“Public Policy Exception” to Employment at Will in California

Under the public policy exception to employment at will, it can amount to wrongful termination to fire an employee for:

1. Refusing to break the law;
2. Performing a legal obligation;
3. Exercising a legal right or privilege; or
4. Reporting a potential violation of an important law.¹

The law of wrongful discharge in violation of public policy is an exception to the general rule of at-will employment in California labor law. At-will employment means that, in most cases, employers can terminate employees

• for any or
• for no reason unless an employment contract (which can include an implied contract) says otherwise.²

However, the public policy exception to at-will employment provides that even at-will employees have a right to sue their employers if they are wrongfully terminated for one of the activities listed above.

Below, our California employment law attorneys answer the following frequently asked questions:

• 1. What is the public policy exception to employment at will?
• 2. What are the grounds for a lawsuit?
• 3. What is wrongful constructive termination?
• 4. What damages could I recover?
• 5. How long do I have to bring a claim?
• 6. Can I sue even if I was never actually an employee?
• Additional reading

If you have further questions after reading this article, we invite you to contact us at Shouse Law Group.

1. What is the public policy exception to employment at will?

In California labor law, wrongful termination in violation of public policy occurs when an employer fires an employee for exercising a legal right or performing a legal obligation, provided that the legal right or obligation is connected to an important public policy. ³

Specifically, this means that an employee has the right to sue their employer for wrongful termination if the employer has fired them for doing one of the following:

1. Refusing to violate a statute;
2. Performing a statutory obligation (that is, a legal duty);
3. Exercising a statutory right or privilege; or
4. Reporting an alleged violation of a statute of public importance.⁴

Refusing to violate a statute

Under California public policy wrongful discharge law, an employer may not retaliate against you (including by firing you) for refusing to break the law.⁵

Example: Karina is a teacher at a preschool. She is familiar with state requirements for student-teacher ratio.

Karina notices that sometimes the preschool director assigns students to classes in a way that leads to a higher student-teacher ratio than the law allows. The preschool director asks Karina to create a new set of falsified attendance records that would make it look as if the school had in fact met student-teacher ratio requirements.

Karina worries that this would lead to her being charged with the crime of forgery. She refuses. A week later, the director fires her.

Even though she is an at-will employee, Karina should be able to sue the preschool for wrongful termination under the public policy exception to the California at-will rule.

Performing a statutory obligation

California wrongful termination law also provides that an employer may not fire you for performing a statutory obligation (that is, a legal duty).⁶

For example, California labor law says that employers may not terminate employees for:

• Taking time off to serve on a jury;
• Taking time off to serve as a witness in court in compliance with a subpoena or other court order;⁷ or
• Taking time off for military service.⁸

Exercising a statutory right or privilege

California wrongful termination law also provides that it is wrongful discharge in violation of public policy for an employer to terminate an employee for exercising a right or privilege granted to them by law.⁹

Examples of this form of public policy wrongful termination are

• Terminating an employee for engaging in political activities or speech;¹⁰
• Terminating an employee for attempting to organize a union;¹¹, or
• Terminating an employee for filing a wage/hour complaint with the California Labor Commissioner.¹²

Reporting a violation of law

Many lawsuits over wrongful discharge in violation of public policy involve a situation where an employee was wrongfully terminated for reporting a violation of law by their employer. This may be to the government, law enforcement or another department in the company.

Example: June gets a job as a receptionist at a private medical clinic. She soon realizes that one of the doctors in the practice is writing suspiciously large numbers of prescriptions for powerful painkillers and may be committing California prescription fraud.

June reports her observations to another doctor in the practice, but he does nothing about it. She then reports what she has seen to the Medical Board of California.

A week later, June is fired. No reason is given.

June can probably sue the medical office for wrongful termination in violation of public policy. The facts of her case strongly suggest that she was fired for reporting the potential prescription fraud.

This form of wrongful termination in violation of public policy – that is, when an employer fires an employee for reporting a potential violation of the law – is often referred to as “whistleblower retaliation.”

Several specific federal and California laws provide additional support for employees who want to assert their rights after being fired for whistleblower activities.

