Jasper v. H. Nizam, Inc.

• Decision Date: 23 January 2009
• Docket Number: No. 05-1994.,05-1994.
• Citation: 764 N.W.2d 751
• Parties: Kimberly S. JASPER, Appellant, v. H. NIZAM, INC. d/b/a Kid University and Mohsin Hussain, Individually and in his Corporate Capacity, Appellees.
• Court: Iowa Supreme Court

764 N.W.2d 751

Kimberly S. JASPER, Appellant, v. H. NIZAM, INC. d/b/a Kid University and Mohsin Hussain, Individually and in his Corporate Capacity, Appellees.

No. 05-1994.

Supreme Court of Iowa.

January 23, 2009.

As Amended on Denial of Rehearing March 5, 2009.

Mark D. Sherinian and Andrew L. LeGrant, West Des Moines, for appellant.

Gordon R. Fischer of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellees.

CADY, Justice.

In this appeal, we face several issues of first impression in the continuing development of our tort of wrongful discharge in violation of public policy. Primarily, we must decide whether an administrative regulation may be a source of public policy to restrict the rights of an employer in this state to discharge an at-will employee. We also consider whether a corporate officer may be individually responsible for the tort and address a number of issues relating to damages, including the excessiveness of an award of emotional-distress damages.

We conclude administrative regulations can serve as a source of public policy to give rise to a claim of wrongful discharge from employment. We also conclude an individual corporate officer can be liable for the tort. We further conclude the award of emotional-distress damages in this case was excessive, and punitive damages were not recoverable. We vacate the decision of the court of appeals and affirm the decision of the district court in part, reverse in part, and remand for further proceedings.

I. Background Facts and Proceedings.

This case arose when Kimberly Jasper was terminated from her employment as the director of a child care facility in Johnston, Iowa, called Kid University. The center was owned by H. Nizam, Inc. Mohsin Hussain was the president of the corporation. Zakia Hussain was the vice president. The Hussains were married. Mohsin Hussain was a special education teacher for the Des Moines School District and was not involved in the day-to-day operation of the center.¹

Jasper began her employment as director of the center in late August 2003. She was paid an hourly wage. There was no specific term of employment. A few weeks after Jasper started her employment, she and her husband agreed to rent a home owned by the Hussains. The Jaspers had moved to Des Moines from Arizona and were looking for housing at the time. Jasper learned the Hussain house was available to rent when she and Hussain went to the house to retrieve some equipment to use at the day care center that was stored in the house. The house had four bedrooms and two bathrooms, but had sustained substantial water damage and was in a general state of disrepair. The agreed monthly rent was $10, plus utilities, and the Jaspers were required to make all repairs to the house at their own expense.

Within a short time after Jasper started her employment, Hussain told her the center was not making enough money to justify the size of the staff. He also encouraged Jasper to attract more children to the center. Jasper responded by telling Hussain that any staff cuts would place the center in jeopardy of violating state regulations governing the minimum ratios between staff and children. See Iowa Admin. Code r. 441-109.8 (2003). Hussain was generally aware of the staffing requirements imposed by state regulations through his contact with a consultant and compliance official from the Iowa Department of Human Services. The consultant dealt with licensing and regulatory compliance of child care facilities. She would periodically stop by the center to determine if the facility was being operated in compliance with all regulations. Hussain had also hired a private consultant prior to employing Jasper. The private consultant also informed Hussain of the necessity to comply with the state ratio requirements. Within a month after Jasper started her employment, Hussain was again told of the staffing ratios at a meeting with both consultants and Jasper.

The staff-to-child ratio became a frequent subject of conversation, and friction, between Hussain and Jasper. Hussain was persistent in his desire to reduce staff to decrease expenses, and Jasper was adamant that the current staff was necessary to meet the minimum staffing ratios under the state regulations. During one meeting with the Hussains and Jasper in early November, staff reductions were again discussed. Jasper claimed Zakia Hussain said, "What [the department of human services consultant] doesn't know won't hurt her." Hussain made no response to the statement. In fact, Hussain never specifically told Jasper to violate or ignore the staffing regulations.

