Phillips v. Butterball Farms Co., Inc.

• Decision Date: 21 March 1995
• Docket Number: Docket No. 97976,No. 14,14
• Citation: 448 Mich. 239,531 N.W.2d 144
• Parties: , 63 USLW 2672, 10 IER Cases 729 Teresa PHILLIPS, Plaintiff-Appellant, v. BUTTERBALL FARMS COMPANY, INC, Defendant-Appellee. (After Second Remand) Calendar
• Court: Michigan Supreme Court

Page 144

531 N.W.2d 144

448 Mich. 239, 63 USLW 2672, 10 IER

Cases 729

Teresa PHILLIPS, Plaintiff-Appellant, v. BUTTERBALL FARMS COMPANY, INC, Defendant-Appellee. (After Second Remand)

Docket No. 97976.

Calendar No. 14.

Supreme Court of Michigan.

Argued Nov. 2, 1994.

Decided March 21, 1995.

[448 Mich. 241] Drew, Cooper & Anding by Stephen R. Drew and Amy L. Young, Grand Rapids, for plaintiff.

Miller, Johnson, Snell & Cummiskey, P.L.C. by Craig H. Lubben, Kalamazoo, for defendant.

Clark, Klein & Beaumont by Dwight H. Vincent, J. Walker Henry, and Donica T. Thomas, Detroit, for amici curiae Michigan Mfrs. Ass'n.

OPINION

AFTER SECOND REMAND

LEVIN, Justice.

Plaintiff Teresa Phillips, an employee at will, commenced this action against her former employer, defendant Butterball Farms Company, Inc., claiming that she was discharged for exercising rights under the worker's compensation act. The circuit court entered orders limiting the damages recoverable, and trial has been deferred to provide Phillips with an opportunity to appeal those orders.

The Court of Appeals held that because Phillips was an employee at will, damages for lost wages will be nominal and the measure of damages for mental or emotional distress will also be limited.

We hold that, although Phillips was an employee at will, recovery is not limited to nominal damages, and, if she can establish that she was discharged for exercising rights under the worker's compensation act, she may recover compensation for lost wages, back pay and front pay, and mental or emotional distress damages. The parties have not briefed or argued the issues that might arise respecting the length of front pay and mitigation of damages. We remand for trial.

I

Phillips was a probationary employee at Butterball. She injured her wrist on the job, and returned to work on August 19, 1986, five days after the injury. She alleges that she claimed benefits under the worker's compensation act by requesting that her medical bills be paid by Butterball and was met with a hostile attitude, and, approximately two weeks later, before the end of the probationary period, her employment was terminated.

Phillips commenced this action, ¹ and the circuit court entered the orders limiting damages. ² The Court of Appeals essentially affirmed the circuit court orders limiting damages. ³

The Court of Appeals ⁴ ruled that the instant case was factually similar to Dunbar v. Dep't of Mental Health, 197 Mich.App. 1, 495 N.W.2d 152 (1992), and that, under Administrative Order No. 1990-6, it was bound to follow Dunbar. The Court, however, criticized Dunbar. ⁵

The Court said that, because it was bound to follow Dunbar, it was "compelled to conclude that plaintiff's cause of action sounds in tort, and, therefore, plaintiff may claim all the damages allowed for that cause of action, including damages for mental or emotional distress." ⁶ The Court, however, limited the amount recoverable:

[T]he measure of damages for her mental or emotional distress necessarily will be confined to proof of distress arising solely from the retaliatory nature of the discharge, because an at will employee has no reasonable expectation of being continued in employment. Similarly, whether the action be in tort or contract, damages for lost wages will be nominal because an at-will employee cannot show a reasonable expectation of continued employment. ⁷ [Emphasis added.]

II

Phillips was an employee at will. The general rule is that "in the absence of a contractual basis for holding otherwise, either party to an employment contract for an indefinite term may terminate it at any time for any, or no, reason." Suchodolski v. Michigan Consolidated Gas Co., 412 Mich. 692, 694-695, 316 N.W.2d 710 (1982). This Court continued that nevertheless "some grounds for discharging an employee are so contrary to public policy as to be actionable." ⁸ In addition to statutory causes of action for violation of explicit prohibitions, ⁹ causes of action have been implied where the employee was discharged for failure or refusal to violate a law in the course of employment. ¹⁰

