Punitive Damages may be awarded in Sabine-Pilot Wrongful Termination-of-Employment Suit -- Safeshred, Inc. v. Martinez (Tex. April 20, 2012)

    

EXEMPLARY DAMAGES IN WRONGFUL TERMINATION SUIT UNDER SABINE-PILOT EXCEPTION TO EMLOYMENT-AT-WILL DOCTRINE 

   

Texas Supreme Court says, in opinion released today (Friday April, 20, 2012), that punitive damages are available in successful wrongful termination claim by employee fired for refusing to perform an illegal act because it is a tort, not a contract claim, and exemplary damages are available in tort cases as a general rule. The Court nevertheless reverses the court of appeals’ affirmance of exemplary damages in the case under review, finding that there was not legally sufficient evidence of malice in the employee's termination by his employer.  

      

Safeshred, Inc. v. Martinez (Tex. April 20, 2012)

   

EXCERPTS FROM THE OPINION BY JUSTICE LEHRMANN

   
  

This case requires us to clarify the nature and scope of the cause of action for wrongful termination of an employee for refusing to perform an illegal act that we recognized in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985). In particular, we must determine whether a plaintiff in a Sabine Pilot action may recover punitive damages, and if so, what must be shown as a prerequisite for those damages.

We agree with the court of appeals’ conclusion that a Sabine Pilot cause of action sounds in tort and allows punitive damages upon proper proof. However, because we hold that Martinez failed to present legally sufficient evidence of malice relating to his firing, we reverse the court of appeals’ judgment insofar as it affirms the award of exemplary damages.

 […]

A. The Availability of Punitive Damages

 1. Tort or contract

The first question we must answer is whether a Sabine Pilot claim sounds in tort or contract, because the answer to that question will decide whether exemplary damages are recoverable. While exemplary or punitive damages may generally be awarded for torts involving malicious or grossly negligent conduct, they are not available for breach of contract claims. Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex. 1981). Safeshred argues that the employment relationship is inherently contractual, and that Sabine Pilot essentially supplements that relationship with an implied contractual provision preventing discharge for refusal to perform an illegal act. Martinez, on the other hand, notes that every Texas case to categorize a Sabine Pilot claim has labeled it a tort,2 and that comparisons to other statutory wrongful termination causes of action support that characterization.

Courts outside of Texas are split on whether a public policy exception to the employment-at-will doctrine, like a Sabine Pilot claim, sounds in tort or contract. Compare Brockmeyer v. Dun & Bradstreet, 335 N.W.2d 834, 841 (Wis. 1983) (contract), and Monge v. Beebe Rubber Co., 316 A.2d 549, 551 (N.H. 1974) (same), with Thompson v. St. Regis Paper Co., 685 P.2d 1081, 1089 (Wash. 1984) (en banc) (tort), and Parnar v. Americana Hotels, Inc., 652 P.2d 625, 631 (Haw. 1982) (same).

We conclude that such claims sound in tort.

Apart from Sabine Pilot, this Court has steadfastly adhered to the employment-at-will doctrine. See, e.g., Ed Rachal Found. v. D’Unger, 207 S.W.3d 330, 332 (Tex. 2006). In that vein, we have consistently refused to expand Sabine Pilot beyond the “narrow exception” we recognized in that case. See id. at 332–33 (refusing to expand Sabine Pilot liability to cover whistleblower actions not already authorized by statute); Winters, 795 S.W.2d at 725 (same). Safeshred argues that, in order to maintain that narrow interpretation, we must call a Sabine Pilot claim a contract claim.

