HRM 6302 VIII

HRM 6302, Employment Law 1

Course Learning Outcomes for Unit VIII Upon completion of this unit, students should be able to:

1. Discuss the legal significance of the employer-employee relationship. 1.1 Examine the termination of the employer-employee relationship. 1.2 Apply exceptions to the employment at-will doctrine.

Required Unit Resources Chapter 16: Terminating Individual Employees, pp. 637–669 Unit Lesson The first unit of the course examined the concept of employment at will and the fact that the concept is not an absolute. Subsequent units further explored how employment at will is modified through employment laws that confer rights on employees and impose obligations on employers. This unit will now review exceptions to the doctrine that are imposed by judicial decision and by the practicalities of our legal system that influence employer decision-making. This unit also brings the discussion full circle by focusing on the end of the employment relationship through involuntary termination and the significance of that action for the employment cycle as a whole. Exceptions to the employment at will rule are dependent on state law and states vary widely in the acceptance of exceptions. These exceptions relate to terminations that fall in the gaps between statutory regulation of the employment relationship and address terminations that do not strike one as just. The most prevalent exception is for termination for reasons that violate a state’s public policy. For example, a termination might be illegal if one of the following situations prompts it:

• discrimination based on race, national origin, sex, pregnancy, religion, disability, citizenship status, or age;

• retaliation for taking a leave of absence for a serious medical condition; • retaliation for having complained about workplace safety or a work injury; and • retaliation for having complained about wage violations or having filed a wage complaint.

Even in states that do not recognize the many exceptions to the employment at will rule, it is generally accepted nationwide that an employee cannot be fired for serving on a jury or for refusing to break the law at the direction of his or her employer. Sources of public policies are state constitutions, statutes, or administrative regulations. Public policy wrongful termination cases can be costly to employers. In a Michigan case, a nurse complained that a coworker’s negligence resulted in a patient’s death (Landin v. HealthSource, 2014). Landin, a nurse, complained that a coworker was negligent in patient care. After the accused coworker became aware of Landin’s complaint about her, she reported Landin to management, and Landin was subsequently terminated for procedure violations. Landin’s termination also occurred after the employer became aware that he was speaking to the widow of the deceased patient. The jury found that Landin’s termination violated a public policy contained in Michigan’s health code that prohibits a health facility from disciplining employees who in good faith report the malpractice of a health professional. The jury awarded $1.2 million in damages. The second main exception to the employment at will rule is the implied contract. An implied contract may be formed when an employer makes an oral or written representation to an employee that his or her job is secure or that certain procedures will be followed before an employee is terminated. In the past, an implied contract

