Recovery Theories for Wrongful Termination

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Unless employees are working pursuant to an employment contract or a collective bargaining agreement, most employees are "at-will.". This means that the employee may be fired for most any reason or for no reason. It also means that the employee is free to leave his or her employment without legal recourse.

Although an at-will employee may have a cause of action against an employer who fires him or her in violation of state or federal law (i.e. anti-discrimination laws, whistleblower protection laws), the employee usually has no legal recourse for being fired, even if the firing was unfair or unwarranted. Because of this harsh result, many states have begun to chip away at the at-will doctrine, providing limited causes of action for wrongful termination, even where the firing did not violate a specific state or federal law. These remedies, though not abrogating the at-will employment doctrine, soften its edges, and allow employees to recover damages against employers who act in particularly egregious ways. This article summarizes two of the main theories under which at-will employees sometimes recover in non-statutory wrongful termination actions: breach of implied good faith and fair dealing and violation of public policy.

Violation of Public Policy

Although an employee who is discharged because of his or her race, sex, religion, national origin, or disability, for example, will have a remedy against an employer under state and federal statute, some violations of public policy are not clearly spelled out by statute. In cases where an employer clearly violates an important public policy in firing an employee, most states will allow the employee to recover against the employer in a wrongful termination action. In such cases, punitive damages, in addition to back pay or front pay, may be awarded. Montana has codified this primarily judge-made law by providing an express legal remedy for employees who are fired in contravention of established public policy. In some states, however, courts are hesitant to chip away at the at-will doctrine at all; they refuse to allow any wrongful discharge actions.

Examples of public policy violations that often result in recoveries by terminated employees include:

• Firing an employee for refusing to violate the law
• Firing an employee for reporting a violation of the law by the employer that could or did harm the public
• Firing an employee for exercising a statutory or constitutional right
• Firing employees because they answered a subpoena or attended a civil deposition.

Breach of Implied Covenant of Good Faith and Fair Dealing

In addition to providing a wrongful discharge remedy where an employer has violated public policy, a fewer number of states allow a wrongful termination claim by an at-will employee based upon the theory of a breach of an implied covenant of good faith and fair dealing. In such cases, the employee alleges that the employer breached an implied covenant of good faith and fair dealing by firing him or her.

Sales employees have been most successful in these actions, often prevailing against employers after showing that they were fired because the employers wanted to avoid paying commissions to them. Similarly, employers who fire employees so that they do not have to pay end-of-year bonuses may also face such a claim. In these cases, the employees are usually entitled to recover the unpaid commissions or bonuses. They are not, however, usually entitled to punitive or other damages.