Just How Badly Do You Need to Fire that Employee? (Revisited)
Less than a month ago I wrote on the folly of terminating an employee at an inopportune time, even if your reasons are just and your motives are pure. Apparently the lawyers at Wal-Mart are not subscribers to the Business Law Alert because they did nothing to stop a very questionable termination.
Melissa Jackson is one of several plaintiffs suing Wal-Mart for sexual harassment. Jackson and the other women allege that Wal-Mart did nothing to stop reported sexual harassment by one of the employees. That suit was filed on January 22, and on February 16 Wal-Mart decided it was the perfect time to fire not only Jackson, but her husband as well. Both had been there for close to a decade, and during that time Wal-Mart had never seen a need to fire them, but less than a month after she files an action for sexual harassment, she and her husband had to go.
Do you see how bad that looks? Can you comprehend what the jury is going to think about that decision?
Let me switch perspectives for a moment and explain why Wal-Mart may have made that decision. As I wrote previously, unscrupulous employees will sometimes file employment lawsuits specifically because they know they are on their way out the door. If in defense of the sexual harassment claim by Jackson, Wal-Mart is going to claim that she was about to be terminated and only filed this suit in an effort to keep her job, then Wal-Mart should remain consistent and continue with the termination. Alternatively, it could be that Jackson and her husband have developed attitude problems about Wal-Mart, and are just too toxic to keep around. (I have no personal knowledge of the facts of this case, and offer this case only as a hypothetical fact pattern for discussion.)
But with all that said, was there no other way to handle this matter? I once spoke to the owner of a business that had come up with a very creative approach. He had an employee who was a perpetual problem, not doing his job and filing what the business owner perceived to be fraudulent worker's compensation and labor claims. He desperately wanted to fire the employee, but he knew any termination would be met with a wrongful termination action for retaliation. So, the business owner put the maintenance worker in charge of the flagpole. His duties were to raise and lower the flag, keep the pole and flag clean, and to make certain no one disturbed them. He was given an ergonomic chair to sit on near the flagpole so that he would not make any claims for back injuries, and there he sat, eight hours a day, five days a week, watching the flagpole. The employee could not stand the tedium, and within two weeks had quit.
Although the business owner's plan worked perfectly in that case, I don't suggest for a minute that this is a workable solution. Aside from the fact that many employees might be perfectly content to work as a flagpole watcher, from a legal standpoint the worker could still have made the claim that this newly created position was a form of retaliation. But I offer this tale as an example of an employer that thought outside the box. He looked at the bigger picture and successfully avoided a costly lawsuit.
Businesses tend to think in black and white terms. I often see cases where an employee loyally worked for a company for years, and after being rewarded with a promotion, the company terminates that employee because he is unable to perform the new job duties. Why is no thought given to returning the employee back to the position where he was a valued employee?
Lesson for all businesses: When you are considering terminating an employee and are asking yourself, "how is this going to look?", then take a moment to also ask yourself, "can I solve the problem with something other than a termination?"
Trade Secret Claim Costs Company Over $17 Million
A case that illustrates how NOT to deal with company secrets.
An RV sales manager – we’ll call him Trealoff because that’s his name – was hired by Forest River, an RV company. Forest River was apparently on the cheap side, because it didn’t even provide Trealoff with a computer, forcing him to use his own laptop. According to Trealoff, the company also did not provide him with a promised raise, so he went looking for another job.
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When the company got suspicious that Trealoff was looking for greener pastures, it was decided that Trealoff really should not be permitted to leave with all the data residing on his personal laptop computer, gained while he was an employee of Forest River. Reasoning that the data was, after all, the property and trade secrets of Forest River, the president of the company, according to the case, decided that the best course of action was to temporarily steal Trealoff’s laptop and erase the hard drive. Trealoff took exception when his erased hard drive was returned to him, especially given that it contained years of contact information that he acquired independent of Forest River, so he sued.
The San Bernardino jury took exception to the conduct as well, and in addition to awarding Trealoff damages for unpaid commissions, the jurors tacked on punitive damages of $7 million against the RV company and $8 million against the president. (Personally, despite the egregious conduct, I would have found Trealoff contributorily negligent for not backing up the data in the first place.)
Lessons for all businesses: First, get over this concept of trade secrets unless you really do have trade secrets. In many instances, when a company calls me ready to go to the mattresses over alleged trade secrets, I find that the information is not at all secret. For instance, I once represented a company that was being sued by one of their salesperson’s former employers, because the salesperson had contacted their customers. There was no non-solicitation or non-disclosure agreement; the entire basis for the suit was that the customer list was a trade secret. I went on-line and found that the company’s entire customer list was proudly displayed on its website. Case dismissed.