These include

• The whistleblower provisions of the Sarbanes-Oxley Act of 2002–a federal law designed to protect investors from fraudulent accounting by public companies–gives employees of publicly-traded companies the right to sue for wrongful termination if their employer fires them for reporting suspected securities fraud to the federal government or a supervisor.¹³
• The “qui tam” section of the California False Claims Act, which allows an employee to sue their employer on behalf of the state government if the employer has committed fraud or embezzlement with respect to government funds. If an employer terminates an employee for bringing a qui tam suit, the employee has the right to sue for wrongful discharge in violation of public policy/qui tam retaliation.¹⁴
• California’s Fair Employment and Housing Act, the main state law prohibiting workplace harassment and employment discrimination, also makes it illegal for employers to retaliate against employees for FEHA-protected activities such as filing a complaint about harassment or discrimination.¹⁵

Another form of termination that is arguably a form of public policy wrongful termination is termination in violation of the California WARN Act. The WARN Act requires employers to provide 60 days advance notice of mass layoffs, including those due to plant closures or relocations. You may be entitled to WARN Act damages if your employer terminates you without the required notice.

Required nexus between public policy and termination

One important point that plaintiffs in wrongful termination suits based on public policy need to prove is that there was a “nexus” between

1. the employer’s public policy violation and
2. the employee’s termination.¹⁶

This means that there needs to be a clear causal connection between the public policy problem (the employer’s request that you do something illegal, your reporting of a violation) and your termination.

Example: James works in sales for a brewery. He believes that the company may be violating laws related to alcoholic beverages and reports this suspicion within the company. Supervisors in the company investigate James’ claims but find no evidence of wrongdoing.

James continues to work in his job and receives positive performance reviews.

Four years later, James is terminated from his job.

James cannot prevail in a public policy wrongful discharge lawsuit because he cannot show a nexus between his reporting activities and his firing.¹⁷

2. What are the grounds for a lawsuit?

Most public policy wrongful termination cases involve a federal or state law such as a law that the employee was fired

• for refusing to violate, or
• for reporting that the employer violated.

However, not every law or regulation will support an employee’s lawsuit for wrongful termination in violation of public policy.

California courts have decided that employees have a cause of action for public policy wrongful termination only if the public policy in question meets the following criteria:

1. The policy is set forth in a statute or constitutional provision;
2. The policy serves the interests of the public rather than that of the individual;
3. The policy was well-established at the time of the wrongful termination; and
4. The policy is “substantial and fundamental.”¹⁸

The first of these requirements is straightforward. You need to be able to point to a specific statutory or constitutional provision that sets out the public policy that was violated by your wrongful discharge.

The second – that the public policy serves the interests of the public – is also usually easy to prove, since most laws are designed for the public benefit. Policies that have been found to serve the interests of the public include:

• Antitrust laws;¹⁹
• Laws prohibiting disability discrimination;²⁰ and
• Laws prohibiting perjury.²¹

The third requirement – that the public policy is well-established – means that you cannot successfully sue for public policy wrongful termination on the basis of a law that didn’t exist or wasn’t clear when you were fired.

Example: Barbara’s employer asks all employees to submit a urine sample for a drug test. Barbara refuses to do so and is fired.

Several years after Barbara loses her job, a state appellate court holds that the California Constitution sets out a right of privacy that is violated when someone is forced to provide a urine sample against their will.

But Barbara does not have a cause of action for public policy wrongful termination on this basis–because the policy was not established by court decision until after she was fired.²²

Finally, a public policy can only support a wrongful termination lawsuit if it is “substantial and fundamental.”

Courts have a great deal of discretion in interpreting this phrase, which is quite vague. Most significant laws and constitutional provisions are likely to be considered substantial and fundamental.

However, California courts deciding public policy wrongful termination suits have held that the following policies are NOT substantial and fundamental:

• Policy against the control of religious speech in the workplace where the employer is a religious organization;²³
• Labor laws prohibiting workplace discrimination based on voluntary participation in alcohol or drug rehabilitation programs;²⁴ and
• An employee’s right to sue customers or clients of the employer.²⁵

3. What is wrongful constructive termination?

The concept of “wrongful constructive termination” / “wrongful constructive discharge” in California law can allow you to sue your employer for public policy wrongful discharge even if you were not actually fired from your job.

