Here at the Liberty Blog, we often write about the benefits of at-will employment for both the employee and the employer. A system that allows both sides to end the employment relationship for any reason or no reason not only promotes economic efficiency, but makes it easier for employees to get jobs in the first place. If employers are concerned with litigation each time they discharge an underperforming employee, the cost of hiring marginal job candidates vastly increases. These costs overwhelmingly fall on low-skilled, hourly workers.
Nevertheless, states have recognized the tort of “wrongful termination in violation of public policy,” which allows a discharged employee to sue when the termination is in violation of some established state public policy, usually codified as a statute. The cause of action is an exception to the general rule of at-will employment, but its existence causes significant uncertainty for employers. If a “public policy” is not tethered to a statute, then the phrase becomes inherently ambiguous, such that employers have a difficult time knowing beforehand which terminations would expose them to liability. As a result, they become more stingy when making job offers in the first place.
Roberto Landin had several performance problems during his tenure as a nurse at Healthsource Saginaw, a Michigan hospital. But when he was fired in 2006, he claimed that it was in retaliation for reporting to a supervisor what he believed was the malpractice of a coworker. According to Landin, the coworker’s actions had threatened a patient’s life. He based his legal claim on a Michigan statute that prohibits hospitals from discriminating against an employee who reports the malpractice of a health professional. According to Landin, the statute establishes Michigan’s public policy and gives him the right to sue Healthsource for wrongful termination. The trial court and the Michigan Court of Appeals agreed, even though a prior Court of Appeals opinion held that the statute was enforced only through administrative sanctions on hospitals. The Michigan Supreme Court is now reviewing the case.
As part of PLF’s efforts to defend the traditional at-will employment rule, we filed an amicus brief (with the help of local counsel Tom Ludden of the firm Lipsen Neilson) in support of Healthsource last week. Our brief argues that the Michigan Supreme Court should consider the significant benefits of at-will employment and not expand the wrongful termination tort beyond its precise boundaries. In particular, an internal allegation of malpractice should not be treated the same as an official report to a public agency, which is already protected under Michigan’s Whistleblowers’ Protection Act. Internal reports do not serve the public interest nearly as much as external ones, are prone to being made in preparation for litigation, and carry no penalties for false statements. The court should not permit Landin to invoke the wrongful termination tort in order to avoid the consequences of his performance problems. Instead, it should reaffirm that the tort is a narrow exception to the favored default rule of at-will employment.