Wednesday, January 15, 2014

Goodbye Wrongful Demotion?

New ImageAs the Restatement of Employment Law heads towards  final approval by the American Law Institute, it seems destined to end as it began -- in considerable controversy.

Exhibit A: The early drafts  not only approved the tort of wrongful discharge in violation of public policy but extended it to "other material adverse action." So, for example, Tentative Draft 2, revised in July 2009, provided that the tort reached

an action that significantly affects compensation or working conditions or other action, short of discharge, that is reasonably likely to deter a similarly situated employee from engaging in protected activity.

I don't recall much controversy about this, and it makes sense, right? The animating concept for the tort is that employers ought not be able to deter employees from public-policy furthering conduct by employment-related sanctions.  Permitting suit for wrongful demotion is consistent with that notion. Plus, of course, the framing was essentially the same as the that used by the Supreme Court for Title VII retaliation cases in Burlington Northern v. White.

I was more than a little shocked, therefore, to open Council Draft 11 (December 2013) to find the tort cut back to reach only wrongful discharge. See 5.01.  Although constructive discharge remains actionable, cmt. c, wrongful discipline has been eradicated root and branch. 

The explanation?  The earlier version recognized that few cases had recognized wrongful discipline, but argued that the "better approach" was to allow "claims of wrongful discipline short of discharge to go forward, where such discipline is likely to deter" going forward with protected activity.

The explanation for the change?  One is that "the majority view of jurisdictions addressing the issue" refuses to extend the tort beyond discharge. Of course, the ALI is not bound to accept the majority view, but what's even odder is that the Reporter's Notes cite courts in 6 jurisdictions finding wrongful discharge actionable at common law (including two state supreme courts) and  6 (including one supreme court)  holding to the contrary  (once different decisions from the same jurisdiction are aggregated).   And, no there's not a trend: the most recent case, from West Virginia, approved a claim of wrongful withholding of wages).

It's not that I think that nose counting should be outcome determinative, nor have I undertaken my own review of the case law,  but it's hard to see, taking the Reporters to be accurate, that the proposed formulation is the majority rule. At worst, the division in authority allows the Institute to do what it is best at -- formulating the most appropriate rule.

So what's the policy explanation for the change? The course originally laid out is objectionable because it "would require courts to scrutinize routine employer action on pay, promotion, and the like without a specific legislative directive to proceed."  That's a striking passage because it reflects exactly what the public policy tort does with wrongful discharge -- create a tort without legislative direction.

If there's a difference between the two situations, then, it must be the fear that extending the tort would result in the proverbial flood of litigation.  But, if that's such a big risk, why have only 12  jurisdictions even addressed the question? And my recollection is that most commentators think this is a "no problem problem" because of the strong disincentives for suing one's current employer.

Finally, the rejected approach would essentially map on to Title VII retaliation law. Of course, there was "legislative direction" for a retaliation cause of action, but the Burlington Northern Court essentially looked to the logic of the provision to define what qualified as actionable retaliation.  The ALI should follow in the Court's footsteps, and revert to the earlier formulation.

Absent that, the whole notion of "protected activity" in the public policy tort arena becomes somewhat chimerical -- maybe we should speak of  "partially protected activity."


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What Charlie said.

Posted by: Alex Long | Jan 15, 2014 11:11:40 AM

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