UNIT VIII STUDY GUIDE Terminating the Employment Relationship

HRM 6302, Employment Law 2

UNIT x STUDY GUIDE Title

was found in some states from representations in an employee handbook that employees would be discharged only for “just cause.” In the leading case on the implied contract exception, when hired by Blue Cross Blue Shield of Michigan, a manager, in response to his question about job security, was told that his employment would be secure as long as he did his job. Additionally, the employment policies included statements that it was the employer’s policy to terminate employees only for “just cause” (Toussaint v. Blue Cross & Blue Shield, 1980). The court found that the manager’s representation and the provision in an employee handbook stating that an employee can be fired only for just cause created an implied contract if it created an expectation of job security in the employee. Most employers respond by including in their policies a disclaimer clearly stating that its policies do not create a contract for employment and carefully define the persons who have authority to create a contract with an employee for a definite term. Additionally, offer letters typically contain a statement that they do not create a contract for a definite term and that employment can be terminated at any time, for any reason. Despite all states not being bound to adhere to the implied contract exception, these disclaimers in employee handbooks and offer letters guard against expectations and potential legal problems. Human resources (HR) professionals should also ensure that managers understand the risks of verbally providing assurances of job security and that such statements can bind the employer. The third exception to the employment at will rule and the one recognized in the fewest states is the covenant of good faith and fair dealing. This exception originated in California, where an 18-year airline employee was terminated without any explanation. Relying in part on the length of the employee’s employment, the court found that the employee could not be fired without good cause. The court found a covenant of good faith and fair dealing in the employment relationship and a corresponding duty not to deprive the employee of the benefits of employment (Cleary v. American Airlines, Inc., 1980). There are complicated exceptions, as well as the human factor of how unpredictable juries can be in reacting to actual cases. As a result, employers cannot rely solely on the premise of the employment at will concept as a justification for termination. According to Paul Falcone (2016), in the event a case escalates to the trial stage, the employer must be prepared to prove that there was cause to terminate. That proof of legitimate cause is best substantiated by documented progressive disciplinary warnings and/or failed or negative reviews or evaluations. When jurors go behind closed doors, they are going to want to see that the employer treated the employee fairly. Jurors will see this through accurate and timely documentation of performance issues and efforts to work with the employee to correct the issues. Reducing risk in connection with employee terminations requires attention to detail and holding managers accountable for managing performance. A supervisor may want to terminate an employee on the spot when there is no documentation of performance issues, or when the reasons are subjective ones such as “not a good fit” or “not a team player.” However, efforts must made to identify if there are objective factors that support termination. Further, documentation of reasons for termination should occur before an employee is fired; collecting information after an employee is terminated can be viewed as an effort to justify a termination that was rushed and not well thought through. Another tool to reduce risk is to have someone in HR review all termination decisions to ensure they are appropriate, documented, and consistent with how the organization has handled similar situations. Some organizations utilize a committee to review the case for termination, review the employee’s file, ask questions about the decision, and make a determination based on knowledge of the organization’s historic approach and how the circumstances of the particular case fit into that approach. It is highly recommended for the employer to consult with counsel when there are significant risk factors. A process such as this can not only reduce risk before a termination is implemented but demonstrate to a jury that the employer takes each termination seriously and utilizes a process to ensure employees are treated fairly and consistently. Just as important is the goal to reduce risk in the execution of the termination decision. The best approach is for the employee’s direct manager and a witness, preferably an HR representative who will take notes to document what is said amongst parties, attend a termination meeting. The meeting should have a clear plan and defined roles in advance; what will be said and who will say it should be determined. A clear statement of the grounds for termination should be prepared, documented, and delivered verbally to the employee. Some states require employers to provide a written reason to the employee at the termination meeting, and some require a termination letter if requested by an employee (“Termination,” 2015). While stating the reason for termination may be awkward, providing no reason, making vague or inconsistent statements, or giving too

HRM 6302, Employment Law 3

UNIT x STUDY GUIDE Title

much information can cause employees to believe they were unfairly treated and cause them to take legal action. It is best to be honest and be brief. No employer wants to find its name in the news or on the defending side of a lawsuit after it terminates an employee. Besides the obvious costs, damage can occur in critical areas of recruiting, retention, and morale. HR professionals play key roles in making sure the appropriate and required factors are weighed fairly in decisions about whether to terminate employment. HR professionals must remove the emotion from the decision and consider what is best for the organization. They must lead the way in reducing risk through application of their legal knowledge and by treating people with dignity and respect.

References Cleary v. American Airlines, Inc., 111 Cal. App. 3d 443 (1980). Falcone, P. (2016, September 26). Employment-at-will vs. the discharge-for-just-cause-only standard: A

critical employment law distinction. Society for Human Resource Management. https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/employment- at-will.aspx

Roberto Landin v. HealthSource Saginaw, Inc., 854 N.W.2d 152 (2014). Termination: Should a company provide a terminated employee with a reason for the termination? (2015,

March 25). Society for Human Resource Management. https://www.shrm.org/resourcesandtools/tools-and-samples/hr- qa/pages/shouldacompanyprovideterminatedemployeewithareasonforthetermination.aspx

Toussaint v. Blue Cross & Blue Shield, of Michigan, 408 Mich. 579, 292 N.W. 2d 880 (1980). Suggested Unit Resources You are encouraged to read the remainder of Chapter 16 in your textbook, which continues this unit’s discussion of additional issues involved in the termination of employees. Chapter 16: Terminating Individual Employees, pp. 670–696 In order to access the following resources, click the links below. The following PowerPoint presentation supplements the textbook chapter reading and is provided for further knowledge and review of the unit materials. Chapter 16 presentation (PowerPoint) or Chapter 16 presentation (PDF) Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. At the end of each chapter of your textbook, scenario-driven questions provide legal issues and realistic situations that relate to employment law. Exploring these questions allows you the opportunity to further your understanding of the concepts in each chapter and prepares you for similar situations you may encounter in your workplace.

• Review the Chapter 16 questions in your textbook on pages 697–701.

