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I. CURRENT
STATUS AND STATUTORY DEVELOPMENTS:
A. Background
 The
Montana Wrongful Discharge from Employment Act (WDA,
MCA 39-2-901, et seq.) was adopted by the Montana
Legislature in 1987, and is effective to all
discharges in Montana occurring after July 1, 1987.
The Act was in a direct response to the concern for
large jury awards for compensatory damages and
punitive damages, i.e. Gates v. Life of Montana
Insurance Co., 196 Mont. 178, 638 P.2d 1063
(1982); Crenshaw v. Bozeman Deaconess Hospital,
213 Mont. 488, 693 P.2d 487 (1984); Flanigan v.
Prudential Federal Savings & Loan Assoc., 221
Mont. 419, 720 P.2d 257 (1986). Although
historically and legally the employment relationship
in Montana was considered at will, the Montana
Supreme Court adopted the theory of the implied
covenant of good faith and fair dealing which it
implied in an at will employment relationship. The
Montana court treated the traditional at will
employee relationship as an at will contract and
held that it, like other contracts, had implied in
it the covenant of good faith and fair dealing.
Montana had implied such a covenant in other
contractual situations, namely Nicholson v. United
Pacific, involving a breach of lease situation. The
concern from the employer's viewpoint was that there
were no specific guidelines or standards to
determine what constituted a breach of the implied
covenant of good faith and fair dealing other than
"the justifiable expectation of the parties"
allowing juries vast discretion to determine if
there was a breach of the obligation of good faith
and if so, to award compensatory and punitive
damages.
The Wrongful Discharge Act as adopted has been
upheld as constitutional and not violative of full
legal redress, speedy remedy, repeal of right to
implied covenant claim, or equal protection.
Meech v. Hillhaven West, Inc., 238 Mont. 21, 776
P.2d 488 (1989).
B. Exemptions
The Wrongful Discharge Act is the exclusive remedy
for a wrongful discharge from employment in the
traditional at will situation. There are three
exemptions which are excluded from the Act, and
those are:
If the discharge is subject to any other state or
federal statute that provides a procedure or remedy,
i.e. prohibited discrimination;
If the employment is covered by a written collective
bargaining agreement;
If there is a written contract of employment for a
specific term.
The WDA preempts all
other common law remedies and specifically provides
that no claim for discharge may arise from tort or
express or implied contract.
C. Constructive Discharge
The Act applies to a discharge which is defined as a
constructive discharge and any other termination of
employment, including resignation, elimination of
the job, layoff for lack of work, failure to recall
or rehire and any other cutback in the number of
employees for a legitimate business reason. A
constructive discharge means the voluntary
termination of employment by an employee because of
a situation created by an act or omission of the
employer with which an objective reasonable person
would find so intolerable that voluntary termination
is the only reasonable alternative. A constructive
discharge does not mean voluntary termination
because of a refusal to promote or improve wages,
responsibilities, or other terms and conditions of
employment. There were cases prior to the Act
holding that the covenant of good faith and fair
dealing did not apply to a constructive discharge.
In Russell v. Mini Mart, Inc., 711 Fed. Supp.
556 (D. Mont. 1988) the federal court held that the
manager's resignation was not a constructive
discharge, despite evidence of tension between the
manager and supervisor and disagreements over
management style as there was no evidence to support
a finding of intolerable working conditions. In
Finstad v. Montana Power Co., 241 Mont. 10, 785
P.2d 1372 (1990), the Montana court held that an
employee was not constructively discharged where he
terminated following refusal to accept a lateral
transfer from Cut Bank to Butte. The cases under the
Act have approached the issue of constructive
discharge as to whether or not the action or
inaction of the employer has rendered working
conditions so oppressive that resignation is the
only reasonable alternative. This appears to be an
objective standard. However, the Montana court has
indicated that this is a question of fact which
needs to be determined by the jury. Thus as of date,
in those situations involving constructive
discharges, although it is an objective standard as
to whether the condition is so intolerable, they
will not be subject to summary disposition, but
rather will require a trial with the jury deciding
that issue. There have been no cases under the Act
to date holding that a voluntary termination because
of a refusal to promote or improve wages or
responsibilities does not, as a matter of law,
constitute a constructive discharge. It would appear
that the thrust of the statutory definition of
constructive discharge is aimed at the situation
where the employer wants to terminate an employee
but has no grounds as permitted under the Wrongful
Discharge Act and engages upon a course of conduct
of making the job so miserable and burdensome that
the employee voluntarily terminates.
