Ruling broadens public policy in wrongful termination claims

Assessing potential wrongful termination based on public policy claims can be challenging to plaintiffs' counsel where the line between bad faith, unethical behavior and illegal conduct is not clear. This point was underscored over half a century ago in Petermann v. International Brotherhood of Teamsters, 174 Cal. App. 2d 184 (1959), where the appellate court, in reversing a judgment for the employer on a claim by an at-will employee that he had been wrongfully terminated, noted, "the question, what is public policy in a given case, is as broad as the question of what is fraud." Id. at 189.

The Oxford English Dictionary defines "public policy" as "the principle that injury to the public good is a basis for denying the legality of a contract or other transaction." Since Petermann, the California Supreme Court and appellate courts have refined the definition in the context of employment terminations to support tort claims to overcome the at-will presumption codified in Labor Code Section 2922.

The most noteworthy formulation by our Supreme Court following Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980), where the public policy exception to the at-will doctrine was confirmed, came eight years later in Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988), where the court's focus was on whether or not an alleged violation implicated a policy that sought to protect the public as opposed to one that "serves only the private interest of the employer." Id. at 671. In support of its holding, the Foley court noted with approval in a footnote Labor Code, Section 1102.5(b), the state Whistleblower Act, which provides a civil remedy against terminations "for disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or noncompliance with a state or federal regulation."

The scope of the public policy exception was broadened in Green v. Ralee Engineering Co., 19 Cal. 4th 66 (1998), where administrative regulations "tethered to a statute" were found supportive of public policy, and in Rojo v. Kliger, 52 Cal. 3d 65 (1990) where the Supreme Court upheld a cause of action for tortious termination where an employee had been subjected to sex discrimination in violation of the California Constitution.

The most recent judicial refinement of this common law tort is set forth in Galeotti v. International Union of Operating Engineers Local No. 3, 2020 DJDAR 4435 (2020), where the appellate court reversed the sustaining of a demurrer in a wrongful termination based on public policy claim where a union employee alleged that a substantial motivating reason for his termination was his refusal to accede to extortion (Penal Code Sections 518, 519), theft by deceit (Penal Code Section 484), and unlawful taking of wages (Labor Code Section 221, 224). The plaintiff contended that he was terminated for refusing to pay a $1,000 contribution to the re-election campaigns of union supported candidates. Penal Code Section 519 provides that "fear" for purposes of extortion, "may be induced by a threat to inflict unlawful injury to the person or property of the individual." The court rejected the employer's argument that the plaintiff's interest in employment did not constitute "property" within the meaning of Section 519. Applying the broad definition of property, including "intangible benefit(s) and prerogative(s) susceptible of possession or disposition" (People v. Fisher, 216 Cal. App. 4th 212 (2013)), the court found that the plaintiff's employment fell within that definition. The court rejected the defense argument based on Shapiro v. Wells Fargo Realty Advisors, 152 Cal. App. 3d 467 (1984), that at-will employees have no property right in their jobs. The court found that the employee in Shapiro had not identified any substantial public policy that was violated by his termination. Regarding Galeotti's claim that Penal Code Section 484(a), proscribing theft by false pretenses also supported his claim, the court found that regardless of whether the plaintiff could sustain his burden of proof under this criminal statute, his termination was "contrary to the policy delineated in Penal Code, § 484" and therefore stated a wrongful termination based on public policy claim.

By confirming a property interest in employment and fraud as a basis of a public policy claim (albeit in the context of Penal Code statutes), Galeotti has broadened the definition of statutorily based public policy, to the benefit of unjustly terminated employees. 