Chapter 12 - Employment-at-will, Employee discipline, and Negligent hiring issues

Breach of contract

Breach of contract is the real concern in contractual employment relationships. Once a contract becomes legally enforceable, the party that fails to provide the previously discussed consideration is legally liable for breaching the contract. Not only is an employer liable for breaching the contract when terminating an employee for any reason other than just cause, but the employee breaches the contract as well if he or she attempts to sever the employment relationship before the contract expires.

Procedural Due Process

Procedural due process refers here to the fairness of the procedure used by the organization in determining whether its work rules or policies have been violated. Procedural due process focuses on such factors as notifying the accused party of the allegations against him or her. It also includes affording the accused a hearing with an opportunity to respond to the allegations and present witnesses and evidence to support his or her position before an impartial party or parties. Thus, procedural due process is provided when any accused party is permitted to respond to charges in an impartial forum.

Contractual Exceptions to EAW

Two situations can arise creating a contractual obligation to terminate an employee for only just cause reasons. There may be an explicit contract that creates such a guarantee, or the guarantee may be derived from an implicit contract. Employees and employers are aware of explicit contracts, having both agreed to the terms and conditions of employment and having expressed them in a written manner. Employers may be unaware of the existence of implied contracts. As we shall see shortly, implied contracts often occur because of a verbal or written statement made by the employer that the employee interpreted as a guarantee of continued employment. The employer may not have intended to make such a guarantee, but some state courts have ruled that such statements do prevent employee discharges except for just cause.

Situations That Erode Employment-at-Will

•Contracts (explicit and implied) •Whistleblower clauses (anti-retaliation clauses) •Equal employment opportunity laws •Just cause statutes •Public policy •Good faith and fair dealing (called "outrage" in some states)

Public policy issues

•Engaging in a legal duty •Engaging in a legal right •Refusing to perform an illegal act •Encouraging immoral acts or behavior •Assisting another party to break the law Figure 12.2 Public Policy Issues

Errors to Avoid When Conducting Investigations

•Failing to investigate •Excessive delays in starting the investigation •Inconsistency •Retaliation •Lack of thoroughness in the investigation •Inappropriate disclosure of confidential information •Losing objectivity •Strong-arm interview tactics •Invasion of employee's privacy •Inadequate feedback to the parties during the investigation process

Findings from Investigations

•Is the alleged perpetrator innocent or guilty? •If innocent, what should be done to maintain or restore his or her credibility? •If guilty, how serious was the infraction of organizational rules? •What other policies were violated? •Was the violation intentional or unintentional? •Was the violator aware of the organizational policy or work rule? •Was the violator cooperative in the investigation? •Were there other violators? •What corrective action is appropriate? •What corrective action has the organization imposed for similar violations in the past?

Questions to Answer When Conducting Investigations

•What happened? •When did it happen? •What did you do or observe? •What is the background of the incident? •What documentation or physical evidence is present? •Who else witnessed the incident? •What were their observations?

Public policy info

A termination violates public policy when an employee is discharged for refusing to violate a law or ordinance, fired for refusing to avoid a civic duty or obligation (i.e., jury duty or when summoned as a witness), or terminated for engaging in a legally protected activity (see Figure 12.2). Take, for example, the case of Peterman v. International Brotherhood of Teamsters,17 in which an employee was fired for refusing to submit false and untrue statements to a California legislative committee. The employee lost his job for refusing to commit perjury. A manager who assists another manager in committing perjury is also in violation. The employee was forced to choose between breaking the law and securing his continued employment. Demanding that an employee lie under oath or refuse to provide testimony clearly requires the employee to violate a legal obligation and, therefore, is an unequivocal public policy violation. Also, public policy can be violated if an employee is pressured into committing immoral acts such as requiring an employee to sleep with a client in order to keep an important account.

Explicit Contract

An explicit contract is a written document (in most instances) that exists between the two parties (the employer and the employee) establishing the terms of employment. Usually, a period of employment is specified, as well as other terms and conditions of that employment. To terminate an employee who is formally contracted to perform specific work for a specific period of time for either an invalid reason or no reason at all would be a breach of the contract. This also applies to employees covered under collective bargaining agreements negotiated by a labor union, which are in effect labor contracts. Consequently, all contractual employees may be terminated only for just cause. Essentially, the employer must communicate an offer to the prospective employee to perform in a particular manner in exchange for the prospective employee's agreeing to reciprocate by acting as requested. It is important to note that no offer becomes effective until it has been communicated to the second party. In either case, mutual assent does not occur until the second party accepts the offer by willingly agreeing to be bound by the terms of the offer. Acceptance occurs when the buyer pays the requested purchasing price for a good or service, thus obligating the first party to provide that good or service. In the instance of employment contracts, acceptance occurs when the prospective employee signs the written contract, obligating the employer to pay the agreed-upon salary for the agreed-upon period. The prospective employee also obligates himself or herself to perform the agreed-upon work activities for the agreed-upon period.

