Category Archives: At Will Employment

Are We at a “Tipping” Point for Wrongful Discharge Claims in Minnesota?

A bartender is told by his employer, in violation of state law, that he must share tips with other employees. He refuses to comply and is fired. The state law in question says he can sue for being required to share tips, but doesn’t say anything about suing because he was fired. Does the law effectively provide a “wrongful discharge” claim for the bartender, even though no such claim is expressly written into the statute and despite Minnesota’s strong adherence to the rule of at-will employment? The answer, provided in the recent Minnesota Supreme Court decision in Burt v. Rackner, Inc., 2017 Minn. LEXIS 629 (Oct. 11, 2017), comes as something of a surprise. Its broader implications for the at-will rule, however, remain to be seen.

At-will employment is so firmly established in Minnesota law that it seldom receives a second thought. The rule in Minnesota, as in the overwhelming majority of states, is that employment relationships are terminable by either the employee or the employer, at any time and without advance notice, and for any reason or for no reason at all (just not for an unlawful reason). Put another way, discharging an employee is actionable only if it implicates an exception to the general at-will rule.

For the most part, the exceptions are based either on contract or statute. Contractual exceptions include individual employment contracts, collective bargaining agreements in unionized workplaces, and even employment handbooks or workplace policies (although careful drafting normally provides that handbooks and policies do not abrogate the at-will rule). Statutory exceptions include discrimination laws, “whistleblower” acts, and other laws defining employee “protected conduct.” If the conduct is protected by statute, then the law will typically state that the employee can sue if he or she is fired for engaging in such conduct. Further, some states recognize public policy exceptions to the at-will employment doctrine. But the bottom line is that at-will employment remains the norm.

That norm, however, may be subtly changing in Minnesota. In Burt, a divided Minnesota Supreme Court held that the Minnesota Fair Labor Standards Act (“MFLSA”), Minn. Stat. §§ 171.21-.35, allows employees to sue for wrongful discharge when they refuse to share tips, even though the statute says nothing explicitly authorizing such a claim. The case may be viewed as the only logical way to enforce the statutory requirement that employers in service industries or with tip-generating businesses cannot require employees to share tips with each other (although employees are free to do so voluntarily). Yet the underlying rationale for the Court’s decision could have significant effects on the at-will employment doctrine in Minnesota.

The plaintiff in Burt worked as a bartender, earning tips in addition to his regular wage. At some point, his employer allegedly told him “that he needed to give more of his tips to the bussers, and that there would be consequences if that did not happen.” Nevertheless, the plaintiff refused to share his tips. A few months later, he was told that his employment “was being terminated because [he] was not properly sharing his tips with other staff.” Unable to find alternative employment, the plaintiff sued for wrongful termination. The District Court dismissed his case, but the Court of Appeals reversed.

In a 5-2 opinion, the Minnesota Supreme Court held that through the language of the MFLSA, the state legislature had expressly created a cause of action for employees who are terminated for refusing to share tips. Specifically, the Court relied on two provisions to find an express cause of action:

Under Minn. Stat. § 177.24, subd. 3,

No employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees. This section does not prevent an employee from voluntarily sharing gratuities with other employees. The agreement to share gratuities must be made by the employees without employer coercion or participation . . . .

And under Minn. Stat. § 177.27, subd. 8,

An employee may bring a civil action seeking redress for a violation or violations of sections 177.21 to 177.44 directly to district court.

According to the Court, because § 177.24 prohibits employers from requiring employees to share tips, it necessarily also prohibits employers from terminating employees who refuse to do so. The Court concluded that the mere threat of termination qualifies as “requiring” an employee to take an action. And given that § 177.27 authorizes civil actions to redress any prohibited conduct under the MFLSA, the Court held that the plaintiff had a viable claim against his employer for wrongful discharge. But even if the Court’s logic is compelling (the statute would provide little protection if any employee could be fired for refusing to share tips), it goes beyond the exact statutory wording, which does not mention termination or any action for wrongful discharge.

