Baldwin v. Sisters of Providence: Washington Gives at Will Employees a Gun With No Ammunition to Fight Against Unjust Dismissal

• Publication year: 1991

UNIVERSITY OF PUGET SOUND LAW REVIEWVolume 14, No. 3SPRING 1991

COMMENT

Baldwin v. Sisters of Providence: Washington Gives At Will Employees A Gun With No Ammunition To Fight Against Unjust Dismissal

Michael T. Zoretic

Nelson works in the computer sales department of X Corporation, a computer processing firm. He started out at the company as a delivery boy fifteen years ago, but through hard work and determination he has gradually advanced to his current position. Nelson does not have a formal contract with X Corporation establishing the length or conditions of his service, but he has always assumed that the company would never fire him as long as he continued to do a good job.

Mr. Leith, an executive at X Corporation, knows little about Nelson's long record of exemplary service. Leith does know, however, that he has promised his nephew, Tyler, a good paying job in the company. Although his nephew is unqualified for a computer sales position, Leith fires Nelson and gives Tyler the job.

Nelson is shocked. Although he has done nothing wrong, he finds himself unemployed with no way to support his family. He calls you and asks for legal help in getting his job back. As a legal practitioner in the state of Washington, what do you tell him?

Under current state and federal law,(fn1) the answer is quite simple: Nelson has no legal means of recourse. He is an "at will" employee and, as such, the employment relationship can be terminated by either party at any time for almost any reason. As will be shown, while the traditional at will doctrine(fn2) has been weakened by several exceptions, cases similar to the hypothetical above continue to fall through the cracks. The result is an arguably unfair termination that finds no remedy in Washington statutory or common law.

The Washington Supreme Court recently addressed the issues of at will employment and unjust dismissal in Baldwin v. Sisters of Providence in Washington, Inc.(fn3) In its decision, the court took a step forward by granting unjust dismissal plaintiffs greater procedural rights, but then rendered that progress largely meaningless by refusing to recognize substantive rights that would broaden the protections against unjust dismissal. The net result is that only the few unjustly terminated employees who are able to survive a summary judgment motion will benefit from the more equitable procedural burdens during trial. Thus, unfortunately, the courtroom doors remain closed to many other deserving employees whose terminations do not fit the substantive requirements for redress under the at will doctrine.

In Baldwin, the court addressed three main issues: one procedural and two substantive. Procedurally, the court wisely adopted a system of shifting evidentiary burdens for use in unjust dismissal suits. The shifting burdens provide an employee with a more realistic chance of reaching trial on the merits.

However, the court denied most at will employees a substantive basis for utilizing this procedural change by refusing to recognize the existence of an implied covenant of good faith and fair dealing in the at will employment relationship. The court's failure to recognize that employment at will is actually an employment contract, under which the parties should be subject to the same obligations of good faith as in ordinary contracts, was based on a flawed logic that used the employment at will doctrine to validate itself.

Although the court's flawed reasoning lead it to reject an implied covenant of good faith and fair dealing, it did expand the substantive rights of employees whose employers have promised that dismissal will be only for "just cause." The court authorized judicial review of an employer's determination that just cause for termination of an employee existed. Unfortunately, this substantive gain was undercut when the court held that an employer's good faith belief that it had just cause to dismiss an employee was sufficient to satisfy the just cause standard.

This Comment will explore the status of the employment at will doctrine and unjust dismissal actions following the supreme court's decision in Baldwin. First, Section I will explain the historical background of the employment at will doctrine and its steady erosion in the modern era. Next, Section II will provide an overview of the Baldwin case itself, including facts, procedural history, and general holdings. Sections III through V will explore the three major issues decided by the court in Baldwin: allocating burdens of proof in wrongful discharge suits; implied covenants of good faith and fair dealing in employment at will contracts; and the standard for determining when an employer has "just cause" for firing an employee. Finally, in Section VI, the author will suggest legislative action to correct the inadequacies of the post-Baldwin employment at will doctrine.

I. Historical Basis of Employment At Will

Roughly two-thirds of the American workforce are considered terminable at will.(fn4) The at will doctrine originated in the late 19th Century when American commentator Horace G. Wood stated that "a general or indefinite hiring is prima facie a hiring at will."(fn5) Although Wood's theory contradicted English common law(fn6) and was not supported by any American courts,(fn7) his proposition gradually gained nationwide approval.(fn8)

Wood's conception of the at will doctrine synthesized many of the legal and social theories of the late 19th Century: freedom of contract, laissez-faire economics, and mutuality of contract. Mutuality of contract, in which both the employer and employee could terminate the employment relationship at any time, was the argument most often advanced by courts to support the at will doctrine. The United States Supreme Court advocated this theory in Adair v. United States,(fn9) noting "[i]n all such particulars the employer and employe [sic] have equality of right, and any legislation that disturbs that equality is an arbitrary interference with the liberty of contract which no government can legally justify in a free land."(fn10)

The at will doctrine was ideally suited to the economic conditions extant during its emergence: rapid business expansion westward lured many employees away from their previous jobs, temporary agricultural jobs were still common, and most workers did not spend long periods working for a single employer.(fn11) By the beginning of the early 20th Century, however, the economic conditions had changed to the extent that employees were clearly disadvantaged by the at will rule.(fn12) Employees began to remain with the same company for long periods of time. In addition, periods of high unemployment hampered discharged employees from finding other jobs. Most importantly, rapid industrialization shifted power to large corporate employers, an event that virtually invalidated the idea of absolute freedom of contract.(fn13)

Courts and legislatures, faced with a changed economic setting and an employment principle ill-suited to the new reality, gradually placed limitations on the employment at will doctrine. The first attempts to limit the doctrine were made by the New Deal Congress, largely because the concept of at will employment had become so entrenched in the common law that courts were reluctant to modify or eliminate it. In 1935, Congress passed the National Labor Relations Act,(fn14) which prohibited certain employers from discharging employees who engaged in such acts as organizing, bargaining collectively, and striking.(fn15) Since then, Congress has legislated several other exceptions to the at will rule,(fn16) but all have dealt with particular classes of employees, such as union members, women, and minorities.(fn17) Conversely, although the courts have been more reluctant to join the fray until recently, the common law exceptions they have created have attacked the at will doctrine across the board without focusing on a particular class of employees.

A. Judicial Exceptions to Employment At Will

Courts, recognizing the severity of the at will doctrine, have created narrow exceptions to the rule that allow terminated employees to seek redress in specific situations. The most widely recognized exceptions are for public policy and implied-in-fact contracts.

1. The Public Policy Exception

A substantial majority of courts recognize an exception to the at will doctrine when the employer's discharge of an employee violates fundamental principles of public policy.(fn18) Under this exception, employees have a cause of action in tort for wrongful discharge if they are dismissed for activities that are deemed protected by public policy. This exception to the at will rule was explained in one of the earliest "public policy" cases, Peterman v. International Brotherhood of Teamsters.(fn19) In Peterman, an employee was fired following his refusal to commit perjury on behalf of his employer. The court stated that allowing an employer to discharge an employee for refusing to commit a crime would be "obnoxious to the interests of the State and contrary to public policy and sound morality."(fn20)

However, the Peterman court did not adopt an exception for public policy out of concern for the rights of the employee but to protect the state's interest in discouraging perjury. The court believed that allowing employers to fire employees for refusing to commit perjury would...