Implied Contract

An implied contract results when a contract can be inferred by the actions or conduct of the parties rather than stated in an expressed offer and acceptance. This is also called an implied-in-fact contract. Three conditions will establish an implied-in-fact contract: a party furnished some service or property; that party had an expectation to be compensated for the service or property furnished, and the other party knew, or should have known, that compensation was expected; and the other party had an opportunity to decline the service or property, and did not.25 In employment environments, implied contracts are often alleged to hold that some assurance was made by the employer that the employee would enjoy continued employment so long as he or she did a good job. These implied contracts often arise when an employee can prove he or she received some assurance of employment for a specific period of time. In essence, the employee offers good job performance with the expectation, based on the employer's oral statements or written policies, that such performance will be compensated by continued employment and job security. Pg 345

Protection against retaliation (whistleblower cause)

Another statutory limitation on employment-at-will arises from anti-retaliation or whistleblower clauses. Employment-at-will cannot be used as a justification for termination when the employee has reported the employer's violation of any law that contains a whistleblower clause. You will recall that whistleblower clauses protect employees from employer retaliation for reporting violations of a given law. Most federal statutes (i.e., the National Labor Relations Act, Occupational Safety and Health Act, Fair Labor Standards Act, Civil Rights Act of 1964, etc.)15 contain these clauses. Usually, if the employee is terminated for "blowing the whistle," he or she is entitled, at least under federal laws, to reinstatement, back pay, and attorneys' fees It is essential for managers and HR professionals to know that any action taken against a whistleblower must be consistent with the treatment initiated against other employees under similar situations. If, for example, a whistleblower has been discharged for excessive tardiness, while other employees with the same record remain on the payroll, a wrongful discharge could be easily deduced. Again, documentation is key to demonstrating that any adverse employment action is based on the employee's performance or conduct.

Consideration

Consideration is defined as a bargained-for exchange and is based on the premise that one promise (i.e., providing a product or service) is consideration for another promise (i.e., receiving the payment). Consideration is the price paid for the offer or promise. There is no contract when the second party refuses to pay the first party's asking price. Nor is there a contract if the seller refuses to provide the product when the buyer offers to buy only at a lower price. Or in an employment situation, no contract exists if the employee refuses to work for the employer's initial salary offer, or the employer refuses to meet the employee's counteroffer. Pg 341

Due process

Due process refers here to an employee's right to fair and consistent treatment in regard to terms and conditions of employment.43 Simply stated, due process is the employee's guarantee against arbitrary and capricious treatment in the workplace.

Employee handbooks

Employee handbooks often present a double-edged sword for employers. On one hand, they provide a valuable means for disseminating important work-related information and policies to employees. On the other hand, an employee handbook may be viewed as an implied contract by many courts, thus eroding an employer's employment-at-will prerogatives. This can create a "you can't live with them and you can't live without them" situation. In truth, it is far more likely that employers "can't live without them" because properly constructed employee handbooks provide far more benefits than costs (see Figure 12.3).

EEOC and other laws

Employment-at-will is stopped in its tracks by the equal employment opportunity statutes at federal, state, and local levels. Although employment-at-will permits an employer to fire employees for bad reasons, unlawful discrimination is not among any of them. Any employer automatically loses its employment-at-will status when it impermissibly uses the race, color, religion, sex, national origin, or disabilities of qualified individuals in its termination decisions

In order to establish an employer's negligent misrepresentation

In order to establish an employer's negligent misrepresentation, the complaining party must demonstrate that the former employer knowingly provided false information to the new employer, the new employer relied on that false information in making an employment decision, and the new employer was exposed to liability for injuries to a third party because of the reliance on false information.57 Assume that an employer gives a positive recommendation regarding a former employee to his or her new employer, but fails to mention that the employee had been disciplined on a number of occasions for workplace violence. Later, the former employee becomes violent at his or her new place of employment and injures a coworker. The former employer may be liable for his or her misrepresentation.58 Even if the previous employer is asked about a former employee (one with a record of violence or fraud) and makes no comment, that employer could be liable for the former employee's misconduct.

Taking Appropriate Corrective Action

In the event that the facts indicate a violation has indeed occurred, the next step is to determine the appropriate corrective action that must be taken. When an organization takes any corrective action, including disciplinary action, the punishment should always fit the violation (see Figure 12.7). After any corrective action has been administered, it is incumbent upon managers to monitor the employee to see if the desired behavioral changes have occurred.

