California Wrongful-Discharge Tort

Closer Look:
The Courts Continue to Exhibit Judicial Activism with Steady Expansion of the State’s Wrongful-Discharge Tort

Daily Journal Extra – Nov 11, 2002
Stephen Greene and Joshua Henderson
© The Daily Journal Corporation. All rights reserved.

In Closing Column

California recognizes an exception to the rule of employment at will by permitting dismissed employees to sue in tort for wrongful discharge in violation of public policy. This tort permits recovery of compensatory damages.

To avoid free-wheeling judicial expansion of this tort, the California Supreme Court requires that any asserted public policy must be supported by a provision in a federal or state constitution, statute, or regulation, must benefit the public rather than simply serving the interests of the plaintiff, must have been well-established at the time of the discharge, and must be fundamental and substantial.

By thus preventing judges from relying on personal notions of the public good, these requirements seek “to avoid judicial interference with the legislative domain.” See Stevenson v. Superior Court, 16 Cal.4th 880, 889 (1997).

Two recent California appellate decisions suggest that these requirements are failing in their purpose. In Phillips v. St. Mary Regional Medical Center, 96 Cal.App.4th 218 (2002), the court upheld a retaliatory discharge claim against a nonprofit religious corporation.

The plaintiff’s protected activity was filing an administrative complaint of employment discrimination under the Fair Employment and Housing Act. The court upheld the retaliatory discharge claim even though the act, at the time of the dismissal, exempted religious entities from liability. See v. Methodist Hosp., 22 Cal.4th 1108 (2000), which held that recent FEHA amendments affecting the exemption did not apply retroactively.

The court found support for the wrongful discharge claim by noting that Title VII, unlike the act at the time, did cover exempt religious entities. The court reasoned that federal policy as expressed in Title VII could support a wrongful discharge claim even though that federal policy contradicted state policy, as expressed in the FEHA.

The court also found support for the claim in the California Constitution, even though it mentions only sex, race and other discrimination and says nothing about retaliation. The Phillips court justified its action as “afford[ing] the plaintiff the maximum opportunity to vindicate his civil rights.” Phillips.

The judicial activism reflected in the Phillips decision is not an anomaly. Another recent Court of Appeal decision, Grant-Burton v. Covenant Care Inc., 99 Cal.App.4th 1361 (2002), reflects the same judicial tendency to expand public policies to support wrongful discharge claims.

Sharron Grant-Burton, a nursing facility employee, told other employees that she had not received a bonus because her supervisor did not believe in them. When her supervisor heard of her comments, Grant-Burton was fired. Her wrongful-discharge claim invoked the public policy expressed in California Labor Code Section 232, which forbids an employer to dismiss an employee for disclosing the amount of her “wages.”

To support its conclusion that Section 232 advances a truly public policy, and not just private interests, the court relied on the National Labor Relations Act and the parallel state statute, Labor Code Section 923, noting that the act protects concerted employee activity and expresses a public policy in favor of employee discussions of satisfactory wages.

The court also used the labor relations act – and its broad application to any concerted activity involving employee compensation – to support the court’s broad interpretation that “wages” in Labor Code Section 232 covers the bonus Grant-Burton had discussed with her colleagues.

In relying on the labor relations act, the court overlooked the doctrine of the act’s pre-emption, which deprives courts of jurisdiction over claims arising out of unfair labor practices. See San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959).

In Garmon, the Supreme Court held that, when an activity is arguably protected or prohibited by the act, courts “must defer to the exclusive competence of the [National Labor Relations Board] if the danger of state interference with national policy is to be averted” and that activity may not form the basis of a judicial claim. Garmon.

By enacting the labor relations act, Congress granted to the board primary and exclusive jurisdiction over any matters arguably protected or prohibited by the act, reasoned the Garmon court, and thereby deprived both state and federal courts of jurisdiction to determine those matters. Hayden v. Reickerd, 957 F.2d 1506 (9th Cir. 1991).

Because discussing wages among employees is NLRA-protected concerted activity, whether the employees are unionized or not, dismissing an employee for engaging in this activity is an unfair labor practice under the act.

Claims arising from a dismissal in these circumstances are subject to Garmon pre-emption and the labor relations board’s exclusive jurisdiction. For example, Rodriguez v. Yellow Cab Cooperative Inc., 206 Cal.App.3d 668 (1988) (pre-emption of state law claims of retaliation for organizing a union and filing unfair labor practice charges).

If Grant-Burton claimed retaliation for engaging in concerted activity, the court would have had no jurisdiction to determine the matter. Yet the court relied on the act as the public policy validating her claim.

The ironic consequence of reaching for the act as a basis for decision, therefore, is that the court may have demonstrated the lack of jurisdiction over the case.

The court seems to have realized this when it modified its original opinion by adding a footnote, 99 Cal.App.4th 1378, fn. 2, acknowledging that “depending on the circumstances, federal law may preempt a state law claim.” The trial court is to address the issue on remand.

Phillips and Grant-Burton are but two recent examples of judicial creations of public policy to maximize a plaintiff’s opportunity to vindicate his or her civil rights. A more modest judicial role would be to rely on the plain text of the constitutional, statutory and regulatory provisions that alone qualify as public policy for purposes of the tort of wrongful discharge.

Stephen Greene practices employment law with Seyfarth Shaw in Sacramento. Joshua Henderson, formerly of Seyfarth Shaw, now practices employment law with , Herlihy in San Francisco.

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