Phipps v. Clark Oil & Refining Corp.

• Decision Date: 18 November 1986
• Docket Number: No. C1-86-795,C1-86-795
• Citation: 396 N.W.2d 588
• Court: Minnesota Court of Appeals
• Parties: 106 Lab.Cas. P 55,695, 1 Indiv.Empl.Rts.Cas. (BNA) 1063 Mark A. PHIPPS, Appellant, v. CLARK OIL & REFINING CORPORATION, et al., Respondents.

Page 588

396 N.W.2d 588

106 Lab.Cas. P 55,695, 1 Indiv.Empl.Rts.Cas. (BNA) 1063

Mark A. PHIPPS, Appellant, v. CLARK OIL & REFINING CORPORATION, et al., Respondents.

No. C1-86-795.

Court of Appeals of Minnesota.

Nov. 18, 1986.

Review Granted Jan. 21, 1987.

Syllabus by the Court

1. Employee terminated for refusing to violate a law has a cause of action for wrongful discharge against his employer under a public policy exception to the employment-at-will doctrine.

2. Employer's statement that employee was terminated because "he may have refused to provide full service to a handicapped customer" gives rise to a claim for defamation because it tends to injure employee's reputation in the community.

Randy V. Thompson, Smith, Persian, MacGregor & Thompson, Minneapolis, for appellant.

Thomas B. Hatch, Robins, Zelle, Larson & Kaplan, Minneapolis, for respondents.

Heard, considered and decided by FORSBERG, P.J., and FOLEY and LANSING, JJ.

OPINION

LANSING, Judge.

This appeal is from a judgment on the pleadings in an action by an employee against his employer for wrongful discharge and defamation. The trial court held that Minnesota law does not recognize a public policy exception to the employment-at-will doctrine. The court found that the statement made by the employer explaining appellant's discharge was not defamatory as a matter of law and had been admitted by the allegations of the complaint. The court denied appellant's request to amend his complaint to allege malice. We reverse and remand.

FACTS

The complaint sets forth the following facts: Mark A. Phipps was employed by Clark Oil Refining Corporation as a cashier at a self-service gas station. On November 17, 1984, a customer drove into the station and asked him to pump leaded gasoline into her 1976 Chevrolet--an automobile equipped to receive only unleaded gasoline. Phipps' manager, respondent Leroy Chmielewski, told Phipps to comply with the customer's request, but Phipps refused, believing that dispensing leaded gasoline into the gas tank was a violation of law. See Clean Air Act, 42 U.S.C. Secs. 7401-7642. Phipps was willing to pump un leaded gas into the customer's automobile; nevertheless, Chmielewski immediately fired him.

In response to an inquiry by the Minnesota Pollution Control Agency, Clark Oil's management stated that Phipps was fired because he had been rude to customers on several occasions and "may have refused to provide full service to a handicapped customer."

Phipps brought this action against his employers (referred to collectively as Clark Oil), seeking damages for wrongful termination and defamation. Clark Oil moved for judgment on the pleadings. Phipps requested leave to amend his complaint to allege malice, because Clark Oil claimed a qualified privilege in their answer. The trial court granted Clark Oil's motion, stating that Minnesota law allowed Phipps, an employee-at-will, to be terminated for any reason or for no reason. The court found that the statement explaining Phipps' discharge was not defamatory as a matter of law because it was not the type of statement which tended to injure Phipps' reputation in the community. Further, the court held that Phipps had, by the allegations in his complaint, admitted the truth of the statement. The court denied Phipps' motion to amend his complaint. Phipps appeals.

ISSUES

1. Does Minnesota law recognize a cause of action for wrongful discharge if an employee is terminated for refusing to violate a law?

2. Does the employer's statement that employee "may have refused to provide full service to a handicapped customer" give rise to a claim for defamation?

ANALYSIS

A. Employment-at-Will Doctrine and the Public Policy Exception

The parties concede that there is no formal agreement governing the employment relationship between Phipps and Clark Oil. Thus, Phipps is an at-will employee. ¹ The at-will employment doctrine in Minnesota is generally traced to the early case of Skagerberg v. Blandin Paper Co., 197 Minn. 291, 266 N.W. 872 (1936). The Skagerberg court interpreted a contract for permanent employment as being merely a contract for employment at will. Skagerberg set forth the general rule in Minnesota that employment at will "may be terminated by either party at any time, and no action can be sustained in such case for a wrongful discharge." Id. at 301-02, 266 N.W. at 877 (quoting Minter v. Tootle, Campbell Dry Goods Co., 187 Mo.App. 16, 27-28, 173 S.W. 4, 8 (1915)).