Second, proceed with caution when pursuing trade secret claims. Many companies file groundless lawsuits in an attempt to frustrate a former employee’s efforts to work for a competitor. They reason that even if the action ultimately fails, it may be sufficient to persuade the competitor that the employee is just too hot to handle. If the company decides to call your bluff and hires a firm such as ours, then you will likely be taken to the woodshed, as was Forest River.
Third, provide your employees with computers so that the information contained thereon remains yours.
Top Five Employee Suits
The EEOC recently identified the five most commonly filed employee suits, which are:
sex discrimination and harassment (30.1 percent);
retaliation (22.2 percent);
race discrimination (13.5 percent);
disability discrimination (12.8 percent); and
age discrimination (8.2 percent).
Sadly, many such cases are fomented by plaintiffs’ attorneys who don’t properly advise their clients. Never mind that in a huge number of cases there is not a scintilla of evidence that the termination was based on discrimination, it is enough that the employee belonged to a protected class. In most cases the employer ponies up some cost of defense settlement amount to avoid the uncertainty of trial.
Thus, no one can advise you how to keep your employees from pursuing legal action, but my first post on this site still remains solid advice on how to ultimately prevail if you decide to go the distance.
Pay Close Attention to Your Employee Handbook (Part 2)
We last discussed the unintended impact employee handbooks can have on at-will employment. There are also innumerable examples where seemingly boilerplate statements in a handbook dramatically defeated the intent.
In one instance, an employee handbook provided that employees could be asked to submit to a drug test if the employer had reasonable cause to expect drug use. This is really just a recitation of the law on drug testing, which is tolerant of random drug tests, but requires a higher standard for 
targeted testing. What the employer meant was that it would follow the law, utilizing random tests, but only using testing an individual with cause. However, the court interpreted the provision to mean that employees could only be tested with reasonable cause. Kraslawsky v. Upper Deck Co. (1997) 56 Cal.App.4th 1142.
And the changes do not end there. In another case, an employee at a car dealership drove one of the cars to lunch, and rear-ended another driver, causing injury. The dealership tried to avoid liability by claiming that the lunch run was outside the employee’s course and scope of employment. As evidence, the employer pointed to the employee handbook, which prohibited the "unauthorized" use of cars from the lot, and claimed that it had never authorized such use. However, the same handbook provided a list of what was prohibited, and did not include using the cars for trips to lunch. The court held that there was therefore nothing in the handbook that prohibited what the employee had done. Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994. Thus, a poorly written handbook actually reached out beyond the company’s own employees and created liability as to third parties.
Employee handbooks are useful tools, but they require close inspection from all angles to make certain they are not having an unintended result.
Don't Shoot Your Business in the Foot With Your Employee Handbook
Most employers and human resource directors are familiar with the concept of at-will employment, but may not know the statutory basis. In California, at-will presumption comes from a short and simple Labor Code. Section 2922 provides:
“An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.”
A contract that is for a specific term is by definition not an at-will agreement. If you hire an employee under a one-year contract, then you have agreed to employ that person for one year. You thus need cause to fire the employee prior to the expiration of the contract. Terminating without cause would be a breach of the agreement.
Any employee that does not have a contract for a specified term is thus presumed to be at-will. An employer does not need a contract stating that the employee is at-will or even a document signed by the employee acknowledging he is at-will. At-will employment is the default, absent a contract to the contrary. The mistake employers make is to do something to defeat the at-will presumption, and employee handbooks are fertile ground for such mistakes.
The pendulum swings with judicial interpretations of employee handbooks. At one time, employee handbooks were the bread and butter of employment attorneys, who used them to create employment contracts that defeated the at-will presumption. If the handbook provided for a disciplinary process, and the employee relied on that representation, it was argued that an implied contract had been created by the handbook. So, if the handbook provided that no employee would be terminated without first receiving a written warning, then it was a breach of the agreement if the employee was fired with no warning. Businesses responded by printing on page one of their handbooks that the handbook was not an agreement, and that the company was not required to follow its own policies.
That approach is effective only to a point. The courts are mindful and open to the mixed message argument. A classic misstep involves creating a probationary period. If your handbook states that an employee is probationary for their first 90 days at the company, then what do they become on day 91? The classic meaning of “probation” is a test period, where the employee can be fired without cause. Be definition, then, after that 90 days, cause will be required.
It is not enough that your employee handbook states that all employees are at-will, and that it is not at agreement, if there are still internal inconsistencies. After all, if your handbook states that employees can be terminated without cause, and then goes on to set forth what constitutes cause for termination, why should the first statement be elevated over the latter? You and/or your attorney should review every clause and make certain they are all consistent and achieve the intended result.
Next time, a few more handbook provisions that have tripped-up employers.
