Righting Wrongful Discharge: A Recommendation for the New York Judiciary to Adopt a Public Policy Exception to the Employment- At-Will Doctrine

• Author: Nadjia Limani
• Position: J.D. (2006), Benjamin N. Cardozo School of Law.
• Pages: 309-337

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The author would like to thank the entire staff of the Cardozo Public Law, Policy and Ethics Journal for their outstanding effort in publishing this Note. The author would like to extend special thanks to everyone whose love and support made this Note possible, especially my parents, Fuad and Martha, and my brother, Errol.

"Work joyfully and peacefully, knowing that right thoughts and right efforts will inevitably bring about right results."¹

Introduction

The notion that employees who perform productively expect to be rewarded for their efforts is firmly established among American workers.² One of the most fundamental and established beliefs of American workers is that job security is one of these reciprocal benefits.³ According to a survey conducted by the Peter D. Hart Research Association, "[a] huge proportion of workers-85 percent-say the right to job security unless an employer has good reason for termination is essential or very important."⁴ Expectations "may not be written into any formal agreement but operate powerfully as determinants of behaviour."⁵ Employees engage Page 310 in a "psychological contract" with their employers based on mutuality and reciprocity.⁶ A breach in this "psychological contract" results in "feelings of injustice, deception, or betrayal" among employees.⁷ Since discharging an employee is undoubtedly harmful,⁸ a worker should be guaranteed an actionable claim when the basis for termination violates public policy. In order to be fair to employers, who are entitled to a certain level of managerial discretion, the determination of whether or not a discharge violates public policy should take into consideration the requisite level of discretion that employers must retain.⁹

In the United States, an employer can discharge an employee without notice or cause as long as the employment contract does not specify an employment term.¹⁰ This rule, widely known as the employment-at- Page 311 will doctrine, has a long-standing history in American jurisprudence;11 its application, however, has been subject to both statutory and judicial limitations, most notably a judicial refusal to acknowledge a public policy exception to the employment-at-will doctrine.¹²

Since retaliatory terminations often contravene public policy, the New York judiciary must acknowledge a public policy exception to the employment-at-will doctrine.¹³ Through an integrated analysis of the origin of the doctrine, the development of the public policy exception in American jurisprudence, and the judicial tests used to implement the exception in various jurisdictions, this Note will craft an exception to the employment-at-will doctrine recommended for the New York judiciary.

I History of the Employment-At-Will Doctrine

English common law presumed a duration of one year into all employment contracts failing to specify a term.¹⁴ The rationale for this rule was etched in the doctrine of master and servant, whereby the servant enjoyed a certain amount of loyalty from his master, who was held Page 312 to a duty of responsibility in terms of his servants.¹⁵ Rebutting the one- year presumption required an examination of the customs present in the industry and the "mutuality of obligation between the parties."¹⁶ English courts emphasized the mutuality of the presumption between parties; if the employer was held to an annual term of employment, then the employee was similarly bound.¹⁷ In husbandry, the advantages of the one-year rule were readily apparent: a master's objectives might be hindered if a servant was allowed to leave shortly before the harvest, and injustice might result when a servant who worked through the harvest was then discharged before winter.¹⁸

In his 1877 treatise, Horace Gray Wood posited that American courts did not presume a one-year term in employment contracts mum on the subject.¹⁹ Wood's proposition provided the basis for the employment-at-will doctrine,²⁰ whose conventional rhetorical form is as follows: "in the absence of a written contract of employment for a defined duration, an employer can terminate an employee for good cause, bad cause or no cause at all."²¹ The doctrine is rooted in the assumption of equal bargaining power on the part of the employer and the employee,²² Page 313 giving both the freedom to execute and terminate working arrangements without the presumption of temporal restrictions.²³