The employer's absolute right of discharge has been tempered during the last 50 years. The majority of jurisdictions have adopted, and numerous commentators have advocated, exceptions to the employment-at-will doctrine. Three general exceptions have been judicially created to relieve employees from the strict application of the employment-at-will doctrine:

(1) a contract cause of action based on implied-in-fact promises of employment conditions, generally derived from personnel manuals;

(2) an implied covenant of "good faith and fair dealing" under both contract and tort theories; and

(3) a "public policy" exception, based in tort, which permits recovery upon the finding that the employer's conduct undermines some important public policy.

Although the Minnesota Supreme Court has declined to imply a covenant of good faith and fair dealing into every employment contract, Hunt v. IBM Mid America Employees Federal Credit Union, 384 N.W.2d 853 (Minn.1986), it has followed the modern trend in recognizing exceptions to employment at will. Lewis v. Equitable Life Assurance Society, 389 N.W.2d 876, 882-83 (Minn.1986).

In Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.1983), the supreme court recognized the implied-in-fact contract exception. The Pine River court held that an employee manual may constitute an employment contract with enforceable terms preventing termination at will. See also Grouse v. Group Health Plan, Inc., 306 N.W.2d 114 (Minn.1981) (promissory estoppel principles provide cause of action for terminated at-will employee); Bussard v. College of St. Thomas, Inc., 294 Minn. 215, 200 N.W.2d 155 (1972) (material issue of fact existed as to whether parties had oral agreement of permanent employment under unique facts of case).

Among other states, the most widely adopted exception to the doctrine is the public policy exception. Simply stated, the exception provides that an employer becomes subject to tort liability if its discharge of an employee contravenes some well-established public policy. Although the adoption of this exception has not been addressed in Minnesota, the majority of jurisdictions recognize this exception to the employment-at-will doctrine. ²

The exception began as a narrow rule permitting employees to sue their employers when a statute expressly prohibited their discharge. The rule later expanded to include any discharge in violation of a statutory expression of public policy. The broadest formulation of the rule permits recovery even in the absence of a specific statutory prohibition. See Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370, 376, 710 P.2d 1025, 1031 (1985); Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 871 (Mo.Ct.App.1985); Brockmeyer v. Dun &

Bradstreet, 113 Wis.2d 561, 571, 335 N.W.2d 834, 840 (1983). ³

Courts have reached the public policy exception to accommodate competing interests of society, the employee, and the employer. The Illinois Court of Appeals stated:

With the rise of large corporations conducting specialized operations and employing relatively immobile workers who often have no other place to market their skills, recognition that the employer and employee do not stand on equal footing is realistic. In addition, unchecked employer power, like unchecked employee power, has been seen to present a distinct threat to the public policy carefully considered and adopted by society as a whole. As a result, it is now recognized that a proper balance must be maintained among the employer's interest in operating a business efficiently and profitably, the employee's interest in earning a livelihood, and society's interest in seeing its public policies carried out.

Palmateer v. International Harvester Co., 85 Ill.2d 124, 129, 52 Ill.Dec. 13, 15, 421 N.E.2d 876, 878 (1981) (citation omitted).

These courts have also recognized that important societal interests oppose an employer's conditioning employment on required participation in unlawful conduct:

Although employers generally are free to discharge at-will employees with or without cause at any time, they are not free to require employees, on pain of losing their jobs, to commit unlawful acts or acts in violation of a clear mandate of public policy expressed in the constitution, statutes, and regulations promulgated pursuant to statute. The at-will employment doctrine does not depend upon the employer having such a right. The employer is bound to know the public policies of the state and nation as expressed in their constitutions, statutes, judicial decisions and administrative regulations, particularly, as here, those bearing directly upon the employer's business.

* * *

The at-will employment doctrine does not include, contemplate or require a privilege in the employer to subject its employees to the risks of civil and criminal liability that participation in such activities entails.

Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 877-78 (Mo.Ct.App.1985).

We find the reasoning of the cases adopting a public policy exception to be persuasive. An employer's authority over its employee does not include the right to demand that the employee commit a criminal act. An employer therefore is liable if an employee is discharged for reasons that contravene a clear mandate of public policy.

Employers may have a legitimate concern that such an exception will allow fraudulent or frivolous suits by disgruntled employees who are discharged for valid reasons. In order to prevent this, the employee...