The investigation

Investigations are exercises in fact-finding. Generally, investigations should be structured to answer questions that will establish either that an organizational policy or work rule was violated or that it was not. Some of the typical questions that should be asked are listed in Figure 12.6. In the event of an incident in which witnesses were present, written statements regarding what they saw should be collected as soon as possible. Witnesses should put their observations in their own words. Avoid having supervisors or any other company representative "coach" the witnesses on their responses. Also avoid questions that support the answer you are looking for or want to hear48—so-called leading questions. These actions could be construed as the organization's trying to coerce the witnesses into fabricating testimony to support the company's interests. HR professionals must go to great lengths to ensure that facts (not just collaborating evidence) are gathered and that the investigation is systematic and fair throughout.

Negligent Hiring

Negligent hiring has become a significant source of employment litigation. This is a tort arising from state law and varies to some degree from state to state.49 In general, negligent hiring becomes actionable when an employer fails to exercise ordinary care in hiring or retaining an employee and that employee creates a foreseeable risk of harm to a third party.50 For example, assume an employer hires a programmer analyst who is known to have been terminated from her previous place of employment for threatening a coworker with physical violence. Shortly after the programmer analyst was employed, she physically assaults an auditor from the accounting department following an argument over a program's output. The employer could be held liable for the injuries sustained by the auditor if the following can be established: The employer knew or reasonably should have known of the employee's tendency toward violence (or even incompetence), the employee in question committed a tortuous act against the third party, and the employer owes a duty of care to third parties within the zone of foreseeable risks created by the employment relationship.51 In this example, the employer knew the new programmer analyst had a record of violent behavior. The programmer analyst assaulted and injured a coworker, a third party. The employer owes its employees a safe work environment and jeopardized that safety interest by knowingly hiring a volatile programmer analyst. Therefore, the company has committed negligent hiring.

Negligent retention

Negligent retention, sometimes called negligent supervision, is very similar to negligent hiring. Negligent retention is a cause of action under tort law by which an employer is liable for the damages caused by an employee when the employer knew that the employee posed a danger to others and failed to remove the employee from his/her position of responsibility.52 Knowingly retaining a dangerous employee thus increases the employer's exposure to liability in the event that a coworker or third party suffers harm.53 Here, the knowledge that an employee presents a danger to coworkers or other third parties (through violent behavior, sexual harassment, or incompetence) is based on the employee's demonstrated performance or behavior. Not only may employers be held liable for injuries to third parties caused by current employees, they may be held liable for injuries caused by former employees.

Reducing exposure to implied contract

Pg 348

Covenant of good faith and fair dealing

Some states (currently eleven of them)20 permit an employee to bring suit when an employer's termination is intended to either intentionally cause the employee injury or to deprive the employee of some benefit or compensation to which he or she is entitled.21 In essence, the employer has behaved in an outrageous or patently unfair manner toward an employee. Perhaps the most often cited case used to demonstrate wrongful discharge under good faith and fair dealing is Fortune v. National Cash Register Co.22 In this case, a salesman who had made $5,000,000 in sales for his employer was terminated to avoid paying him over $92,000 in sales commissions that the sales had earned him.23 In a jurisdiction recognizing good faith and fair dealing, any attempt to deprive an employee of an earned wage or benefit would be a violation.24

Substantive due process

Substantive due process focuses on the purpose or the reason for employment practices so as to ensure that an employee has not been arbitrarily disciplined or terminated.44 Substantive due process assures employees that no disciplinary action shall be taken against any employee unless there is clear and convincing evidence that the employee committed a disciplinary offense. Another element of substantive due process is ensuring the disciplinary action imposed on the offender is appropriate for the offense committed. This is sometimes referred to as "distributive justice."45 In a more simplistic way, it answers the question, "Does the punishment fit the crime?" If the employer's disciplinary actions are judged by the employees to be too harsh (or too lenient in some cases), the employer will have failed to provide adequate substantive due process. For example, a policy that calls for immediate termination the first time an employee returns late from a break might appear arbitrary and unduly harsh to many employees. Pg 350

Employement-at-will

The employment-at-will doctrine holds that if the employee has the freedom to quit at his or her own volition, then the employer has an equal right to fire the employee at his or her own volition. Or, put another way, if under the employment-at-will doctrine an employee can terminate an employment relationship for a good reason, a bad reason, or no reason at all, then the employer may terminate the employment relationship for a good reason, a bad reason, or no reason at all.2 Again, this concept merely mirrors the employee's right to voluntarily quit for any reason. It does not give any manager license to engage in arbitrary or capricious behavior. If an employer does not enjoy employment-at-will, then each termination must be for just cause, which then places the burden on the employer to provide evidence that the firing was justified; this requires additional documentation. For example, the employer must provide tangible evidence that the employee is being terminated for a behavioral problem (i.e., insubordination, fighting, theft, threats, harassment, etc.), performance deficiencies (i.e., inability to perform essential job functions, violation of policies or rules, etc.), or a financial exigency (i.e., plant closings, reductions in force, reengineering, etc.). If such documentation can be produced (and is factual), the discharge is likely to be judged as being for a "just cause." In the absence of such documentation, the termination will be suspect.

