Phipps v. Clark Oil & Refining Corp.

• Decision Date: 26 June 1987
• Docket Number: No. C1-86-795,C1-86-795
• Parties: , 107 Lab.Cas. P 55,788, 2 Indiv.Empl.Rts.Cas. (BNA) 341 Mark A. PHIPPS, Respondent, v. CLARK OIL & REFINING CORPORATION, et al., Petitioners, Appellants.
• Court: Minnesota Supreme Court

Page 569

408 N.W.2d 569

56 USLW 2043, 107 Lab.Cas. P 55,788,

2 Indiv.Empl.Rts.Cas. (BNA) 341

Mark A. PHIPPS, Respondent, v. CLARK OIL & REFINING CORPORATION, et al., Petitioners,

Appellants.

No. C1-86-795.

Supreme Court of Minnesota.

June 26, 1987.

Syllabus by the Court

1. When an at-will employee is discharged for refusing to violate the law, that employee may bring a wrongful discharge action against the employer.

2. The trial court erred in granting judgment on the pleadings with respect to the defamation claim.

Thomas Hatch, Minneapolis, for appellants.

Randy V. Thompson, Gary Persian, Minneapolis, for respondent.

Heard, considered, and decided by the court en banc.

OPINION

SCOTT, Justice.

Mark A. Phipps commenced this action in Hennepin County District Court in September, 1985. In their answer defendants, Clark Oil & Refining Corporation (Clark Oil) and Leroy Chmielewski, asserted that the complaint failed to state a claim upon which relief could be granted. On December 16, 1985, defendants moved for judgment on the pleadings pursuant to Rule 12.03 of the Minnesota Rules of Civil Procedure. The trial court granted defendants' motion and, on February 11, 1986, judgment was entered in favor of the defendants, and Phipps' complaint was dismissed with prejudice. Phipps appealed to the Minnesota Court of Appeals. That court reversed and remanded. The defendants then petitioned for further review, which was granted.

Phipps was employed as a cashier at a service station in Brooklyn Park, Minnesota, owned and operated by Clark Oil & Refining Corporation. Clark Oil employs Leroy Chmielewski as manager at that station. Phipps claims that on November 17, 1984, a customer requested that leaded gasoline be dispensed into her 1976 Chevrolet and Chmielewski directed him to do so. Phipps allegedly refused to dispense leaded gasoline into the vehicle "because the dispensing of leaded gasoline into said vehicle was in violation of federal law and regulations." Phipps maintains that he was at all times willing to dispense unleaded gasoline into the vehicle. Phipps was terminated from his employment, allegedly as a result of his refusal to dispense leaded gasoline into this vehicle.

Phipps also alleges that the defendants wrongfully stated to state administrative agencies that he was terminated for being rude to customers and for failing to provide proper service to a handicapped customer. Phipps claims, as Count II of his complaint, that this statement was libelous. Defendants, however, assert that the statement was privileged. Phipps sought to amend his complaint to allege malice, which could defeat a qualified privilege, but the trial court denied him permission to amend.

This case presents the following questions:

(1) Does an at-will employee who is terminated for refusing to violate a law have a cause of action for wrongful discharge?

(2) Does an employer's statement that the employee was terminated because "he may have refused to provide full service to a handicapped customer" give rise to a claim for defamation?

1. The court of appeals reversed the trial court's judgment on the pleadings and held that when an employer discharges an employee "for reasons that contravene a clear mandate of public policy," the employee has a cause of action for wrongful discharge. Phipps v. Clark Oil & Refining Corp., 396 N.W.2d 588, 592 (Minn.App.1986). Clark Oil argues that this court should reverse the court of appeals and defer to the legislature for any changes in the at-will employment doctrine.

Since oral argument, the legislature has enacted Minn.Stat. Sec. 181.932, subd. 1, which provides in part:

An employer shall not discharge, discipline, threaten, otherwise discriminate against, or penalize an employee regarding the employee's compensation, terms, conditions, location, or privileges of employment because:

* * *

(c) the employee refuses to participate in any activity that the employee, in good faith, believes violates any state or federal law or rule or regulation adopted pursuant to law.

Therefore, we no longer have before us the policy question of whether or not Minnesota should join the three-fifths of the states that now recognize, to some extent, a cause of action for wrongful discharge. See Lopatka, The Emerging Law of Wrongful Discharge--A Quadrennial Assessment of the Labor Law Issue of the 1980's, 40 Bus.Law. 1, 1 (1984). The only question that remains is whether we should uphold the court of appeals' decision applying this public policy exception to the November 17, 1984, discharge of Phipps.