But, in fact, the opposite is true. To say the cause of action sounds in contract, we would need to drastically alter our view of the at-will employment relationship in general, rather than merely recognize a narrow exception to the at-will doctrine. E.g., Physio GP, Inc. v. Naifeh, 306 S.W.3d 886, 887-888 (Tex. App.—Houston [14 Dist.] 2 2010, no pet.); Draker v. Schreiber, 271 S.W.3d 318, 323 (Tex. App.—San Antonio 2008, no pet.) (citing Louis v. Mobil Chem. Co., 254 S.W.3d 602, 610 (Tex. App.—Beaumont 2008, pet. denied)); Miller v. Raytheon Aircraft Co., 229 S.W.3d 358, 373 (Tex. App.—Houston [1st Dist.] 2007, no pet.); see also Garcia v. Sun Belt Rentals, Inc., 310 F.3d 403, 404 (5th Cir. 2002); Hanold v. Raytheon Co., 662 F. Supp. 2d 793, 803 (S.D. Tex. 2009).

This is so because, to say that Sabine Pilot created an implied contractual provision would presume, in the first place, that there is a contract between at-will employees and their employers in which to place an implied provision. We have never recognized such a proposition. See, e.g., Montgomery Cnty. Hosp. Dist. v. Brown, 965 S.W.2d 501, 502–03 (Tex. 1998) (treating the implied employment contract urged by petitioners as a significant departure from at-will employment); Garcia v. Sunbelt Rentals, Inc., 310 F.3d 403, 404 (5th Cir. 2002) (“[N]o Texas court has held that an at-will employment relationship constitutes an oral contract . . . .”). On the contrary, we have long held firm to the principle that, in Texas, an at-will employee may be fired for a good reason, a bad reason, or no reason at all. Brown, 965 S.W.2d at 502. And where the promise of continued employment is illusory, it cannot form the basis of an enforceable contract. Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644, 660–61 (Tex. 2006) (citing RESTATEMENT (SECOND) OF CONTRACTS § 77 cmt. a (1981); 3 WILLISTON ON CONTRACTS § 7.7 (4th ed. 1992)). It would be inconsistent to call Sabine Pilot an implied contractual restriction on a relationship that is not even contractual. Cf. City of Midland v. O’Bryant, 18 S.W.3d 209, 216 (Tex. 2000) (“[A] contractual limitation [like a duty of good faith and fair dealing] would afford more rights to the plaintiffs than at-will employees possess.”).

Instead, we conclude that Sabine Pilot claims are not contractual in nature, but sound in tort, providing a remedy when an employee refuses to comply with an employer’s directive to violate the law and is subsequently fired for that refusal. This approach is consistent with our treatment of a statutory workers’ compensation retaliation claim (another narrow exception to employment-at-will), which we have labeled an intentional tort. See Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d  444, 453 (Tex. 1996) (discussing TEX. LAB. CODE § 451.001). It also gives due attention to the fact that Sabine Pilot liability stems not from an agreement between employer and employee (the subject of contract), but from legislatively expressed public policies embodied in the criminal law. For these reasons, we hold that a Sabine Pilot claim sounds in tort, not in contract.

2. Punitive Damages for This Tort

Safeshred contends that, even if we recognize a Sabine Pilot claim as a tort, allowing exemplary or punitive damages would constitute an expansion of the claim that we did not intend in Sabine Pilot, and one better left to the Legislature. But punitive damages are generally available for common law torts so long as the traditional prerequisites are met: a finding of actual damages, Doubleday & Co. v. Rogers, 674 S.W.2d 751, 754 (Tex. 1984); and outrageous, malicious, or otherwise reprehensible conduct, Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 16 (Tex. 1994). Rather than expanding the claim, allowing punitive damages would merely avoid arbitrarily excluding a category of damages that is otherwise presumptively available. In a similar situation, where the Legislature only specified the availability of “reasonable damages” for workers’ compensation retaliation claims, we interpreted that term to include punitive damages, which “have long been seen as an important policy tool and a valid measure of damages.” Azar Nut Co. v. Caille, 734 S.W.2d 667, 669 (Tex. 1987) (citing Hofer v. Lavender, 679 S.W.2d 470, 474–75 (Tex. 1984)). Here, we face similar policy concerns to those presented by the statute at issue in Azar Nut (deterring employers from wrongfully terminating employees), as well as the additional objective of deterring violations of the criminal law. We hold that, in the proper case, Sabine Pilot plaintiffs may recover any reasonable tort damages, including punitive damages.

