Palmer v. Brown

• Decision Date: 25 March 1988
• Docket Number: No. 61102,61102
• Parties: , 56 USLW 2615, 109 Lab.Cas. P 55,904, 3 IER Cases 177 Leigh PALMER, Appellant, v. Paul BROWN, M.D.; Gary B. Morsch, M.D.; Paul M. Wardlaw, M.D.; Michael W. Mathews, M.D.; Douglas R. Gwinn, M.D.; and Associates in Family Care, P.A., Appellees.
• Court: Kansas Supreme Court

Page 685

752 P.2d 685

242 Kan. 893, 56 USLW 2615, 109

Lab.Cas. P 55,904,

3 IER Cases 177

Leigh PALMER, Appellant, v. Paul BROWN, M.D.; Gary B. Morsch, M.D.; Paul M. Wardlaw M.D.; Michael W. Mathews, M.D.; Douglas R Gwinn, M.D.; and Associates in Family Care, P.A., Appellees.

No. 61102.

Supreme Court of Kansas.

March 25, 1988.

Syllabus by the Court

1. It is declared the public policy of the State of Kansas to encourage citizens to report infractions of the law pertaining to public health, safety, and the general welfare.

2. Termination of an employee in retaliation for the good faith reporting of a serious infraction of the law by a co-worker or an employer to either company management or law enforcement officials is an actionable tort.

3. To maintain an action in tort for retaliatory discharge for "whistle-blowing", an employee has the burden of proving by clear and convincing evidence, under the facts of the case, a reasonably prudent person would have concluded the employee's co-worker or employer was engaged in activities in violation of rules, regulations, or the law pertaining to public health, safety, and the general welfare; the employer had knowledge of the employee's reporting of such violation prior to discharge of the employee; and the employee was discharged in retaliation for making the report. However, the whistle-blowing must have been done out of a good faith concern over the wrongful activity reported rather than from a corrupt motive such as malice, spite, jealousy or personal gain.

4. Circumstances alleged to constitute fraud must be stated with particularity in the petition in order to support the claim.

Kevin M. Fowler, of Frieden & Forbes, Topeka, argued the cause and Randall J. Forbes and John C. Frieden, were with him on the brief, for appellant.

Mark A. Corder, of Hackler, Londerholm, Corder, Martin & Hackler, Chartered, Olathe, argued the cause, and was on the brief, for appellees.

HERD, Justice:

This is an action for retaliatory discharge in which Leigh Palmer appeals the district court's order of dismissal for failure to state a claim upon which relief may be granted.

For the purpose of this appeal we accept the facts as stated by Palmer. Palmer is an experienced medical technician who was working in a medical laboratory in 1986 when Gary Coulter, executive vice-president of Associates in Family Care, P.A., (AFC) recruited her to administer AFC's in-house laboratory. Coulter told Palmer AFC wanted someone with her assertive nature who would not be easily manipulated by the AFC doctors. At the time she was hired, AFC had a policy of a 90-day probationary period for new employees. Palmer had no written employment contract, individual or union, with the AFC.

During Palmer's probationary period, she discovered at least one of the physicians was billing Medicaid for lab work which had not been performed. The appellees knew she possessed this knowledge.

Around the first of December, with her probationary period almost over, Coulter told Palmer her probation was being extended. He explained that, although AFC was pleased with the technical quality of her work, her overall performance would be reevaluated on or before January 16, 1987.

Following her discussion with Coulter, Palmer made changes in her operating procedures, attempting to please her employer, although she felt any criticism AFC had of her work was either totally unfounded or based on her adhering to Coulter's instructions to her when she was first hired. She then asked each of the member physicians if he was pleased with her work. They all said her performance was excellent.

Toward the end of December, Dr. Gary Morsch, a member of AFC, began insisting Palmer have lunch with him. When she finally accepted, he took the occasion to interrogate her about her knowledge of AFC's billing practices and to obtain her assurance she would keep the information secret. When she refused to assure him she would not report the practices to the appropriate authorities, he told her she could not be trusted and warned her if she were to say anything to anyone she would not be given permanent status with AFC.

About a week later, Palmer proceeded to transmit information to unspecified authorities which she said supported her suspicions of Medicaid fraud. She was later informed, a week before the end of her new probationary period, that she was fired because her job performance had seriously deteriorated in the last two weeks. She claims her job performance had not deteriorated and that she was fired in retaliation for "whistle-blowing." She does not, however, specifically allege AFC had knowledge she had reported the alleged fraud.