Constructive termination / constructive discharge occurs when an employer makes working conditions so intolerable for an employee that s/he has no choice but to resign.²⁶

In order to bring a successful public policy wrongful termination lawsuit based on a constructive termination theory, you need to show that your employer EITHER intentionally created OR knowingly permitted working conditions that were so intolerable at the time of your resignation that a reasonable employer would realize that a reasonable employee in your position would feel compelled to resign.²⁷

Example: Javier works for a construction contractor. He observes several other employees, including his own supervisor, sexually harassing the company’s one female employee.

Javier tells the company’s human resources department about the sexual harassment, and several of the offending employees are disciplined.

Shortly after this incident, Javier’s supervisor starts assigning him to all the most physically demanding tasks on the construction site, which previously had been spread between all the employees. Javier starts to experience physical pain and minor injuries as a result of this work. As a result, he quits the job.

Javier may have a case for wrongful constructive termination in violation of public policy.

4. What damages could I recover?

There are several different kinds of damages that you may be able to recover if you successfully sue your employer for wrongfully discharging you in violation of public policy.

These include:

1. Lost wages and benefits–that is, the lost pay and the value of any employee benefits that you could reasonably have expected to earn had you not been wrongfully terminated in violation of public policy. Note that this amount will be reduced by the amount of wages and benefits that you actually earned, or could have earned, from substantially similar employment after your termination.²⁸
2. Damages for emotional distress/pain and suffering arising from your public policy wrongful termination — which may include compensation for physical pain, mental suffering, loss of enjoyment of life, grief, anxiety, or humiliation.²⁹

In certain kinds of cases, you may also be able to collect attorney’s fees from your former employer after a successful suit for wrongful termination in violation of public policy. This is only possible in wrongful termination cases arising out of specific statutes that provide for awards of attorney’s fees for successful employee-plaintiffs, such as

• wrongful termination under the Fair Employment and Housing Act and
• wrongful termination under Sarbanes-Oxley.³⁰

And in a few cases, an employee may be able to receive punitive damages. Punitive damages are designed to punish the employer for its behavior and do not need to be related to any economic or non-economic loss you suffered. Punitive damages are only awarded in public policy wrongful termination cases where the employer is found to be guilty of

• oppression,
• fraud or
• malice.³¹

5. How long do I have to bring a claim?

There are statutes of limitations–that is, deadlines for filing a lawsuit–for wrongful termination in violation of public policy in California.

For most public policy wrongful discharge lawsuits, the statute of limitations is two (2) years from the date of your termination.³²

But be warned: responses to certain kinds of wrongful termination in violation of public policy have shorter deadlines for filing a suit or complaint. For instance, if you are fired in retaliation for complaining about discrimination or harassment at work, you need to file a complaint with the California Department of Fair Employment and Housing within three (3) years.³³

For this reason – and we cannot emphasize enough – it is a good idea to contact a California employment attorney as soon as possible if you think you may have been wrongly terminated in violation of public policy.

6. Can I sue even if I was never actually an employee?

Under California law, you cannot sue an employer for public policy wrongful termination if you were an independent contractor rather than an employee.³⁴

But it is an open question whether job applicants can sue employers under public policy wrongful termination laws if the employer refused to hire them for reasons that violate public policy, since California courts have not considered that question.

Additional reading

For more in-depth information, refer to these scholarly articles:

• The Public Policy Exception to Employment at Will: Balancing Employer’s Right and the Public Interest – Journal of Legal Ethical & Regulatory Issues.
• Working towards Freedom from Abuse: Recognizing a “Public Policy” Exception to Employment-at-Will for Domestic Violence Victims – N.Y.U. Annual Survey of American Law. 
• Still Crazy after All These Years: The Employment at-Will Doctrine and Public Policy Exceptions – Atlantic Law Journal.
• The Public Policy Exception to Employment at Will – When Should Courts Defer to the Legislature – Nebraska Law Journal.
• Employment Law – Exceptions to the At-Will Doctrine – The Adoption of the Public Policy Exception in Two Specific Situations Could Signal the Adoption of Addititonal Exceptions to the Doctrine – Mississippi Law Journal.
• The Public Policy Exception to Employment at-Will: Time to Retire a Noble Warrior – Mercer Law Review.

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