G. Public Policy Exceptions

Courts and state legislatures have carved out other exceptions to the employment-at-will doctrine based on public policy considerations. For example, in some states, workers may be protected from discharge who:

• Refuse to violate criminal laws by committing perjury on the employer's behalf, participating in illegal schemes (e.g., price- fixing or other anti-trust violations), mislabeling packaged goods, giving false testimony before a legislative committee, altering pollution control reports, or engaging in practices abroad which violate foreign, federal and state laws.
• Perform a public obligation, exercise a public duty (e.g., attend jury duty, vote, supply information to the police about a fellow employee, file workers' compensation claims) or observe the general public policy of the state (e.g., refuse to perform unethical research).

A detailed analysis of some of these important subjects follows.

Whistleblowing

The law generally protects workers who expose abuses of authority through "whistleblower" statutes, which are in force in some states. Michigan, for example, has enacted a Whistleblower's Protection Act which protects employees from retaliation (defined as discharge, threats, or discrimination against an employee regarding the em- ployee's compensation, terms, conditions, locations, or privileges of employment) after they report suspected violations of laws or regulations. This statute provides specific remedies, including injunc- tive relief or actual damages or both, reinstatement, back wages, fringe benefits, seniority rights, or any combinations of these remedies. Costs of litigation, including reasonable attorney fees and witness fees, are also mandated under the law. Some other states have even stricter laws with greater penalty provisions.

People who work for federal agencies are also protected from being fired for whistleblowing. In one case, a nurse was dismissed after reporting abuses of patients at a Veterans Administration Medical Center. She sought reinstatement and damages before a federal review panel, which ordered that she be reinstated and awarded her $7,500 in back pay.

The following actual cases illustrate examples of irings that were found to be illegal in this area:

• A quality control director was fired for his efforts to correct false and misleading food labeling by his employer.
• A bank discharged a consumer credit manager who notified his supervisors that the employer's loan practices violated state law.
• A financial vice president was fired after reporting to the company's president his suspicions regarding the embezzlement of corporate funds.

For an employee's conduct to constitute protected activity, the majority of whistleblower statutes require that the employee have a reasonable belief that the employer's conduct violated a law, regulation or ordinance. Most statutes also require some proof that the employee intended to, or did report the violation.

TIP: The biggest potential for violations in this area occurs with safety-related claims made by disgruntled employees. Under numerous federal laws, including The Clean Air Act, Safe Drinking Water Act, Solid Waste Disposal Act, Toxic Substances Control Act, Water Pollution Control Act, Occupational Safety and Health Act, Asbestos School Hazard Detection and Control Act, and most federal discrimination laws, employees are permitted to come forward and report alleged violations affecting public safety. In addition, more than half the states protect reporting of actions that are contrary to the health, safety, welfare and environmental laws.

To protect your company in this area, all employers should remember the following:

1. Avoid committing safety violations.
2. Know the law in your state regarding whistleblower protection.
3. Require workers to report violations first to a supervisor within the company, rather than going outside. Such a statement in your work rules or policy manual may be helpful since not all whistleblowing activity is protected under this public policy exception. Some companies have successfully fired workers who "blew the whistle" without properly investi- gating the facts, who bypassed management or tattled in bad faith. In some states, employers must be given a reasonable period of time to remedy any violations before the employee has the right to report the violation to a public body.

Counsel Comment #129: Remind workers in writing that problems sometimes arise and that the company should always be notified and given a reasonable period of time to correct its mistakes before news of a violation is leaked to an outside agency. Such a strategy can help your company defend itself from charges that it fired a worker illegally and that it violated a public safety law or ruling.

4. Recognize that some state whistleblower laws do not protect workers who question internal management systems. Michigan's statute, for example, does not protect workers who report an employer's violation of internal rules, regulations or policies. It only protects workers who report safety, health and environmental violations. Many other states also restrict what workers may legally report.
5. Speak to an experienced labor lawyer before you decide to fire the suspected employee. Huge damages can be assessed against companies who fire workers illegally. Such lawsuits may carry large punitive damage awards and damages for emotional distress. In one case, for example, $8 million was paid to settle a whistleblowing claim pursued by the Justice Department under the Federal False Claims Act.

Most courts assign to the employee the initial burden of proof of establishing that he or she was unlawfully discharged in retaliation for reporting an employer's unlawful conduct. Companies can defeat such a claim by demonstrating that the company did nothing wrong or that the individual was fired for a legitimate reason, such as poor work performance or a business reorganization.

Counsel Comment #130: A competent labor attorney can analyze potential damages and determine the best way to avoid exposure in this area. When an employer learns that one of its employees has reported alleged improprieties concerning the employer, the first reaction might be that such disloyal and damaging conduct warrants immediate discipline, up to and including termination. Always control such an impulse until after you have spoken at length with counsel and have received the green light. Confer with counsel before the decision to fire has been made, not after.