Adler v. American Standard Corp.

Murphy, C. J., delivered the opinion of the Court. The United States District Court for the District of Maryland, pursuant to Maryland Code (1974, 1980 Repl. Vol.), § 12-601 of the Courts and Judicial Proceedings Article, has certified for our determination the following questions of state law: (1) Is a cause of action for "abusive discharge” recognized under the substantive law of the State of Maryland? (2) Do the allegations of the Amended Complaint, if taken as true, state a cause of action for "abusive discharge” under the substantive law of the State of Maryland?

The amended complaint was filed by Gerald Adler against American Standard Corporation (the Corporation) to recover general, special and punitive damages for Adler’s claimed "abusive discharge” from his employment with the Corporation. Adler alleged in his complaint that he was employed in March of 1975 as an Assistant General Manager of the Corporation’s Commercial Printing Division at a salary of $37,000 per year; that James Kinealy was Vice ³³ President and General Manager of the Division and James Sinclair was Vice President in charge of the Corporation’s Graphic Arts Group, which encompassed the Commercial Printing Division; and that it was Adler’s responsibility to conduct a thorough analysis of the management and operational structure of the Commercial Printing Division and to propose changes which would promote efficiency in management and operations and enhance the accuracy of intracorporate transmittal of information. The complaint alleged that Adler was "complimented for his efforts by his superiors” and by August 1,1978 his annual salary had been increased to $60,000. According to further averments of the amended complaint, Adler "discovered numerous inadequacies in the management and operation of the Commercial Printing Division and, also, numerous improper and possibly illegal practices, including: a.

Attempts to treat capital expenditures as expenses. b. Payment of commercial bribes. c. Falsification of sales and income information, and alteration of commercial documents to support the falsified information. d. Misuse of corporate funds by officers for their personal benefit. e.

Manipulation of work-in-process inventory information. f. Alteration of forecasts in connection with intra-corporate financial reporting.” The amended complaint alleged that on repeated occasions Adler reported his "discoveries” to Kinealy and Sinclair and made recommendations respecting their correction but that Kinealy and Sinclair "consistently failed and refused to give consideration to plaintiffs discoveries and recommendations and, indeed, discouraged further efforts on his part.” The complaint alleged that Adler communicated his findings to the Corporation’s headquarters personnel on several occasions and "was praised for his candor, was urged to continue his efforts and was assured that his position ³⁴ would not be jeopardized by so doing”; that as a result of Adler’s activities Kinealy and Sinclair "became increasingly insecure and suspicious that . .. [Adler’s] adherence to his stipulated responsibilities compromised their own positions”; that a high-level managerial meeting was scheduled for October 13,1978, at which headquarters personnel were to be present; that Adler intended at that meeting "to discuss frankly the improprieties which troubled him”; that Kinealy and Sinclair insisted at that time that Adler resign; and that after Adler refused to resign, he received a letter signed by Kinealy and Sinclair on behalf of the Corporation informing him that his employment was terminated "for unsatisfactory performance.” The amended complaint alleged that Adler’s discharge by the Corporation "was motivated solely by its desire, and the desire of its superior management personnel, to conceal improprieties and illegal activities which plaintiff might have disclosed at the meeting scheduled for October 13,1978 and on other occasions should he have remained in defendant’s employ... including the payment of commercial bribes and the falsification of corporate records and financial statistics, ... [which were] contrary to the public policy of the State of New York, the State of Maryland and of the United States, and thus constituted an abusive discharge.” The Corporation filed a motion to dismiss Adler’s complaint on the ground that it failed to state a cause of action under Maryland law. In its Order of Certification, the District Court noted that a hearing was conducted on the motion to dismiss, at which Adler contended "that although he was an employee at will with no fixed term of employment and no written employment contract, he can maintain a cause of action against the defendant for 'abusive discharge’ because the motives that prompted the defendant corporation to fire [him], namely the concealment of various activities (commercial bribery, falsification of corporate records, falsification of corporate financial data), were contrary to the public policy of the State of Maryland, especially in view of his satisfactory performance as evidenced by the regular salary increases and excellent performance appraisals.” The Certification Order also noted that it was the Corporation’s ³⁵ position that Maryland law does not recognize a cause of action for "abusive discharge,” and that, in any event, Adler’s discharge was prompted by a genuine dissatisfaction with his performance as an employee. (A) The common law rule, applicable in Maryland, is that an employment contract of indefinite duration, that is, at will, can be legally terminated at the pleasure of either party at any time.