This Court continued in Suchodolski that "the courts have found implied a prohibition on retaliatory discharges when the reason for a discharge was the employee's exercise of a right conferred by a well-established legislative enactment. See, e.g., Sventko v. Kroger Co. [69 Mich.App. 644, 245 N.W.2d 151 (1976) ]; Hrab v. Hayes-Albion Corp, 103 Mich.App. 90, 302 N.W.2d 606 (1981). Both cases involved allegations of discharges in retaliation for having filed worker's compensation claims." ¹¹

In Sventko, the Court of Appeals recognized a cause of action for discharge in retaliation for filing a worker's compensation claim. The lead opinion said that "while it is generally true that either party may terminate an employment at will for any reason or for no reason, that rule is not absolute." ¹² The opinion continued that "the better view is that an employer at will is not free to discharge an employee when the reason for the discharge is an intention on the part of the employer to contravene the public policy of this state." ¹³ The Court of Appeals thus found that, although there was no explicit statutory proscription, the public policy expressed in the worker's compensation act precluded an employer from discharging an employee for filing a claim.

III

The Court of Appeals initially determined that an action for retaliatory discharge sounded in tort. ¹⁴ Subsequent panels concluded that the action sounded in contract. ¹⁵ In Dunbar, ¹⁶ the Court ruled that an action for wrongful discharge in retaliation for filing a worker's compensation claim sounds in tort, not contract. The Court continued that the cause of action is now statutorily based, and that, for breach of the statutory duty, the action sounds in tort not contract. ¹⁷

Butterball argues, consistent with the Court of Appeals opinions concluding that the claim sounds in contract, that the contractual employment relationship is what gives rise to Phillips' cause of action. Implied in every contract, Butterball contends, is a promise not to contravene public policy. Thus, the action for retaliatory discharge is in contract because the right not to be discharged arises out of a promise implied in the contract.

This argument ignores that the source of this right against retaliatory discharge does not stem from any term agreed upon by the contracting parties, but from public policy now expressed in a statute. ¹⁸ The duty not to retaliate against an employee for filing a worker's compensation claim arises independently from the employment contract. ¹⁹ In Lathrop v. Entenmann's, Inc., 770 P.2d 1367, 1373 (Colo.App., 1989), a Colorado appellate court said: "[t]he duty of the employer to refrain from retaliation in violation of a state's public policy does not find its source in any private contract; it is a duty imposed by the state's legislative body; and it is one that cannot be adjusted or modified by the private actions of an employer and a collective bargaining agent."

Many states now recognize a cause of action for retaliatory discharge of an employee who has filed a worker's compensation claim. ²⁰ The vast majority hold that such an action is grounded in tort on the basis of a public policy exception or express statutory proscription. ²¹

The Nevada Supreme Court observed:

We know of no more effective way to nullify the basic purposes of Nevada's workmen's compensation system than to force employees to choose between a continuation of employment or the submission of an industrial claim. In the absence of an injury resulting in permanent total disability, most employees would be constrained to forego their entitlement to industrial compensation in favor of the economics necessity of retaining their jobs. ²²

In holding that such a cause of action sounds in tort, not contract, the Kansas Court of Appeals observed that "the mere existence of a contractual relationship between the parties does not change the nature of [this] action." ²³

In enacting § 301(11) of the Worker's Disability Compensation Act, ²⁴ the Legislature codified Sventko. While the contractual relationship was "at will," the contractual relationship is not the source of an employee's right to protection against retaliatory discharge for filing a worker's compensation claim. The right stems not from an implied promise by the employer, but from the statute. A cause of action seeking damages from an employer who violates the worker's compensation act is independent of the contract, and sounds in tort, not contract. ²⁵

IV

The Court of Appeals, in holding that because Phillips was an employee at will, she may recover only limited or nominal damages, in effect ruled that there is no meaningful remedy for retaliatory discharge for filing a worker's compensation claim. Some employees are employed for fixed terms. Others are protected by individual or union contracts providing that the employee may only be discharged for just cause. And still others, perhaps the majority, are "at will." A fixed-term or just-cause employee is protected by that term of the employment relationship. Unless employees at will are also protected from retaliatory discharge for filing a worker's compensation claim, almost no employee is protected by the prohibition against discharge of an employee therefor.

In Dunbar, supra, the Court of Appeals held that, because a claim for retaliatory discharge sounds in tort, the employee can claim damages for mental distress and loss of pay resulting from the improper discharge. ²⁶

Butterball contends that the Dunbar panel erred, and argues that decisions of this Court have limited the circumstances in which an employee can obtain mental distress damages when there has been no evidence of physical injury. Butterball cites this Court's decisions in Valentine v. General American Credit, Inc., 420 Mich. 256, 362 N.W.2d 628 (1984...