D. Elements of the Claim
The Act allows an employee to bring a claim for
wrongful discharge in three specific areas:
violation of public policy, lack of good cause, and
violation of written personnel policies.
Violation of Public Policy.
A discharge is wrongful if it is a retaliation for a
refusal of the employee to violate public policy or
for reporting a violation of public policy. Public
policy is any constitutional provision, statute, or
administrative rule that concerns public health,
safety, or welfare. The statutory definition of
public policy is very broad in view of the
voluminous laws and regulations in today's society.
Although the court held it was questionable that
failure to install an air conditioner was a
violation of public policy of health and welfare,
summary judgment was denied. Also, the plaintiff was
allowed to amend her claim to claim company's
requirement of working excess hours, refusing rest
and lunch breaks and understating profitability and
reducing workforce to avoid state taxes was held to
state a claim of violation of public policy.
Boldt v. U-Haul Co. of Idaho, (Montana Federal
Court). The limits and applications of the statutory
provision remain to be determined by the courts.
Basically, this prohibited discharge is aimed at the
classic whistle-blowing situation and the public
health, safety and welfare should be related to the
job or business of the employer.
Lack of Good Cause.
The second basis for imposing liability on an
employer for a wrongful discharge is a discharge
after the probationary period which is not for
good cause. Good cause is defined as reasonable job
related grounds for dismissal based upon (1) a
failure to satisfactorily perform job duties, (2)
disruption of the employer's operation, or (3) other
legitimate business reasons. Generally, the reasons
or basis for discharge have to be reasonable and
supported by the facts. Otherwise, a claim of
subterfuge or pretextual discharge will be made. The
courts have upheld discharges based upon lying,
provided that the employee is given the opportunity
to disprove the charge, stealing from the till,
economic necessity or downsizing, replacing manager
after business acquisition, and violation
established personnel policies disrupting operations
of the employer, stealing drug samples, and
falsifying records, and unsatisfactory job
performance. In Miller v. State Bank, ___
Mont. ___, ___ P.2d ___, May 9, 1992, the Supreme
Court rejected the employee's contention to adopt a
new standard of good cause based upon whether the
employee satisfied the general obligations of an
employee and whether the employer followed industry
standards of progressive discipline and exercised
bad faith. The Supreme Court refused to adopt this
proposed new standard and held that she was
terminated for good cause based on job-related
grounds. She had been warned by her employer that
her continued substandard performance would result
in dismissal and the dismissal was in conformance
with the express written personnel policies.
Violation of Written Personnel Policies.
The third grounds for a claim of wrongful discharge
is the employer's failure to follow its own written
personnel policies. Personnel policies claims are
always difficult as a loophole, inconsistency, or
ambiguity can always be found and claimed in most
written personnel policies. The area for exposure is
inconsistent application of the policy and
exceptions made for other employees in the past. In
addition, the employer always has difficulties in
terms of the knowledge and awareness of managers and
supervisors in terms of the actual policy manual and
the procedures, not only relative to performance of
the job, but also discipline and termination. The
cases to date have dealt with inconsistent
application of the policy or prior exceptions from
the policy and the issue as to whether the personnel
policy required progressive discipline as opposed to
immediate discharge. Employers with written
personnel policies should review them on an annual
basis with their supervisors and managers to make
sure that any terms and conditions are consistent
with the actual job performance and the policies in
place. Special attention should be paid to the
definition of probationary period, the requirement
of annual evaluations, the procedure on discipline
and discharge, promotion and transfer, and an
internal grievance procedure. Failure to apprise the
employee of the personnel policy and failure to
apply it in a uniform consistent manner are the
biggest areas of concern in terms of exposure for
wrongful discharge claims under the third grounds
for liability under the Act.
E. Damages
In terms of damages, the statute put a maximum lid
of four years of lost wages and benefits plus
interest on that amount, reduced by what the
employee could have earned with reasonable
diligence. The issue as to whether unemployment
benefits are applied to reduce the amount awarded
still remains to be decided. Fringe benefits include
the normal benefits which were in place at the time
of the discharge, i.e. leaves, insurance and
retirement benefits which are employer paid.