Palmer brought suit against AFC and the individual physicians based on the above facts. The appellees filed no answer and did not respond to discovery; instead, they moved to dismiss the suit on the ground Kansas does not recognize an exception to the employment-at-will doctrine except for retaliatory discharge for filing a workers' compensation claim.

At the hearing on the motion, Palmer argued the defendants had not addressed her "separate fraud and detrimental reliance" claims. However, the court held the motion to dismiss was based squarely on the pleadings and sustained the motion, holding Palmer had not stated a cause of action.

The first issue is whether discharge of a probationary employee in retaliation for the reporting of employer fraud or infraction of the law is a tort. A motion to dismiss for failure of the plaintiff to state a claim upon which relief can be granted, K.S.A. 60-212(b)(6), must be denied unless the allegations in the petition, viewed in the most favorable light to the plaintiff, clearly demonstrate the plaintiff is not entitled to relief under any set of facts which could be proved in support of the claim. Keith v. Schiefen-Stockham Insurance Agency, Inc., 209 Kan. 537, 540, 498 P.2d 265 (1972).

We must, therefore, for purposes of review, assume Palmer was fired for reporting the illegal actions of her employers. Appellees disagree, arguing Palmer did not actually claim in her petition that they were aware she had notified state authorities. However, her allegation the termination took place "with the intent of punishing [her] for ... reporting the unethical and illegal billing practices of AFC" is sufficient, under the applicable standard of review, to constitute such a claim.

The appellees have attached as an appendix to their brief a letter from the Surveillance and Utilization Review Section of the State Department of Social and Rehabilitation Services. The letter was not written until a week after the district court's decision. It is not a part of the record in this case. Thus, it is not considered in this appeal.

Kansas has long held that, in the absence of an express or implied contract between an employee and employer regarding the duration of employment, either party is free to end the employment at any time for any reason. Johnston v. Farmers Alliance Mutual Ins. Co., 218 Kan. 543, 546, 545 P.2d 312 (1976). This rule has many exceptions.

Public employees are constitutionally protected against wrongful discharge because such discharge involves state action. See Wertz v. Southern Cloud Unified School District, 218 Kan. 25, 29-31, 542 P.2d 339 (1975). Kansas public employees are specifically protected in their right to report violations of state or federal law to any person or agency under K.S.A. 75-2973(b)(1). An estimated 82% of all collective bargaining agreements contain "just cause" provisions which protect workers against wrongful discharge. See Note, A Common Law Action for the Abusively Discharged Employee, 26 Hastings L.J. 1435, 1448 (1975).

All at-will employees are statutorily protected from retaliatory discharge for reporting certain types of abuses. No employee may be fired for reporting child abuse, K.S.A. 38-1525; for reporting abuse of certain adults in need of care, K.S.A. 39-1403(b), 39-1423(b); for testifying before the secretary of human resources, K.S.A. 44-615; or for reporting unsafe or unlawful working conditions to the secretary of human resources, K.S.A. 44-636(f). K.S.A. 44-831 states an employee has a cause of action against any employer who violates the state's "right to work" amendment, Kan. Const. art. 15, § 12, by conditioning employment on membership or nonmembership in a union. K.S.A. 44-1009(a)(1) prohibits any employer of four or more persons from firing an employee because of race, religion, color, sex, physical handicap, national origin or ancestry.

Appellees argue the statutory exceptions to the right to terminate an employee at will are exclusive since it is generally the province of the legislature to declare public policy. Noel v. Menninger Foundation, 175 Kan. 751, 267 P.2d 934 (1954). The legislature has nevertheless provided that "[t]he common law as modified by constitutional and statutory law, judicial decisions, and the conditions and wants of the people, shall remain in force in aid of the General Statutes of this state." K.S.A. 77-109. Before courts are justified in declaring the existence of public policy, however, "it should be so thoroughly established as a state of public mind so united and so definite and fixed that its existence is not subject to any substantial doubt." 175 Kan. 751, Syl. p 4, 267 P.2d 934.

The Court of Appeals accepted its obligation to declare public policy in Murphy v. City of Topeka, 6 Kan.App.2d 488, 630 P.2d 186 (1981), where the plaintiff alleged he was fired for refusing to withdraw his workers' compensation claim. A special panel of the Court of Appeals recognized a cause of action in tort, based on public policy, for wrongful discharge in retaliation for the filing of a workers' compensation claim. Noting that the Workers' Compensation Act is the exclusive remedy afforded an injured employee, the court held the Act's purpose in protecting employees could not be...