  

SOURCE: TEXAS SUPREME COURT - Safeshred, Inc. v. Louis Martinez, III (Tex. April 20, 2012)(Opinion by Lehrmann) (on petition for review from the Austin Court of Appeals)
LEGAL TERMS AND LINKS: Sabine Pilot Exception to Employment at Will Doctrine  Employment at Will

Defamation Claim by fired employee and former employer's Qualified Privilege Defense

Qualified Privilege As a defense against a slander or libel claim in the termination-of-employment context
 
For a private individual to sustain a defamation claim, the plaintiff must prove that: (1) the defendant published a false statement about the plaintiff; (2) the statement was defamatory concerning the plaintiff; and (3) the defendant acted with either actual malice, if the plaintiff was a public official or public figure, or negligence, if the plaintiff was a private individual, regarding the truth of the statement. WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568, 571 (Tex. 1998).
  
However, a qualified privilege to make a statement exists when “’the person making the statement . . . makes it in good faith on a subject matter in which the speaker has a common interest with the other person, or with reference to which the speaker has a duty to communicate to the other.’” Saudi v. Brieven, 176 S.W.3d 108, 118 (Tex. App.—Houston [1st Dist.] 2004, pet denied) (quotingGrant v. Stop-N-Go Mkt. of Tex., Inc., 994 S.W.2d 867, 874 (Tex. App.—Houston [1st Dist.] 1999, no pet.)). This privilege does not apply if the information is furnished to others that do not share the common interest. Id.; see Dun & Bradstreet, Inc. v. O’Neil, 456 S.W.2d 896, 898-99 (Tex. 1970).
   

 “The privilege is also defeated if the defendant makes the statement with actual malice.” Saudi, 176 S.W.3d at 118 (citing Grant, 994 S.W.2d at 874). “’The privilege is abused if the statement is made with actual malice—that is, it is made with knowledge of its falsity or with reckless disregard as to its truth.’” Id. (quoting Grant, 994 S.W.2d at 874); see Freedom Newspapers of Tex. v. Cantu, 168 S.W.3d 847, 858 (Tex. 2005) (stating that “hatred, spite, ill will, or desire to injure” is not proof of actual malice). “Malice . . . cannot be inferred from falsity of the statement alone.” Martin v. Sw. Elec. Power Co., 860 S.W.2d 197, 200 (Tex. App.—Texarkana 1993, writ denied). “An uncontroverted affidavit by the person publishing the statement that indicates the statement was not made with actual malice is sufficient to meet the burden to negate actual malice as a matter of law.” Associated Press v. Cook, 17 S.W.3d 447, 458 (Tex. App.—Houston [1st Dist.] 2000, no pet.); see Mitre v. La Plaza Mall, 857 S.W.2d 752, 754 (Tex. App.—Corpus Christi 1993, writ denied).

  
Essentially, qualified privilege is an affirmative defense in which [FORMER EMPLOYER / DEFENDANT] bore the burden of conclusively establishing each element of the privilege to prevail on its summary-judgment motion with respect to [TERMINATED EMPLOYEE-PLAINTIFF]’s defamation claim. See Bryant v. Lucent Techs., Inc., 175 S.W.3d 845, 852 (Tex. App.—Waco 2005, pet. denied).

To establish the affirmative defense of qualified privilege, [EMPLOYER-DEFENDANT] must show that the alleged defamatory statement: (1) was made without malice; (2) concerned a subject matter of sufficient interest to the author or was in reference to a duty owed by the author; and (3) was communicated to another party with a corresponding interest or duty. See id. (citing Saudi, 176 S.W.3d at 118; Austin v. Inet Techs., Inc., 118 S.W.3d 491, 496 (Tex. App.—Dallas 2003, no pet.); San Antonio Credit Union v. O’Connor, 115 S.W.3d 82, 99 (Tex. App.—San Antonio 2003, pet. denied)).
   