Although not decided, most likely the Supreme Court
would include in the definition of lost wages
overtime, if there had been a past history or
practice of overtime hours. Although not decided,
the interest rate is presumably the judgment
interest rate of ten percent (10%) per annum. All
other damages, i.e., pain and suffering, emotional
distress, general damages and punitive damages are
precluded. There is one exception for punitive
damages and the Act does allow punitive damages when
it is established by clear and convincing evidence
that the employer had engaged in actual fraud or
actual malice in the discharge of the employee in
retaliation for the employee's refusal to violate
public policy or for reporting a violation of public
policy. As indicated previously, unlawful
discrimination claims are still available and the
Montana blacklisting prohibitions are still
applicable. To the extent that the grounds and facts
relative to the discharge form the basis for the
separate tort claim of intentional infliction of
emotional distress, it is believed that the court
will hold that the claim is barred by the Wrongful
Discharge Act. However, this tort is still available
and present in regard to conduct and acts not
associated with the discharge. In addition, the
claims of libel (publication of written untruth) and
slander (publication of oral untruth) is still
present and grounds for liability to the employer
subject to the privilege defense.
F. Grievance and Arbitration
The Act specifically provides that if the employer
has written internal procedures under which an
employee may appeal a discharge within the structure
of the employer (i.e. an internal grievance
procedure), the employee has to exhaust those
procedures prior to filing any lawsuit. The failure
to exhaust an internal grievance procedure is a
defense to any lawsuit. The Act specifically
provides that within seven (7) days of the date of
discharge the employer must notify the discharged
employee of the existence of the grievance procedure
and supply the discharged employee with a copy. A
short two or three step grievance procedure with a
short time period, i.e. 10 to 15 days, requiring the
employee to file a written grievance, is all that is
required in order to provide protection to the
employer. The employee should file the grievance
with his or her supervisor or manager with a
subsequent 10-day period in which to bring the
grievance to the attention of the owner or the board
of directors. The use of the grievance procedure
basically allows the employer to review the matter
fully in terms of additional facts and information
supplied by the employee and also gives the
opportunity for a third party, i.e. owner or the
board of directors, to review the discharge and the
employer's reasons. The existence of the grievance
procedure not only provides protection to the
employer, but also is a useful tool in resolving and
avoiding lawsuits and quickly resolving any claimed
wrongful discharges.
G. Arbitration
The Act specifically provides that the parties can
agree in writing to final and binding arbitration in
regard to any dispute under the Act. The statute
provides that an offer to arbitrate must be in
writing, providing for a neutral arbitrator to be
selected by mutual agreement or as provided under
the Montana Uniform Arbitration Act. In addition,
the arbitration must be governed by the Montana
Uniform Arbitration Act and the arbitrator is so
bound. If a lawsuit is filed, an offer to arbitrate
must be made within sixty (60) days after service of
the complaint and must be accepted in writing within
thirty (30) days after the date the offer is made. A
party who makes a valid offer to arbitrate that is
not accepted by the other party and who prevails in
the lawsuit is entitled claim as costs reasonable
attorney's fees incurred subsequent to the date of
the offer. A discharged employee who makes an offer
to arbitrate, which offer is accepted by the
employer and prevails in the arbitration, is
entitled to have the arbitrator's fee and all costs
of the arbitration paid by the employer. Once
arbitration is made and accepted, this is the
exclusive remedy and there is no right to bring or
continue a lawsuit. The arbitration provision as
provided in the Act is a useful tool in terms of
efficiently and quickly resolving the dispute
without the necessity of a lawsuit and the vagaries
of a jury. In addition, the element of the
arbitration provisions that basically allow an award
of attorney's fees to the prevailing party changes
the economics of the lawsuit and causes both the
employee and the employer to reassess their position
in terms of going to trial on the claim, especially
in view of the potential liability for litigation
costs. On the employer's side, an offer to arbitrate
should always be made to cause the employee and the
employee's attorney to realistically assess
liability and damages in terms of proceeding to
trial. Although the Act specifically provides that
if an offer to arbitrate is made and rejected, the
offering party is entitled to attorney's fees if it
prevails; the Montana Supreme Court recently
overturned an award of $25,000.00 of attorney's fees
in the situation where the employer had requested
arbitration, which was refused, and at trial the
Court granted a directed verdict in favor of the
employer.
H. Time to Bring Suits
The time limit in which to file lawsuits has been
drastically reduced from the usual two or three
years to one year after the date of discharge.
by
Ronald
A. Bender
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