HRM 6302, Employment Law 1

Course Learning Outcomes for Unit VIII Upon completion of this unit, students should be able to:

1. Discuss the legal significance of the employer-employee relationship. 1.1 Examine the termination of the employer-employee relationship. 1.2 Apply exceptions to the employment at-will doctrine.

Required Unit Resources Chapter 16: Terminating Individual Employees, pp. 637–669 Unit Lesson The first unit of the course examined the concept of employment at will and the fact that the concept is not an absolute. Subsequent units further explored how employment at will is modified through employment laws that confer rights on employees and impose obligations on employers. This unit will now review exceptions to the doctrine that are imposed by judicial decision and by the practicalities of our legal system that influence employer decision-making. This unit also brings the discussion full circle by focusing on the end of the employment relationship through involuntary termination and the significance of that action for the employment cycle as a whole. Exceptions to the employment at will rule are dependent on state law and states vary widely in the acceptance of exceptions. These exceptions relate to terminations that fall in the gaps between statutory regulation of the employment relationship and address terminations that do not strike one as just. The most prevalent exception is for termination for reasons that violate a state’s public policy. For example, a termination might be illegal if one of the following situations prompts it:

• discrimination based on race, national origin, sex, pregnancy, religion, disability, citizenship status, or age;

• retaliation for taking a leave of absence for a serious medical condition; • retaliation for having complained about workplace safety or a work injury; and • retaliation for having complained about wage violations or having filed a wage complaint.

Even in states that do not recognize the many exceptions to the employment at will rule, it is generally accepted nationwide that an employee cannot be fired for serving on a jury or for refusing to break the law at the direction of his or her employer. Sources of public policies are state constitutions, statutes, or administrative regulations. Public policy wrongful termination cases can be costly to employers. In a Michigan case, a nurse complained that a coworker’s negligence resulted in a patient’s death (Landin v. HealthSource, 2014). Landin, a nurse, complained that a coworker was negligent in patient care. After the accused coworker became aware of Landin’s complaint about her, she reported Landin to management, and Landin was subsequently terminated for procedure violations. Landin’s termination also occurred after the employer became aware that he was speaking to the widow of the deceased patient. The jury found that Landin’s termination violated a public policy contained in Michigan’s health code that prohibits a health facility from disciplining employees who in good faith report the malpractice of a health professional. The jury awarded $1.2 million in damages. The second main exception to the employment at will rule is the implied contract. An implied contract may be formed when an employer makes an oral or written representation to an employee that his or her job is secure or that certain procedures will be followed before an employee is terminated. In the past, an implied contract

