How To Reduce Liability Risks When Discharging Employees

The best way to reduce the liability risks associated with firing employees is to make sure that you hire good employees. But, even employers who screen very carefully during the hiring process will find themselves from time to time with employees they do not wish to retain. Here are some important things to keep in mind when deciding to let somebody go:

1. Employment at will is a myth. Although California law provides that employment is at will in the absence of a contrary agreement (see Labor Code section 2922), the reality is that you cannot fire someone for no reason. Because of the way the burden of proof is allocated in a lawsuit, a discharged employee generally need only show that he or she was performing competently in order to put the burden on the employer to show a legitimate reason for the discharge. We explained this in more detail a couple of years ago in a post entitled Layoffs Mean Lawsuits. When you decide to discharge somebody, make sure that you can articulate a good reason for doing so.
2. Document the reason before you discharge the employee. You are at a trial where a former employee testifies that she was fired a week after she complained about sexual harassment. The vice president of the department where she worked testifies that she had to let her go because everybody agreed that she was the worst employee they had ever hired. Cross-examination goes like this. "Q: Can you show me a single piece of paper that ever criticized the employee's performance? A: No, we don't do things that way." Is there much doubt about how the jury will vote? 
3. Evaluate employees regularly and tell them how to improve. Another trial. Same type of retaliation claim. The director of human resources testifies that the employee was let go because she was ten minutes or more late for work five times in the first six months that she worked at the company. Cross-examination goes like this: "Q: Was the employee ever written up for being late? A: No. Q: After the employee started work, did you ever tell her that she could be fired for being late? A: No, it's in the policy posted on the employee bulletin board--five lates means you can be fired. Q: Did you ever go over the policy with her? A: No, that's her responsibility. Q: Did it matter to you that she was late the fifth time because her son came down with the flu? A: No. The policy is the policy." How much better the case would be for the company if (1) the policy were in an employee handbook that the employee acknowledged having reviewed in writing, (2) the first time she was late, the employee's supervisor sat down with her and explained the importance of the policy and asked whether there was a reason she could not get to work on time, (3) the second time she was late, there was further counseling and a note in her personnel file, (4) the third time, she received a written warning, and (5) the fourth time she got a written final warning that the next late would result in termination.
4. Consider a severance agreement. Instead of just letting the employee go, you could offer something extra in return for a release of all liability -- another few weeks of pay, a couple of months extension on medical benefits. With such an agreement, you have an ironclad defense to any lawsuit the employee might try to pursue. This will not work every time. Sometimes, offering a severance package will get the employee wondering whether he or she might have a valuable claim that is worth a lot more, leading him or her to consult an attorney and file a lawsuit.

May Employers Base Employment Decisions on Off-Duty Conduct?

Three teachers have recently been in the news for their extracurricular activities. A Philadelphia high school teacher was suspended for complaining on her blog that her students acted like "rude, disengaged, lazy whiners." A Florida high school football coach was fired for sending racy pictures to his non-student girlfriend. Another Florida teacher was fired for posting to Facebook that gay marriage was a sin and that same-sex unions were a cesspool. See Teachers Under The Morality Microscope by Jonathan Turley in the Los Angeles Times. These and other cases raise questions about the legal limits on an employer's ability to make employment decisions based on off-duty conduct.

Private Employers

Under the at will presumption of Labor Code section 2922, a private employer may discharge an employee for any reason, so long as it is not an illegal reason. Thus, in the absence of a statutory bar, an employer may base discharge on off duty conduct. For example, even though tobacco use is lawful, an employer could require its employees to refrain from tobacco use. (For an example of an unsuccessful effort by a smoker to challenge his termination, see Rodrigues v. EG Systems, Inc., 639 F. Supp. 2d 131 (D. Mass. 2009).) In reaction to that possibility, some states (not including California) have enacted protections for tobacco-using employees. (See this compilation by the National Conference of State Legislatures.)

Although the language of California Labor Code section 96(k) appears to protect employees from adverse action based on "lawful conduct occurring during nonworking hours away from the employer's premises," it has been interpreted to apply only to conduct that already has constitutional protection. See Attorney General Opinion No. 00-303 (10/10/2000); Barbee v. Household Automotive Fin. Corp., 113 Cal. App. 4th 525, 6 Cal.Rptr.3d 406 (2003); Grinzi v. San Diego Hospice Corp., 120 Cal. App. 4th 72, 14 Cal. Rptr. 3d 893 (2004).

California Labor Code section 432.7 bars employers from taking adverse action based on any arrest or detention that does not result in a conviction, but allows them to inquire about an arrest for which the employee or applicant is out on bail or on his or her own recognizance pending trial. Thus, the employer may base adverse action on results of its own investigation of the facts surrounding the incident for which the employee was arrested. Cranston v. City of Richmond, 40 Cal.3d 755, 710 P.2d 845, 221 Cal. Rptr. 779 (1985).

