Restructuring Law on Firings

Already the legal community is debating whether the California Supreme Court’s landmark ruling that an employee fired without good cause can sue only for reinstatement and back pay, not for emotional distress and other tort damages, is inherently conservative or radical. Chief Justice Malcolm Lucas, the author of the 4-3 majority opinion, struck mostly conservative chords; he justified the limits on wrongful-discharge suits by citing the need for “commercial stability,” concern for employers hit with million-dollar judgments from unpredictable juries and the desirability of deferring to the Legislature in such controversies. But the three dissenters--Justices Marcus Kaufman, Allen Broussard and Stanley Mosk--contended that, despite the conservative veneer, this was a deeply radical decision that sharply reversed an entire body of jurisprudence and will leave many California workers to the mercies of their bosses.

On the law, the dissenters are more persuasive. The majority’s decision overruled at least eight Courts of Appeal that had allowed wrongly discharged employees to recover tort damages if their employers had breached the covenant of “good faith and fair dealing” that exists in every contract. These decisions were given at least passing approval in a 1984 Supreme Court ruling on a related issue and inspired thousands of fired workers to sue; of the cases tried so far, employees have won about two-thirds. Rarely does the state Supreme Court repudiate the unanimous rulings of so many lower courts and, in the words of Broussard, “radically restructure California law by abolishing an established cause of action.”

As a practical matter, there is some justification for the majority’s concern about the outlandish judgments that some juries have awarded in wrongful-discharge suits. Naturally jurors tend to sympathize more with the worker just handed a pink slip than they do with the boss who fired him. One recent study found that jury awards in such cases exceed the settlement demands of the employees’ lawyers by 187%. But surely the most equitable way to curb excessive awards would have been for the court to clarify the evolving law of wrongful discharge and to explain what constitutes a bad-faith firing, not simply to rule out most tort claims. Such lawsuits, while expensive, have had a positive influence on industrial relations; the mere prospect of being sued has forced many employers to overhaul their personnel practices, evaluate their workers and document their shortcomings.

In theory, a fired worker can still sue for emotional distress and other damages if he can prove that his firing violated public policy--that, for example, he was dismissed for refusing to commit a crime. Why the courts should allow this tort suit but not one brought by a 25-year employee fired simply to make way for a younger face is something that the majority does not adequately explain; the financial blow and emotional distress suffered by both workers seem identical. But unless the public interest is involved, the majority has decreed, a fired worker must be be content to sue for back pay and other economic losses.

That right, however, may prove illusory: Few attorneys will be willing to handle such time-consuming lawsuits now that sizable returns and punitive damages are precluded, and few private plaintiffs can afford to pay attorneys’ hourly fees. Lucas acknowledged that “contract remedies . . . are insufficient,” but he suggested that recourse may lie with the Legislature. We urge the Legislature to provide some incentive for attorneys to take wrongful-discharge cases by enacting a measure that would require employers to pay the legal fees of victorious plaintiffs. Such a move would put employers and employees on a more equitable footing and would make truly capricious firings costly.