At a meeting between Hussain and Jasper later in November, Hussain proposed that Jasper and her assistant director begin to work as staff in the classrooms occupied by the children as a means to cut staff and reduce expenses. Jasper objected to the plan as unreasonable. She believed it would prevent her from performing her duties as director of the center and risk placing the center in violation of the ratio regulations.

On December 1, 2003, Hussain terminated Jasper from her employment with Kid University shortly after she arrived for work at the center in the morning. She was handed a written letter listing the reasons for the termination and was escorted outside the building. A confrontation followed after she was told she could not return to the building to remove her children from the day-care center, and police were called.

Hussain also brought a forcible entry and detainer action against the Jaspers for failing to pay the December rent. Jasper and her family subsequently moved from the house, and she obtained new employment with another child care facility in April 2004.

Jasper brought a wrongful discharge action against the corporation and Hussain individually. She claimed Hussain terminated her employment because she refused to violate the staff-to-child ratios, in violation of public policy of this state. She sought damages for lost earnings, emotional pain and suffering, and punitive damages. She also sought damages relating to the termination of the rental agreement and for unreimbursed expenses relating to improvements made to the center. At trial, Jasper presented testimony that the center violated the staff-to-child ratios shortly after she was terminated. This violation occurred when one staff member was left in a classroom to supervise five or more children between the ages of one and two years old. The regulations promulgated by the department of human services required one staff member for every four children under the age of two. However, the district court refused to permit Jasper to present evidence that a second day care facility owned by Hussain had been cited by the state for violating the staff-to-child ratios.

Jasper presented evidence of her damages, including lost wages, pain and suffering, expenses relating to the house, and unreimbursed services and expenses relating to the day-care facility. Her damages for emotional distress suffered as a result of the termination from employment were supported by her testimony concerning her emotional state following the termination, as well as the testimony of her husband and sister.

In particular, Jasper testified she "was a wreck" during the days immediately following the termination, and "cried a lot." During the weeks following the termination, she "didn't sleep a lot" and "worried about money." The holiday season following the termination was particularly hard on her, largely due to the financial strain from being unemployed and having to rely upon her husband's income. At times, she "didn't want to get out of bed," and began to experience "anxiety attacks." On one occasion in February 2004, she testified she went to a hospital emergency room because she believed she was experiencing a "heart attack." A doctor prescribed antidepressant and anti-anxiety medication. Jasper did not testify about her emotional state beyond a couple of months after the termination, and certainly nothing after the time she became reemployed. Jasper was hired as the director of another child-care facility in the Des Moines area in April 2004. She worked part-time on occasion at a day-care facility prior to that employment.

Jasper's husband testified his wife was "crying and sobbing" on the day of the termination and that she later became somewhat "distant." She was also "short" with the children and was generally depressed. He also testified she started to gain weight she had lost prior to the termination. Jasper's sister testified Jasper was "withdrawn" after the termination and lacked the "confidence" she had prior to the termination.

The jury returned a verdict for Jasper against the corporation and Hussain individually, based solely on the tort of wrongful discharge in violation public policy. The jury awarded Jasper lost wages of $26,915 and past emotional distress of $100,000. It awarded her $39,507.25 for expenses relating to the house and additional services and expenses. The district court refused to submit the punitive-damage claim to the jury.

During the trial, the district court reserved ruling on a motion for directed verdict made by Kid University. After the jury verdict was returned, the district court granted the motion. It determined Jasper failed to establish the existence of a well-recognized and clearly defined public policy to support her cause of action and that she failed to present substantial evidence to show she was terminated for refusing to violate the state staffing regulations. The district court then proceeded to determine additional claims Kid University raised in a motion for new trial. The court determined the damages for emotional distress of $100,000 were excessive and reduced the award to $20,000. It determined damages relating to the rental house and unreimbursed expenses were independent of the wrongful-termination-of-employment action and could not be recovered...