UNIT VIII STUDY GUIDE Terminating the Employment Relationship

HRM 6302, Employment Law 2

UNIT x STUDY GUIDE Title

was found in some states from representations in an employee handbook that employees would be discharged only for “just cause.” In the leading case on the implied contract exception, when hired by Blue Cross Blue Shield of Michigan, a manager, in response to his question about job security, was told that his employment would be secure as long as he did his job. Additionally, the employment policies included statements that it was the employer’s policy to terminate employees only for “just cause” (Toussaint v. Blue Cross & Blue Shield, 1980). The court found that the manager’s representation and the provision in an employee handbook stating that an employee can be fired only for just cause created an implied contract if it created an expectation of job security in the employee. Most employers respond by including in their policies a disclaimer clearly stating that its policies do not create a contract for employment and carefully define the persons who have authority to create a contract with an employee for a definite term. Additionally, offer letters typically contain a statement that they do not create a contract for a definite term and that employment can be terminated at any time, for any reason. Despite all states not being bound to adhere to the implied contract exception, these disclaimers in employee handbooks and offer letters guard against expectations and potential legal problems. Human resources (HR) professionals should also ensure that managers understand the risks of verbally providing assurances of job security and that such statements can bind the employer. The third exception to the employment at will rule and the one recognized in the fewest states is the covenant of good faith and fair dealing. This exception originated in California, where an 18-year airline employee was terminated without any explanation. Relying in part on the length of the employee’s employment, the court found that the employee could not be fired without good cause. The court found a covenant of good faith and fair dealing in the employment relationship and a corresponding duty not to deprive the employee of the benefits of employment (Cleary v. American Airlines, Inc., 1980). There are complicated exceptions, as well as the human factor of how unpredictable juries can be in reacting to actual cases. As a result, employers cannot rely solely on the premise of the employment at will concept as a justification for termination. According to Paul Falcone (2016), in the event a case escalates to the trial stage, the employer must be prepared to prove that there was cause to terminate. That proof of legitimate cause is best substantiated by documented progressive disciplinary warnings and/or failed or negative reviews or evaluations. When jurors go behind closed doors, they are going to want to see that the employer treated the employee fairly. Jurors will see this through accurate and timely documentation of performance issues and efforts to work with the employee to correct the issues. Reducing risk in connection with employee terminations requires attention to detail and holding managers accountable for managing performance. A supervisor may want to terminate an employee on the spot when there is no documentation of performance issues, or when the reasons are subjective ones such as “not a good fit” or “not a team player.” However, efforts must made to identify if there are objective factors that support termination. Further, documentation of reasons for termination should occur before an employee is fired; collecting information after an employee is terminated can be viewed as an effort to justify a termination that was rushed and not well thought through. Another tool to reduce risk is to have someone in HR review all termination decisions to ensure they are appropriate, documented, and consistent with how the organization has handled similar situations. Some organizations utilize a committee to review the case for termination, review the employee’s file, ask questions about the decision, and make a determination based on knowledge of the organization’s historic approach and how the circumstances of the particular case fit into that approach. It is highly recommended for the employer to consult with counsel when there are significant risk factors. A process such as this can not only reduce risk before a termination is implemented but demonstrate to a jury that the employer takes each termination seriously and utilizes a process to ensure employees are treated fairly and consistently. Just as important is the goal to reduce risk in the execution of the termination decision. The best approach is for the employee’s direct manager and a witness, preferably an HR representative who will take notes to document what is said amongst parties, attend a termination meeting. The meeting should have a clear plan and defined roles in advance; what will be said and who will say it should be determined. A clear statement of the grounds for termination should be prepared, documented, and delivered verbally to the employee. Some states require employers to provide a written reason to the employee at the termination meeting, and some require a termination letter if requested by an employee (“Termination,” 2015). While stating the reason for termination may be awkward, providing no reason, making vague or inconsistent statements, or giving too

HRM 6302, Employment Law 3

UNIT x STUDY GUIDE Title

much information can cause employees to believe they were unfairly treated and cause them to take legal action. It is best to be honest and be brief. No employer wants to find its name in the news or on the defending side of a lawsuit after it terminates an employee. Besides the obvious costs, damage can occur in critical areas of recruiting, retention, and morale. HR professionals play key roles in making sure the appropriate and required factors are weighed fairly in decisions about whether to terminate employment. HR professionals must remove the emotion from the decision and consider what is best for the organization. They must lead the way in reducing risk through application of their legal knowledge and by treating people with dignity and respect.

References Cleary v. American Airlines, Inc., 111 Cal. App. 3d 443 (1980). Falcone, P. (2016, September 26). Employment-at-will vs. the discharge-for-just-cause-only standard: A

critical employment law distinction. Society for Human Resource Management. https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/employment- at-will.aspx

Roberto Landin v. HealthSource Saginaw, Inc., 854 N.W.2d 152 (2014). Termination: Should a company provide a terminated employee with a reason for the termination? (2015,

March 25). Society for Human Resource Management. https://www.shrm.org/resourcesandtools/tools-and-samples/hr- qa/pages/shouldacompanyprovideterminatedemployeewithareasonforthetermination.aspx

Toussaint v. Blue Cross & Blue Shield, of Michigan, 408 Mich. 579, 292 N.W. 2d 880 (1980). Suggested Unit Resources You are encouraged to read the remainder of Chapter 16 in your textbook, which continues this unit’s discussion of additional issues involved in the termination of employees. Chapter 16: Terminating Individual Employees, pp. 670–696 In order to access the following resources, click the links below. The following PowerPoint presentation supplements the textbook chapter reading and is provided for further knowledge and review of the unit materials. Chapter 16 presentation (PowerPoint) or Chapter 16 presentation (PDF) Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. At the end of each chapter of your textbook, scenario-driven questions provide legal issues and realistic situations that relate to employment law. Exploring these questions allows you the opportunity to further your understanding of the concepts in each chapter and prepares you for similar situations you may encounter in your workplace.

• Review the Chapter 16 questions in your textbook on pages 697–701.