Indeed, Chief Justice Gildea authored a dissenting opinion, taking aim at the majority’s interpretation of the relevant statutes. The dissent emphasized the majority’s apparent disregard for longstanding precedent allowing the legislature to abrogate the at-will employment doctrine only with express wording or necessary implication. This critique was particularly apt because other provisions in the MFLSA contain express language authorizing causes of action for wrongful discharge—language that Chief Justice Gildea noted was absent from §§ 177.24 and 177.27. If the Legislature had wanted to create a wrongful discharge remedy for violations of the tip-sharing law, it could have used similar language, but did not do so.

So what are employers to take from Burt?

For starters, they cannot require tip-sharing, nor can they terminate employees who refuse to share tips. The more difficult issue is how the decision could erode at-will employment in Minnesota generally. Although the sky is not yet falling, Burt should give employers pause. It reflects the willingness of a majority of the Supreme Court to recognize a wrongful discharge remedy (at least where there is a compelling logic for such a remedy) even if it is not explicitly described in the statute at issue. As Chief Justice Gildea wrote in dissent, Burt opens the door for employees to allege claims for wrongful discharge just by invoking “any MFLSA provision that imposes a requirement on an employer—and indeed, virtually any statutory provision that imposes a requirement on an employer.”

Now, more than ever, it is critical that employers stay apprised of the legal requirements imposed on them by state and federal laws. It is equally critical that both in-house and outside employment counsel keep an eye on how Minnesota courts interpret and apply Burt in the years to come.

“Hope I don’t get AIDS. Just kidding. I’m white!”: How to get yourself fired for a Facebook post

Social media has created a minefield of concerns for both employees and employers. The news is full of stories of employees documenting their questionable off-duty conduct on social media, or posting comments containing racist or derogatory remarks. Often, the employer—or sometimes, the rest of the online community—will demand that the employee be fired. In such a scenario many employers may be wondering: What could prevent an employer from lawfully terminating an employee based on social media activity, and what steps can employers take to best handle these situations?

Recent examples abound:

Last year an employee of a large corporate bank was terminated following a racist rant on Facebook. Throngs of customers contacted the bank, threatening to close their accounts if the employee was not fired. The employee was promptly terminated for her “reprehensible” comments.

Many readers may remember the notable case of a public relations director in 2013, who, before boarding a flight to South Africa, tweeted: “Going to Africa. Hope I don’t get AIDS. Just kidding. I’m white!” Despite her 170 followers, her tweet immediately went viral worldwide. By the time she landed in South Africa eleven hours later, her manager had informed her that she’d been fired.

Most recently, on October 31, 2017, a marketing director for a government contracting firm was terminated after a photograph of her flipping off President Trump’s motorcade went viral on social media.

In the wake of the September “white nationalist” marches, numerous Twitter accounts were created to identify and draw attention to the participants. Many employers have been inundated with demands that these individuals be terminated, and have been quick to distance themselves from the employees. In this situation, there are several things employers should consider. First, be aware of state and federal laws which may affect the way you might react to employee social media use. For example:

  • Off-duty Conduct Laws. Some states have laws prohibiting employers from disciplining or firing employees for activities pursued in their personal time—including the use of lawful substances such as medical marijuana and tobacco.
  • Protection of Political Views. A few states (and some cities and counties) protect employees from discrimination based on their political views or affiliation. In such a state, terminating or disciplining an employee for purely political social media activity or for political conduct outside the workplace could be illegal.
  • NLRB Protections. The National Labor Relations Act and similar state laws protect employees’ rights to communicate with one other about their employment. More specifically, employees have the right to engage in “protected activity” regarding their workplace—sharing grievances and organizing online in protected activity. Under these laws, an employee who is fired for posting online complaints about their wages, benefits, tip sharing, management, or hours, etc. could have a strong legal claim. As we noted in a recent post, this protection can be quite robust, leading to the reinstatement of a union employee fired after posting: “F*** his mother and his entire f***ing family!!!! What a LOSER!!!! Vote YES for the UNION!!!!!!!” (He was saved by the last sentence, which linked the rant to his union activities.)
  • Prohibitions on Retaliation. Beyond NLRB protections, many employment laws protect employees from retaliation for claiming that their rights have been violated. If an employee complains online about workplace discrimination, harassment, or other legal violations, that employee may be protected.

