, whence came the first judicial decision on matter of public policy? There was no precedent for it, else it would not have been the first. (Pittsburgh, Cincinnati, Chicago & St. Louis Railway v. Kinney, 95 Ohio St. 64, 68-69, 115 N.E. 505, 507 (1916)).(fn1)

Earlier, our Court stated public policy is not static but still may void a contract:

It is said in Griswold v. Illinois Central R. R. Co., 90 Iowa, 265, that "public policy is variable; that the very reverse of that which is the policy of the public at one time, may become public policy at another time, and hence no fixed rule can be given by which to determine what is public policy; that the authorities all agree that a contract is not void as against public policy unless it is injurious to the interests of the public or contravenes some established interest of society."(fn2)

Anyone who is still tempted to say public policy can be defined exactly should heed our Court in State v. Barnett: "The term `public policy' being of such vague and uncertain meaning, and of such variable quantity, has frequently been said not to be susceptible of exact or precise definition. It is stated in State v. Bowman, 184 Mo. App. 549,553, 170 S.W. 700,701: `that one of the best definitions, perhaps, is that of Justice Story, which applied the term to that which `conflicts with the morals of the time, and contravenes any established interest of society.'"(fn3) Therefore, the Court in Barnett held that contract terms could be voided as against public policy only when "it could be said that they were injurious to the interests of the public or contravened some established interest of society."(fn4)

Examples of "clear and compelling public policy" violations that trump an at-will employment contract are given in Jones v. Keogh:

* dismissal for serving on a jury; * dismissal for filing a workers' compensation claim; * dismissal for serving on a jury; * dismissal for refusing to perjure onself.(fn5)

Typical examples in other jurisdictions are:

* refusing to participate in an illegal activity; * performing an important public obligation; * exercising a legal right or interest; * exposing some wrongdoing by the employer; * performing an act that public policy would encourage; * refusing to do something that public policy would condemn, when the discharge is coupled with a showing of bad faith, malice or retaliation.(fn6)

Vermont Cases

There are few Vermont Supreme Court cases regarding public policy exceptions to any area of contract law. The concept is old, however. In 1867, the Court voided a bond between the liquor commissioner and agents he appointed as against public policy.(fn7) In 1934, the Court listed "public policy" as one of the three grounds on which it could refuse to enforce a non-competition covenant.(fn8) Several Vermont cases, including all of the above except Payne, show when an employment contract will not be voided on account of public policy. In Jones v. Keogh,(fn9) a worker alleged she had been fired through bad faith and malice, and in retaliation for asserting rights to vacation and sick leave. The Court explicitly adhered to the employment at-will rule in Mullaney v. C. H. Goss Co.,(fn10) and declined to adopt the rule in Monge v. Beebe Rubber Co.,(fn11) which held that a firing motivated by bad faith, malice, or retaliation violated public policy. In Brower v. Holmes Transportation, Inc.,(fn12) the Court still seemed skeptical of the Monge rule. In Madden v. Omega Optical, Inc.,(fn13) the Court found no violation of clear and compelling public policy when an employer fired workers who refused to sign a non-competition agreement. Consistent with old cases,(fn14) public policy concerns are not implicated where employees "exercised merely private rights."(fn15)

The first successful Vermont public policy case regarding employment succeeded because the Court viewed the concept expansively. In Payne v. Rozendaal,(fn16) the Court held that age discrimination violated public policy even if it occurred before the legislature forbade it. The Court began by saying "under an `at will' employment contract, an employee may be discharged at any time with or without cause, `unless there is a clear and compelling public policy against the reason advanced for the discharge."(fn17) The Court then recognized that public policy in the employment context may be found in sources other than statutes and constitutions.(fn18) The Payne Court held that a compelling public policy is to prevent injuries to the public, especially in matters of public health.(fn19)

There are limits, however. In Adams v. Green Mountain R. Co.,(fn20) a fired employee claimed the employer's reason for firing was pretextual and won a jury verdict for firing in violation of public policy. The Court reversed, holding that the former employee failed to prove that employer fired her for reporting to her immediate supervisor a verbal and physical confrontation that former employee had with another supervisor. The reversal was not on account of the jury instruction, however, which read: plaintiff was entitled to judgment on her claim of retaliatory discharge in violation of public policy if she proved by a preponderance of the evidence that (1) she was engaged in activity protected by public policy; (2) defendant knew of the protected activity; (3) defendant fired her; and (4) the sole or principal reason for her discharge was that she had engaged in protected activity.(fn21)

This was borrowed from Robertson v. Mylan Laboratories, Inc.,(fn22) a Vermont Fair Employment Practices Act case, except that the fourth element in Robertson was merely "a causal connection between the protected activity and the adverse employment action."

Physicians and Ethical Codes

There is one Vermont Supreme Court case allowing an employee to go to trial on a public policy exception stemming from an ethical code, LoPresti v. Rutland Regional Health Services, Inc.(fn23) The Court noted: Other jurisdictions recognize that professional ethical codes can be an important source of public policy in employment matters involving employees who are subject to the mandates of such codes. Mariani, 916 P.2d at 524-25 (relying on state professional accountancy ethical codes as source of public policy in wrongful discharge case); Pierce v. Ortho Pharm., 417 A.2d 505, 513-14 (N.J. 1980) (accepting professional codes of ethics as source of public policy, but rejecting wrongful discharge claim of doctor who failed to prove that conduct requested by employer would lead to an ethical violation). In Pierce, the New Jersey Supreme Court observed that "[e]mployees who are professionals owe a special duty to abide not only by federal and state law, but also by the recognized codes of ethics of their professions. That duty may oblige them to decline to perform acts required by their employers." 471 A.2d at 512; see also Mariani, 916...

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