Receiving a complaint

The first thing HR professionals must remember about any complaint or reported violation is that it may not be truthful or factual. It goes without saying that the complaint should be documented. It is also imperative that whoever is assigned the task of investigating the allegation approach this task in an impartial manner. If the investigation is not conducted in an impartial manner, it will not be a proper investigation and could be subject to later legal challenges. It is important to keep the complaint and the proceedings as confidential as possible.46 We say as possible because, in the event of litigation or intervention by a government agency (i.e., Equal Employment Opportunity Commission [EEOC], Office of Federal Contract Compliance Programs [OFCCP], National Labor Relations Board [NLRB], etc.), the employer may be compelled to disclose all materials to the government. This fact should be conveyed to the parties involved in the investigation. However, barring a subpoena from a court or agency, it is advisable to avoid disclosure, because of potential defamation allegations. It is important to let both parties know that the organization cannot guarantee that the matter under investigation can be kept confidential permanently. To promise absolute confidentiality could actually expose the employer to litigation. However, making the parties aware that no permanent offer of confidentiality exists may reduce the employer's exposure to potential breach of contract litigation by eliminating the employee's argument that he or she justifiably relied on defendant's alleged promise of permanent confidentiality in cooperating in the investigation.47

Preventing negligent hiring

The lesson for HR professionals is simple. To prevent negligent hiring, thorough background investigations should be conducted, and applicants with potential liability problems should be screened. To avoid negligent retention charges, employees who pose a threat to the safety and health of others, even with training and counseling, and those who cannot perform their duties should be removed from the workplace. Finally, when giving reference information to potential employers on former employees, employers should provide only factual information in order to avoid negligent misrepresentation. To avoid potential defamation, there should be documentation on hand to substantiate the former employee's performance or misconduct. There is no law that requires an employer to provide a recommendation, good or bad, for a former employee. However, if a recommendation is provided, it must be honest.

How an employer can protect itself under wrongful litigation

The solution is for HR professionals to properly develop and implement employee handbooks. An employer must guarantee the employee handbook is properly worded, and, once it is developed and implemented, must follow its procedures. This situation means more work for HR professionals and line managers; they must enforce these provisions and policies. This will, in the long run, offset the liability and remedies that could result from Title VII and state tort lawsuits.

To make a contract legally enforceable...

There are two other elements that must be present for a contract to be legally enforceable. First, no contract is legally enforceable if it requires either party to perform an unlawful act. The so-called contracts in Mafia genre films for "hit men" to execute various and sundry people are not contracts in the true legal sense. In a more serious view, an employment contract with a certified public accountant requiring him or her to create knowingly false financial records is not an enforceable contract. Any contract, employment or otherwise, must be legally consistent with existing law and sound public policy.6 Second, the parties to the contract must be legally competent, which means all parties must be legally capable of entering into a contract. In most cases, the parties must be adults (check individual state statutes to determine the legal age of adulthood, also called "age of majority"). Minors enjoy the legal right to avoid contracts. Insanity or impaired mental state may also be used as a means to void a contract. Even circumstances involving a temporarily impaired mental state (i.e., intoxication) can be used as a defense in breach-of-contract litigation.

Just cause statute

Under a just cause statute, employers are limited to discharging non-probationary employees (not to exceed six months) only for broadly and statutorily defined reasons.

Negligent misrepresentation

Under negligent misrepresentation, sometimes called negligent referral, an employer can be held responsible for acts of workplace violence or incompetence at a former employee's new place of employment. This is only an issue when the former employer provides a positive recommendation or evaluation of the former employee's performance and knowingly conceals incidents of workplace violence,56 inability to perform critical work tasks, fraudulent/criminal activities, or sexual harassment that may place others at risk.

Conducting in-house investigations

Whether confronted with establishing a just cause discharge or a complaint of unlawful discrimination, it is absolutely essential that HR professionals have policies and procedures in place to investigate such allegations. No organization should take an adverse action against any employee before it has gathered sufficient information to substantiate that such action is necessary. In short, an employee should not be held accountable for a work rule violation until you have enough information to indicate that he or she did indeed violate the rule. Employers and their representatives often get themselves into trouble when they react before finding enough facts or hearing the accused employee's side of the story (see Figure 12.5).