However, at the end of the day most states are “at-will” employment states, meaning both employers and employees are free to terminate the employment relationship at any time with or without reason. Therefore—if an employer determines that an employee’s speech outside the workplace runs counter to the employer’s values or public image, the employer could have solid grounds for termination. While this is not the case in all states (for example, Montana), in the vast majority of states employment is considered at-will. So long as the aforementioned laws are taken into account, chances are good that an employer can safely terminate an employee for objectionable conduct online. While consulting with legal counsel prior to any such termination is recommended, employers can take the following affirmative steps to provide proper procedure in the event of an employee’s worrisome or unacceptable online behavior.

  • Social Media Use Policy. Adopt a policy, included in your handbook, informing employees that their personal social media accounts, online networking account, blogs, and general online posts could get them in trouble at work. Explain what types of content could create problems, including harassing and bullying behavior or discriminatory or offensive language. This can include online conduct that may be associated with the company or which could cause serious interpersonal problems in the workplace.
  • Be Consistent. As with all employment policies, be consistent when enforcing your social media policies. If a female employee is terminated for posting objectionable material on the internet but a male employee is not for the same or similar conduct, the female employee may have a cause of action for sex discrimination. Always enforce your policies consistently to protect your company.

For Any Lawful Reason: Firing an at-will employee under dubious circumstances need not lead to liability if the reason for the firing was not illegal

A recent decision from the Sixth Circuit Court of Appeals highlights the distinction between firing an employee for personal or politically expedient reasons (which may be entirely legal) and firing an employee because of his or her protected status or for exercising protected rights (which is typically illegal). The decisive question answered in this case was can an employer terminate an employee currently on medical leave if the motivation for the firing is distasteful but unrelated to the leave?

In Mullendore v. City of Belding, Mich., the city council may have acted less than courageously by quickly firing a controversial city manager while she was out of the office for medical reasons and therefore not around to defend herself. But there was no real evidence that her medical condition actually motivated the firing (as opposed to permitting the council to fire her without having to face her), so there was no violation of the Family Medical Leave Act (“FMLA”).

Margaret Mullendore was the city manager of Belding, Michigan, working for a city council whose operations “are fairly described as being somewhat fraught with political drama.” Mullendore herself was a somewhat controversial figure, having fired a city police officer who was later reinstated, generating vocal criticism of Mullendore’s original decision.

Mullendore was also an at-will employee who could be terminated at any time by a vote of the city council.

In November 2014, one of Mullendore’s supporters on the city council lost a recall election to a candidate who had already openly criticized Mullendore and urged a change in the city’s administration. The new representative quickly sent the rest of the council an email advocating Mullendore’s termination.

Approximately a month later, Mullendore was forced to take time off from work due to an ankle injury that required surgery. Mullendore informed the city of her need for time off, although it was a point of dispute in the case whether she had actually invoked her legal rights under the FMLA. The city was aware of her plans to take medical leave and raised no objections, even purchasing a laptop for her to make it easier to work from home during her absence.

However, at a city council meeting shortly after Mullendore’s leave began, the new council member moved to terminate her employment immediately, even though there was no agenda item regarding her employment for the meeting, and Mullendore herself was not present to defend her record. The motion passed, although at least one council member was clearly reluctant to proceed in that manner.

Mullendore claimed violations of the FMLA, contending that she was fired for exercising her rights under that statute. This raised two key legal questions:

(1) Whether Mullendore had in fact invoked her FMLA rights or whether she was simply taking a more informal medical leave; and

(2) Whether the actual reason for her termination was her FMLA-protected leave.