St. Comm’n on Human Rel. v. Amecom Div., 278 Md. 120 , 360 A.2d 1 (1976); Vincent v. Palmer, 179 Md. 365 , 19 A.2d 183 (1941); W., B. & A.R.R. Co. v. Moss, 127 Md. 12 , 96 A. 273 (1915). Statutes enacted by many states have, however, engrafted exceptions upon the terminable at will doctrine that abrogate an employer’s absolute right to discharge an at will employee for any or no reason. In Maryland, for example, under Maryland Code (1957, 1979 Repl. Vol.) Art. 49B, § 16 (a) (1), it is unlawful for an employer to discharge any employee "because of ... race, color, religion, sex, age, national origin, marital status, or physical or mental handicap unrelated in nature and extent so as to reasonably preclude the performance of the employment . . . ,” 1 Adler concedes that his discharge was not specifically prohibited by any Maryland statute.

However, he urges that a judicial exception to the terminable at will doctrine be recognized in Maryland to permit an at will employee, discharged in a manner that contravenes public policy, to ³⁶ maintain a cause of action for abusive or wrongful discharge against his former employer. 2 Jurisdictions that have considered wrongful discharge actions as an exception to the common law terminable at will doctrine have followed essentially three courses of action. Some courts have flatly refused to recognize a cause of action for wrongful discharge, rigidly adhering to the rule that an employer’s motivation for discharging an at will employee is irrelevant. See Bender Ship Repair, Inc. v. Stevens, 379 So. 2d 594 (Ala. 1980); Segal v. Arrow Industries Corp., 364 So. 2d 89 (Fla. Ct. App. 1978); Georgia Power Co. v. Busbin, 242 Ga. 612 , 250 S.E.2d 442 (1978); Kelly v. Mississippi Valley Gas Co., 397 So. 2d 874 (Miss. 1981); Christy v. Petrus, 365 Mo. 1187 , 295 S.W.2d 122 (1956); Dockery v. Lampart Table Co., 36 N.C. App. 293 , 244 S.E.2d 272 (1978).

Other courts, while declining to recognize a cause of action for . wrongful discharge on the facts of the cases before them, have indicated a willingness to adopt a judicial exception to the terminable at will doctrine in a proper case. See, e.g., Lampe v. Presbyterian Med. Center, 41 Colo. App. 465 , 590 P.2d 513 (1978); Jackson v. Minidoka Irrigation Dist., 98 Idaho 330 , 563 P.2d 54 (1977); Scroghan v. Kraftco Corp., 551 S.W.2d 811 (Ky. 1977); Keneally v. Orgain, 606 P.2d 127 (Mont. 1980); Jones v. Keogh, 137 Vt. 562 , 409 A.2d 581 (1979); Ward v. Frito-Lay, Inc., 95 Wis. 2d 372 , 290 N.W.2d 536 (Wis.

App. 1980). Still other courts have recognized a cause of action for wrongful discharge, either in tort or in contract, and in doing so have primarily focused upon the employer’s motivation for discharging the employee. Monge v. Beebe Rubber Co., 114 N.H. 130 , 316 A.2d 549 (1974), held that an action for wrongful discharge of an at will employee would lie in contract. In that case, an at will employee had been fired as a result of her foreman’s hostility towards her, which developed when she refused to socialize ³⁷ with him.

The court, indicating that it sought to balance the interests of the employer and employee, affirmed the jury’s award of damages and held that: "[Termination by the employer of a contract of employment at will which is motivated by bad faith or malice or based on retaliation ... constitutes a breach of the employment contract.” 3 Id. at 133 , 316 A.2d at 551 . In Fortune v. National Cash Register Co., 373 Mass. 96 , 364 N.E.2d 1251 (1977), a salesman employed at will had been discharged because the employer sought to avoid payment of bonuses that the salesman would have earned upon delivery of certain goods. The court permitted the salesman to recover in an action in contract. Although refusing to extend its ruling to all employment at will contracts, the court held that the contract before it contained "an implied covenant of good faith and fair dealing ... .” Id. at 101 , 364 N.E.2d at 1256 .

Because the salesman’s termination had not been in good faith, the court concluded that the employer had breached the employment contract. See Petermann v. International Brotherhood of Teamsters, 174 Cal. App. 2d 184 , 344 P.2d 25 (1959). A majority of the courts expressly recognizing a cause of action for wrongful discharge have treated the employees’ claims as tort actions.