In determining whether the standard for actual malice in a defamation action has been satisfied, “the reviewing court must consider the factual record in full.” Bentley v. Bunton, 94 S.W.3d 561, 591 (Tex. 2002). “[T]he boundaries of actual malice, and particularly reckless disregard, cannot be fixed by the defining words alone but must be determined by the applications of those words to particular circumstances.” Id. at 592. In other words, actual malice can be proven through circumstantial evidence. Id. at 591.

  

SOURCE: WACO COURT OF APPEALS - 10-11-00257-CV – 12/7/11

WBA: Good-faith report to what whistleblower believed to be appropriate law-enforcement agency or regulator

     
TEXAS WHISTLEBLOWER ACT: WHAT IS PROTECTED?
  

The Texas Whistleblower Act is contained in chapter 554 of the Texas Government Code. See Tex. Gov't Code Ann. §§ 554.001-.010. Section 554.002 of the Whistleblower Act provides

 
(a) A state or local governmental entity may not suspend or terminate the employment of, or take other adverse personnel action against, a public employee who in good faith reports a violation of law by the employing governmental entity or another public employee to an appropriate law enforcement authority. 
 
(b) In this section, a report is made to an appropriate law enforcement authority if the authority is a part of a state or local governmental entity or of the federal government that the employee in good faith believes is authorized to:
 
(1) regulate under or enforce the law alleged to be violated in the report; or         
(2) investigate or prosecute a violation of criminal law. 

Id. § 554.002.

Pursuant to section 554.0035 of the act, “[s]overeign immunity is waived and abolished to the extent of liability for the relief allowed under this chapter for a violation of this chapter.” Id. § 554.0035.        
   
Under section 554.002, a conclusion that a governmental entity to whom a report is made is not authorized to regulate under, enforce, investigate, or prosecute the law at issue is not determinative as to whether a whistleblower action can be maintained. Tex. Dep't of Transp. v. Needham, 82 S.W.3d 314, 320 (Tex. 2002).
 

A party may obtain Whistleblower Act protection if he in good faith believed such governmental entity was an appropriate law enforcement authority as the statute defines the term. Id. In the context of section 554.002(b), “good faith” means (1) the employee believed the governmental entity was authorized to regulate under or enforce the law alleged to be violated in the report, or investigate or prosecute a violation of criminal law; and (2) the employee's belief was reasonable in light of the employee's training and experience. Id. at 321.

  

SOURCE: DALLAS COURT OF APPEALS - 05-11-00480-CV  - 11/3/11 

What is Constructive Discharge in employment law?

 
TERMINATION OF EMPLOYMENT: CONSTRUCTIVE DISCHARGE 
   How does it differ from an ordinary firing?

 

A constructive discharge occurs when an employer makes conditions so intolerable that an employee reasonably feels compelled to resign. See Baylor University v. Coley, 221 S.W.3d 599, 604-05 (Tex. 2007), citing Pennsylvania State Police v. Suders, 542 U.S. 129, 141, 124 S.Ct. 2342, 2351, 159 L.Ed.2d 204 (2004); Hammond v. Katy Independent School District, 821 S.W.2d 174, 177 (Tex.App.--Houston [14th Dist.] 1991, no writ).

Many factors are relevant to the issue, including evidence of badgering, harassment, or humiliation by the employer calculated to encourage the employee's resignation. Davis v. City of Grapevine, 188 S.W.3d 748, 766 (Tex.App.--Fort Worth 2006, pet. denied).