The district court, granting summary judgment to the city, found both that Mullendore had failed to properly invoke FMLA rights when announcing her leave and that there was no evidence of illegal motive on the city’s part, i.e., that Mullendore was not fired because of her alleged exercise of FMLA rights.

On appeal, the Sixth Circuit affirmed summary judgment in the city’s favor, but only on the grounds that there was no evidence of illegal motive. The Court of Appeals found that there was a factual dispute as to whether Mullendore’s actions properly invoked the FMLA, but it did not matter, since there was simply no proof that taking FMLA leave was the actual reason for Mullendore’s firing.

This is often the central issue in discrimination, retaliation and other statutory employment claims: Was the protected conduct or protected status of the employee the actual reason for the adverse employment action? Mullendore tried to rely on the fact that the action occurred while she was on medical leave, but timing, while important, is not everything. This was particularly true because the new council member who spearheaded Mullendore’s firing had announced his intention to do so even before her medical condition arose. The council may have found it expedient to get rid of Mullendore while she was not present at the meeting to defend herself, but that also does not prove illegal motivation:

“At best, the evidence demonstrates that the members of the City Council terminated her when she was not at their meeting because it was personally or politically expedient to do so behind her back.”

That was simply not enough.

The case illustrates several key features of employment claims that require proof of motive:

  • A credible bad reason for firing someone is not a violation of the law. The court’s description of the evidence places the city council in a somewhat poor light. They appear as obsessed with political “drama,” and terminating Mullendore “behind her back” is not a particularly courageous action. But the evidence strongly – indeed, decisively – demonstrated that political drama was the basis for Mullendore’s termination and that the timing arose from the desire not to confront Mullendore rather than from any animus towards the exercise of FMLA rights. The council does not look good in this case, but it did not act illegally.
  • Suspicious timing is often not enough. Mullendore’s strongest point was probably that the firing occurred precisely while she was on a medical leave. She argued that this at least strongly suggested that the medical leave was the (illegal) motivation for her firing. But the city council was able to point to evidence that the termination was under consideration before the medical situation arose. This made the city’s version of events (a desire to terminate Mullendore behind her back) credible and merely suspicious timing was not enough to defeat summary judgment.
  • Two grounds for summary judgment are often better than one. In the trial court, the city won the case for two separate reasons, both the failure to formally invoke FMLA rights and the lack of evidence of illegal motive. The Sixth Circuit did not agree with the first reason, finding that there was a dispute as to whether Mullendore had properly invoked the FMLA. But the second reason stood up to appellate review, and that one reason, the lack of motive, was sufficient to preserve the city’s victory in the case.

Quirky Question #212, Montana Non-Competes

Question:

We are an accounting firm and recently fired an employee at will.  We have always understood that Montana law disfavors non-competition agreements, therefore, our employment agreement provides that if the accountant provides services to our clients within six months of leaving, he will pay us the profits from such an engagement which are stipulated to be 75% of gross revenues.   Since our former accountant is not completely prohibited from competing, isn’t this agreement enforceable? Answer→

Closely Held Companies and Lifetime Employment, Quirky Question # 143

Quirky Question # 143:

I read with interest your analysis of QQ # 140, dealing with closely held corporations.  We are in a similar situation, though we have the sticky additional issue you referenced of the matter involving a family member.  This person claims she is entitled to “lifetime” employment.  Given that she’s only in her late 40s, that’s a daunting prospect.  Moreover, as her siblings will attest (if forced), she simply is not competent.  Does the company really have to employ her for the next several decades? Answer→

Privately Held Corporations, Quirky Question # 140

Quirky Question # 140:

We have a small closely held company. Our owners are family members and a few close friends. Happily, our company has been increasingly successful. Unhappily, one of our executives does not seem capable of growing with the company. We have made a difficult decision to get rid of this at will employee. When we advised him of this decision, he said that because he felt he had been treated unfairly for some time, he had spoken with a lawyer. He also told us that he is not truly an “at will” employee and that we owe him higher duties. He claims we have breached the covenant of good faith and fair dealing. What is he talking about? Answer→