Several of these_cases involve at will employees fired in retaliation for filing workmen’s compensation claims. In Frampton v. Central Indiana Gas Co., 260 Ind. 249 , 297 N.E.2d 425 (1973), the court held that a worker fired for exercising his statutorily conferred right to file a workmen’s compensation claim was entitled to damages. In Kelsay v. Motorola, Inc., 74 Ill. 2d 172 , 384 N.E.2d 353 (1978), the court stressed that the public policy of the State, as expressed in the workmen’s compensation statute, ³⁸ could be effectively enforced only by allowing wrongfully discharged employees to maintain a personal action for damages. Other at will employees discharged for filing workmen’s compensation claims have been given a right to recover damages because the discharge was for a socially undesirable motive, Brown v. Transcon Lines, 284 Or. 597 , 588 P.2d 1087 (1978), or because it was intended to contravene the State’s public policy.

Sventko v. Kroger Co., 69 Mich. App. 644 , 245 N.W.2d 151 (1976). These cases, to some extent, relied on workmen’s compensation statutes as a basis for recognition of the employees’ causes of action. An at will employee who had been discharged for refusing to participate in an illegal price fixing scheme was the subject of the court’s inquiry in Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 , 610 P.2d 1330 , 164 Cal.

Rptr. 839 (1980). The court held that the discharge was actionable: "[A]n employer’s authority over its employee does not include the right to demand that the employee commit a criminal act to further its interests, and an employer may not coerce compliance with such unlawful directions by discharging an employee who refuses to follow such an order. An employer engaging in such conduct violates a basic duty imposed by law upon all employers, and thus an employee who has suffered damages as a result of such discharge may maintain a tort action for wrongful discharge against the employer.” Id. at 178 , 610 P.2d at 1336-37 . In Harless v. First National Bank, 246 S.E.2d 270, 275 (W. Va. 1978), discharge of an at will bank employee in retaliation for the employee’s efforts to force the bank to comply with state and federal consumer credit laws was held to be actionable because the discharge contravened a "substantial public policy principle” — the protection of consumers covered by the state and federal legislation.

In Nees v. Hocks, 272 Or. 210 , 536 P.2d 512 (1975), the court affirmed a jury award of compensatory damages made to an at will employee fired for serving on a jury. The court found ³⁹ the employee had been discharged "for such a socially undesirable motive that the employer must respond in damages for any injury done.” Id. at 218 , 536 P.2d at 515 . In Sheets v. Teddy’s Frosted Foods, Inc., 179 Conn. 471 , 427 A.2d 385 (1980), an at will employee with responsibility for exercising control over the quality of the employer’s food products was allegedly dismissed in retaliation for his insistence that the employer comply with a state law governing the labeling and licensing of the employer’s products. The court, in recognizing a tort action for wrongful discharge, said that it had to decide "where and how to draw the line between claims that genuinely involve the mandates of public policy and are actionable, and ordinary disputes between employee and employer that are not.” 427 A.2d at 387 .

Observing that the state law contained criminal penalties for its violation, the court concluded: "We need not decide whether violation of a state statute is invariably a prerequisite to the conclusion that a challenged discharge violates public policy. Certainly when there is a relevant state statute we should not ignore the statement of public policy that it represents. For today, it is enough to decide that an employee should not be put to an election whether to risk criminal sanction or to jeopardize his continued employment.” Id. at 389. Finally, in Palmateer v. International Harvester Co., 85 Ill. 2d 124 , 424 N.E.2d 876 , (Ill.

Sup. Ct. 1981), an at will employee was fired for reporting the suspected criminal activity of a fellow employee to local law enforcement officials and agreeing to cooperate in the investigation and possible prosecution of the alleged crime. The court, in a 4-3 decision, held that the employee had stated a cause of action because: "The foundation of the tort of retaliatory discharge lies in the protection of public policy, and there is a clear public policy favoring investigation and prosecution of criminal offenses.” 85 Ill. 2d at 133 . The dissent criticized the majority’s decision on the ground that: "Here the public policy supporting the cause of action cannot be found in any ⁴⁰ expression of the legislature, but only in the vague belief that public policy requires that we all become 'citizen crime-fighters.’ ” Id. at 136 (quoting from majority opinion at 133).

With few exceptions, courts recognizing a cause of action for wrongful discharge have to some extent relied on statutory expressions of public policy as a basis for the employee’s claim. Courts holding that at will employees failed to state a cause of action, but recognizing implicitly or expressly that a cause of action would be recognized under proper circumstances, generally do so on the grounds that no clear mandate of public policy was contravened by the discharge. In Geary v. United States Steel Corp., 456 Pa. 171 , 319 A.2d 174 (1974), an employee at will had been discharged because of continual charges, made to company officials, that one of the company’s products was unsafe.