Colorado is an “at-will” employment state, which means that, generally speaking, an employee may be terminated for any or no reason, with or without cause, and with or without notice. In fact, even if the reason for termination is unfair, or irrational, or purely a personality conflict, it is not necessarily unlawful.
The seemingly broad protections of “at-will” employment, however, are riddled with exceptions that have been established by various local, state and federal laws, as well as by decisions handed down by the courts. If an exception applies, then the “at-will” protection is no protection at all. It becomes irrelevant.
One of the exceptions to “at-will” employment arises when an employer fires an employee because the employee refuses to act as directed on the grounds that the employee believes the action would be unlawful. It is also unlawful to terminate an employee for their exercising an important legal right, obligation, or basic responsibility as a citizen or worker, such as filing a workers’ compensation claim. The courts refer to this as a “wrongful discharge against public policy.”
So why is it considered a wrongful discharge? Because the courts have repeatedly recognized that an employee, whether “at-will” or otherwise, should not be put to the choice of either obeying an employer’s order to violate the law or losing his or her job.
Employers are particularly vulnerable to public-policy claims because they have significant jury appeal, and they allow employees to recover not only their economic damages, but also damages for pain and suffering and in some cases for punitive damages.
What are some examples of a wrongful discharge against public policy?
In a landmark decision by the Colorado Supreme Court, an employee working for Martin Marietta Corporation alleged he was fired for refusing to participate in his employer’s fraud in the performance of a contract with NASA. The employee relied on a federal fraud statute which prohibited anyone from making false or fraudulent statements or representations to any department or agency of the United States. The Colorado Supreme Court noted that the employee had a duty to report quality control deficiencies, that he refused his superior's order to misrepresent to the government such deficiencies and make unrealistic cost assessments, that carrying out his superior's orders would have violated the federal fraud statute, and that the reason for his termination was his refusal to obey his employer's direction.
The court also pointed out that the public-policy exception would apply in the context of an employee’s performance of an important public function, such as serving jury duty, or when the employee exercises a statutory right or privilege granted to workers, such as the right of an employee to file a workers’ compensation claim.
Since the Colorado Supreme Court’s landmark decision, the public-policy exception has undergone further developments. For instance, Colorado courts have confirmed that employers may be liable for discharging employees who report violations of Colorado law because they have a public duty to do so. For instance, in one case, an accountant alleged that she had been fired because she refused to falsify financial information. The employer claimed it never directed her to do so. The court disagreed, finding that the accountant’s supervisor told her to identify benefits of a proposed merger between the employer and other health insurance carriers. When the accountant told her supervisor that she could not identify any such benefits, the supervisor told her that she should not be working for the company. The court decided that this evidence could persuade a jury to conclude that the accountant was in fact directed to identify nonexistent benefits of merger or face termination. This means that an illegal employer directive can be inferred from communications between the employer and employee.
In 2013, a court decided that a wrongful discharge can arise even if there is no specific statutory authority spelling out the public policy that the employee claims was violated. The court rejected the employer’s defense that -- because the employee himself was not ordered to engage in active deceit and because the employee did not explicitly threaten to report the alleged malfeasance -- the public policy exception to the at-will employment doctrine is inapplicable. The court found that although the public policy exception to the at-will employment doctrine is narrow, it is not as insulating as the employer had argued, and it is not intended to deflect only direct orders to actively participate in activity forbidden by statute. Similarly, the court rejected the argument that the employee needed to “whistle-blow” to a government entity to avail himself of the public policy exception.
Several issues related to the exception remain unclear, such as whether adverse employment actions other than a termination give rise to employer liability, or whether the employee’s own misconduct extinguishes any protection they may have otherwise had. What is clear is that the public-policy exception to the at-will employment doctrine will continue to be a significant source of liability for employers in years to come.