California Labor Code sections 1101 and 1102 prohibit employers from acting against their employees based on their political beliefs and activities. Under those provisions, a newspaper editor who was fired after public stating his support for a mayoral candidate had a cause of action for wrongful termination. Ali v. L.A. Focus Publication, 112 Cal.App.4th 1477, 5 Cal.Rptr.3d 791 (2003).

As we explained in a previous blog entry, posting comments online about one’s employment may be protected under the National Labor Relations Act. Basing action on information from an employee's off duty online comments may also violate privacy and wiretapping laws. See, for example, Pietrylo v. Hillstone Restaurant Group, Case No. 06-CV-5754 (D.N.J. Sep. 25, 2009), where a jury awarded $3,400 to two employees fired after management got log in to their private MySpace chat group.

An employee may claim that the employer punishes off duty conduct differently based on a protected characteristic. For example, after Delta fired a female employee who posted suggestive photos of herself in a Delta uniform on her "Queen of the Sky" blog, she claimed that the airline did not treat male employees similarly. Simonetti v. Delta Airlines, Inc., Case No. 05-cv-2321 (N.D. Ga. 2005). Her case was dismissed without prejudice during Delta's bankruptcy proceedings, and never decided on the merits.

Public Employers



As a general rule, public employees are not at will, but may only be discharged for good cause. Their statutory right to continued employment establishes a property right that is protected by due process. Skelly v. State Personnel Bd., 15 Cal.3d 194, 539 P.2d 774 (1975). These principles impose additional restrictions on public employers who seek to discharge employees for off duty conduct.

Generally, a public employer must show that the off duty conduct is rationally related to the employee's particular job, and would result in impairment or disruption of public service. For example, the U.S. Supreme Court upheld the discharge of a police officer who sold video of himself stripping and masturbating online, because his off duty conduct was "detrimental to the mission and functions of the employer."
City of San Diego v. Roe, 543 U.S. 77 (2004). By contrast, a male correctional officer could not be terminated for wearing female clothing away from work, because there was no evidence that his performance of his job was impaired. Yancey v. State Personnel Bd., 167 Cal.App.3d 478, 213 Cal. Rptr. 634 (1985).

Although criminal convictions may constitute good cause for termination of a public employee, the employer may not rely on the conviction if it resulted from a nolo contendere plea. County of Los Angeles v. Civil Service Com., 39 Cal.App.4th 620, 46 Cal.Rptr.2d 256 (1995). Instead, the employer must introduce evidence that independently establishes the wrongdoing.

Does It Matter Whether Your Employees Are At-Will?

Some private employers worry whether they have done enough to preserve their at-will employment relationship with their employees. Others make risky decisions based on the unjustified belief that the at-will employment doctrine will protect them from liability. (Public employers do not face these issues, because their employees enjoy statutory and constitutional rights to their jobs. In unionized workplaces, collective bargaining contracts typically require just cause for discharge of union workers.)

In California, employment is presumed to be at-will, under Labor Code section 2922. That means that the employment relationship may be terminated at any time by either the employer or the employee. Even if the employer does not expressly agree to some other relationship, it may create an implied agreement not to discharge excerpt for good cause based on its actions, as explained in Foley v. Interactive Data Corp., 765 P. 2d 373 (1988).

In the absence of an express or implied agreement not to discharge except for good cause, the employer may discharge for any reason or for no reason, so long as it is not an illegal reason. That is a substantial limitation on the employer's discretion to end the employment relationship, because of the great number of illegal reasons under federal and California law. You cannot fire someone because of a protected characteristic, such as race, sex, disability, ethnicity, national origin, religious belief, age, or sexual orientation. You cannot fire someone in retaliation for complaining unlawful discrimination or harassment. You cannot fire someone in violation of public policy, such as whistle-blowing. And so on.

The way that the burdens of proof are allocated in employment lawsuit further diminishes the value of the at-will doctrine. Under the McDonnell-Douglas burden-shifting rule, the plaintiff bears the minimal burden of showing that he or she has a protected status (such as race, having complained about discrimination, or whistle-blowing), was subjected to adverse employment action, and some other minimal evidence that the protected status has a causal connection with the adverse action. For example, in a retaliation case, it is enough for the plaintiff to show that he or she complained and was fired, and that the firing came closely on the heels of the complaint. See Arteaga v. Brink's, Inc., 163 Cal. App. 4th 327 (2008). Once the plaintiff satisfies that minimal burden, the burden shifts to the employer to provide a legitimate reason for its action.

Because it is so easy for employees to challenge discharges in court, it is not safe to rely on the at-will doctrine to avoid liability in a lawsuit. Employers must make sure that there is a documented, legitimate basis for every discharge decision.