SOURCE: El Paso Court of Appeals - 08-09-00007-CV - 7/6/11 

RELATED LEGAL TERMS: employment disputes, wrongful termination, whistleblower claims, discrimination, retaliation by employer

Claim under the Whistleblower Act: Procedural requirements & limitations period

WRONGFUL TERMINATION  CLAIMS OF PUBLIC EMPLOYEES UNDER THE TEXAS WHISTLEBLOWER ACT

The Texas Whistleblower Act requires that a state or local governmental entity may not suspend or terminate the employment of, or take other adverse personnel action against, a public employee who in good faith reports a violation of law by the employing governmental entity or another public employee to an appropriate law enforcement authority. TEX. GOV’T CODE ANN. § 554.002(a).

DEADLINE TO BRING SUIT

Pursuant to section 554.005 of the Act, an employee who seeks relief must sue no later than the 90th day after the date on which the alleged violation occurred or was discovered through reasonable diligence, except as provided in section 554.006. TEX. GOV’T CODE ANN. § 554.005 (Vernon 2004).

ADMINISTRATIVE COMPLAINT PROCEDURE PRIOR TO SUIT

Section 554.006 provides as follows: (a) A public employee must initiate action under the grievance or appeal procedures of the employing state or local governmental entity relating to suspension or termination of employment or adverse personnel action before suing under this chapter. (b) The employee must invoke the applicable grievance or appeal procedures not later than then 90th day after the date on which the alleged violation of this chapter: (1) occurred; or (2) was discovered by the employee through reasonable diligence. (c) Time used by the employee in acting under the grievance or appeal procedures is excluded, except as provided by Subsection (d), from the period established by Section 554.005. (d)

If a final decision is not rendered before the 61st day after the date procedures are initiated under Subsection (a), the employee may elect to: (1) exhaust the applicable procedures under Subsection (a), in which event the employee must sue not later than the 30th day after the date those procedures are exhausted to obtain relief under this chapter; or (2) terminate procedures under Subsection (a), in which event the employee must sue within the time remaining under Section 554.005 to obtain relief under this chapter. TEX. GOV’T CODE ANN. § 554.006 (Vernon 2004).

SOURCE: Houston Court of Appeals - 01-10-00485-CV - 7/7/11

The record shows that [ Whistleblower Plaintiff ] initiated [ Houston ISD ]’s grievance procedure in May 2005. She filed an amended grievance in September 2005. A final decision was not rendered in the procedure within 61 days. See id. § 554.006(d). [ Whistleblower Plaintiff ], however, pursued the grievance procedure to a level three decision by [ Houston ISD ]’s board of trustees. While she pursued the grievance procedure, the limitations period was tolled. See id. § 554.006(c). The board of trustees issued its decision against [ Whistleblower Plaintiff ] on June 15, 2006. Under Chapter 21 of the Education Code, [ Whistleblower Plaintiff ] had 20 days to appeal the board’s decision to the Commissioner of Education. See TEX. EDUC. CODE ANN. § 21.301(a) (Vernon 2006). As discussed supra, [ Whistleblower Plaintiff ] did not appeal the decision. By not appealing to the Commissioner, [ Whistleblower Plaintiff ] chose to abandon her administrative remedy and terminate the grievance procedure. Assuming the broadest reading of the record and statute, the limitations period ran in October 2006, that is, 90 days from when [ Whistleblower Plaintiff ] terminated the grievance procedure. See TEX. GOV’T CODE ANN. § 554.006(d)(2); see also id. § 554.005. [ Whistleblower Plaintiff ] did not file suit until March 2007—well outside the limitations period.[8] See id. § 554.005.

We conclude that [ Houston ISD ] met its summary-judgment burden to conclusively show that [ Whistleblower Plaintiff ]’s whistleblower claim was barred by limitations. See TEX. R. CIV. P. 166a(c). [ Whistleblower Plaintiff ] did not meet her corresponding burden to raise a genuine issue of material fact precluding summary judgment. Thus, we hold that the summary judgment is properly granted in favor of [ Houston ISD ] with regard to [ Whistleblower Plaintiff ]’s whistleblower claim. We overrule [ Whistleblower Plaintiff ]’s two issues to the extent they challenge the trial court’s summary judgment with respect to her whistleblower claim.