Phipps claims that his discharge violates the public policy of the Clean Air Act, 42 U.S.C. Sec. 7401 et seq. (1983) and the regulations thereunder, 40 C.F.R. Sec. 80.1-.26 (1984). These regulations, specifically Sec. 80.22(a) (1984), make it illegal for any retailer or his employee to introduce leaded gasoline into a vehicle designed for unleaded gasoline. Phipps alleges that this was what Chmielewski told him to do and that his refusal was the reason for his termination. This case is similar to Wheeler v. Caterpillar Tractor Co., 108 Ill.2d 502, 92 Ill.Dec. 561, 485 N.E.2d 372 (1985), cert. denied, --- U.S. ----, 106 S.Ct. 1641, 90 L.Ed.2d 187 (1986), in which the Illinois Supreme Court held that an employee who refused to work with radioactive materials that were not handled in accordance with federal regulations could sue for wrongful discharge under the public policy exception. Wheeler, 108 Ill.2d at 509-11, 485 N.E.2d at 376-77. That court stated:

The protection of the lives and property of citizens from the hazards of radioactive material is as important and fundamental as protecting them from crimes of violence, and by the enactment of the legislation cited [Atomic Energy Act of 1954, 42 U.S.C. Sec. 2011 et seq.], Congress has effectively declared a clearly mandated public policy to that effect.

Id. at 511, 485 N.E.2d at 377. See also Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370, 378, 710 P.2d 1025, 1033 (1985); Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 224, 337 S.E.2d 213, 215 (1985). The Clean Air Act is similarly a clearly mandated public policy to protect the lives of citizens and the environment, and we hold that an employee may bring an action for wrongful discharge if that employee is discharged for refusing to participate in an activity that the employee, in good faith, believes violates any state or federal law or rule or regulation adopted pursuant to law.

Clark Oil argues that the remedies of the Clean Air Act are sufficient to vindicate the underlying public policy. The act does protect from retaliatory discharge those employees who violate the law at their employer's direction and then report the employer's violation. See 42 U.S.C. Sec. 7622. Phipps suggests that it is illogical to require an employee to pollute before giving him any job protection. While the federal scheme protects the "whistleblower," other courts have held that their common law also protects those fired for their refusal to violate the law. See, e.g., Wheeler, 108 Ill.2d at 510, 485 N.E.2d at 376; Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 876-77 (Mo.App.1985); Sabine Pilot Serv. v. Hauck, 687 S.W.2d 733, 735 (Tex.1985). But see Wehr v. Burroughs Corp., 438 F.Supp. 1052, 1055 (E.D.Pa.1977). We agree.

Clark Oil also claims that the court of appeals improperly allocated the burden of proof. That court stated:

[T]he employee should have the burden of proving the dismissal violates a clear mandate of public policy, either legislatively or judicially recognized. Once the employee has demonstrated that the discharge may have been motivated by reasons that contravene a clear mandate of public policy, the burden then shifts to the employer to prove that the dismissal was for reasons other than those alleged by the employee. See Thompson v. St. Regis Paper Co., 102 Wash.2d at 232-33, 685 P.2d [1081] at 1089.

Phipps, 396 N.W.2d at 592. The procedure suggested by the court of appeals is that used in Title VII actions, see Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 260, 101 S.Ct. 1089, 1097, 67 L.Ed.2d 207 (1981), where after the plaintiff has demonstrated that the action may have been motivated by discrimination, the burden of production shifts to the defendant to articulate a nondiscriminatory reason. The plaintiff, however, retains the burden of proof--the risk of nonpersuasion. Phipps, 396 N.W.2d at 592. See Parnar v. Americana Hotels, Inc., 65 Hawaii 370, 380, 652 P.2d 625, 631 (1982) ("Of course, the plaintiff alleging a retaliatory discharge bears the burden of proving that the discharge violates a clear mandate of public policy."); Sabine, 687 S.W.2d at 735 ("We further hold that in the trial of such a case it is the plaintiff's burden to prove by a preponderance of the evidence that his discharge was for no reason other than his refusal to perform an illegal act."). We agree and hold that after the plaintiff has demonstrated that his discharge may have been motivated by his good faith refusal to violate the law, the burden of production shifts to the defendant to articulate another reason for the discharge. To prevail, however, the plaintiff must prove, by a preponderance of the evidence, that the discharge was for an impermissible reason.

Clark Oil also asks this court to hold that punitive damages are not available in actions under the public policy exception. It bases this request on this court's holding in Lewis v. Equitable Life Assurance Society of the United States, 389 N.W.2d 876 (Minn.1986), that punitive damages should not be available for a newly recognized cause of action. Id. at 892. In Lewis, we based our holding on Minn.Stat. Sec. 549.20 (1986) and the lack of deterrent effect of punitive damages in a compelled self-publication case. Id.

Minnesota Statutes Sec. 549.20, subd. 1, provides: "Punitive damages shall be allowed in civil actions only...