Although the employment-at-will doctrine did bestow a measure of freedom onto employees, the harsh reality of unequal bargaining power in the workplace left unjustly terminated workers without a remedy.24 Employers were free to abuse their leverage vis-'a-vis employees and swell the number of wrongful terminations.²⁵ Because courts routinely enforced the employment-at-will doctrine, workers were left with no actionable claim for wrongful discharge.²⁶

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Although the employment-at-will doctrine for a time sounded the death-knell to most wrongful termination suits,²⁷ society's changing view of the employer-employee relationship in the mid-twentieth century questioned the near-universal application of the doctrine. Commentators began questioning the validity of the doctrine's justification as society began to construe the employer-employee relationship as a situation where employees were financially dependent on their employers and were, therefore, bereft of bargaining power.²⁸ Responding to this asymmetry, Congress passed the Civil Rights Act of 1964, which protected employees from wrongful discharge on the basis of their race, color, religion, sex, or national origin.²⁹ In addition to the statutory limitations on the right of absolute discharge, commentators contended that in situations where an employer had terminated an employee in violation of a state public policy, an exception was needed to limit the doctrine's reach.³⁰ In articulating the rationale behind the public policy exception to the employment-at-will doctrine, the Supreme Court of Page 315 Connecticut asserted that "the myriad of employees without the bargaining power to command employment contracts for a definite term are entitled to a modicum of judicial protection when their conduct as good citizens is punished by their employers."³¹

II Evolution of the Public Policy Exception to the Employee-At-Will Doctrine

Under a system that categorically applies the employment-at-will doctrine, employers wield the absolute right to terminate their employees.³² Strict application, though, disregards the harmful effects of termination on the discharged employee.³³ An exception to the doctrine when a termination violates public policy, however, may mitigate some of these effects.³⁴

Although state courts had generally been hesitant to recognize civil actions for wrongful discharge based on exceptions to the employment- at-will doctrine, California became the first jurisdiction to recognize a public policy exception to the doctrine in 1959.³⁵ In Petermann v. Int'l Brotherhood of Teamsters,³⁶ an employee was hired by a union as a business agent and was assured by the union's secretary-treasurer that his employment would continue as long as his work remained satisfactory. Sometime thereafter, the employee was subpoenaed to testify before the Assembly Interim Committee on Governmental Efficiency and Economy of Page 316 the California legislature.³⁷ The employee claimed that the union had asked him to include lies in his testimony; when he refused to lie, he was terminated.³⁸ In a revolutionary decision, the California appellate court found "the right to discharge an employee under such a contract may be limited by statute or by considerations of public policy."³⁹ The court went on to hold that the public policy interest against perjury could limit an employer's right of absolute discharge. Further, the plaintiff was found to have stated a cause of action for wrongful discharge and was entitled to "civil relief as a consequence thereof."40 Even though the court cautiously characterized public policy as a term that is not easily defined,⁴¹ the Petermann decision was paradigmatic for the judicial crafting of a public policy exception to the employment-at- will doctrine.⁴² The court used a state statutory provision to locate a clear public policy that provided a basis under which the terminated party could seek an action for wrongful discharge.⁴³

During the fourteen years following the Petermann decision, courts in twenty-two jurisdictions considered the public policy exception and all confronted the same fundamental difficulty: defining "public policy."⁴⁴ In 1980, the Connecticut Supreme Court framed the determination as Page 317 one of distinguishing between actionable cases that involve public policy and non-actionable cases which should be left to the employer-employee relationship.⁴⁵ In Sheets v. Teddy's Frosted Foods, Inc.,46 the employee claimed that he was terminated due to his refusal to ignore mislabeling on product labels. The court held that when the basis for the termination of the employee "contravenes a clear mandate of public policy," an action for wrongful discharge may be brought against the employer.⁴⁷

In maintaining the precedent set forth in various other jurisdictions, the Connecticut Supreme Court kept the public policy exception narrow by restricting it to the case's particular facts.⁴⁸ This was the preferred method of implementing the public policy exception, until the Illinois Supreme Court adopted one of the broadest public policy definitions to date in...