Trosper v. Bag 'N Save

734 N.W.2d 704, 273 Neb. 855, 26 I.E.R. Cas. (BNA) 438, 2007 Neb. LEXIS 101

• Court: Nebraska Supreme Court
• Decided: July 6, 2007
• Docket: S-05-889
• Status: Published

Opinions

Connolly, J.

Under Nebraska law, an employer, without incurring liability, generally may terminate an at-will employee at any time. But in Jackson v. Morris Communications Corp.,1 we held a public policy exception to this rule applies when an employer wrongfully discharges an employee in retaliation for filing a workers’ compensation claim. Kimberlee Trosper alleges not that she was fired, but that she was demoted because she pursued workers’ compensation. This case presents the question whether we should extend the public policy exception to include retaliatory demotion. Extending our ruling in Jackson, we now hold that demotion, like discharge, violates public policy. We reverse, and remand for further proceedings.

BACKGROUND

Trosper filed a complaint alleging the following: Bag ’N Save employed her as a “deli manager.” During the course of her employment, she suffered a work-related injury which required medical treatment. When she reported her injury to her employers, the company demoted her from “deli manager” to “deli clerk,” and her annual salary decreased from $30,100 to $22,500. Trosper’s complaint does not allege that she filed for workers’ compensation. Bag ’N Save, however, acknowledges that Trosper filed a workers’ compensation claim and that she reported the injury under the Nebraska Workers’ Compensation Act.²

Trosper alleged that Bag ’N Save acted in a retaliatory manner contrary to our decision in Jackson v. Morris Communications Corp.3 Bag ’N Save moved to dismiss under Neb. Ct. R. of Pldg. in Civ. Actions 12(b)(6) (rev. 2003), alleging that the complaint failed to state a claim upon which relief could be granted. The trial court sustained the motion and dismissed the complaint.

Whether a petition states a cause of action is a question of law which requires this court to reach a conclusion independent of the trial court.⁴

ASSIGNMENT OF ERROR

Trosper assigns, restated, that the district court erred as a matter of law in sustaining Bag ’N Save’s motion to dismiss.

ANALYSIS

Trosper urges this court to adopt a cause of action for retaliatory demotion when an employer demotes an employee for filing a workers’ compensation claim. She contends that demotion, like termination, frustrates the public policy behind the Nebraska Workers’ Compensation Act. Bag ’N Save argues that the public policy exception should be restricted to situations involving discharge. It argues that demotion does not implicate the same concerns as discharge and that expanding the tort could cause a flood of litigation.

Nebraska Jurisprudence on Public Policy Exception

Unless constitutionally, statutorily, or contractually prohibited, an employer, without incurring liability, may terminate an at-will employee at any time with or without reason.⁵ We recognize, however, a public policy exception to the at-will employment doctrine. Under the public policy exception, we will allow an employee to claim damages for wrongful discharge when the motivation for the firing contravenes public policy.⁶ The public policy exception is restricted to cases when a clear mandate of public policy has been violated, and it should be limited to manageable and clear standards.⁷ In determining whether a clear mandate of public policy is violated, courts should inquire whether the employer’s conduct contravenes the letter or purpose of a constitutional, statutory, or regulatory provision or scheme.⁸

We have addressed whether a public policy exception to the at-will employment doctrine should apply in several cases. We have previously recognized public policy exceptions when a statute prohibits an employer from discharging an employee.⁹ And we have recognized the exception when an employee reports, in good faith, his suspicions that his employer is violating a criminal law.¹⁰ In contrast, we determined that the Nebraska Wage Payment and Collection Act did not “represent a ‘very clear mandate of public policy’ which would warrant recognition of an exception to the employment-at-will doctrine.”¹¹ That act did not prohibit employers from discharging employees, and it did not provide employees with any substantive rights. Instead, it was primarily remedial, providing an enforcement mechanism for rights that already exist.¹²

Recently, in Jackson, we recognized a public policy exception to the at-will employment doctrine and permitted a cause of action when an employer discharges an employee for filing a claim under the Nebraska Workers’ Compensation Act. In Jackson, we acknowledged that the Nebraska Workers’ Compensation Act, like the Nebraska Wage Payment and Collection Act, does not include a statutory prohibition that prevents employers from discharging employees who assert their rights under the act.¹³ We, however, cited other states which recognized public policy exceptions absent a clear statutory ban.¹⁴

Moreover, unlike the Nebraska Wage Payment and Collection Act, the Nebraska Workers’ Compensation Act creates substantive rights to compensation arising from the statute itself. It serves the important and beneficent purpose of protecting injured workers from the adverse economic effects of work-related injuries and occupational disease and binds employers to compensate injured workers. This duty “would be seriously frustrated if employers were able to prevent employees from filing claims through the threat of discharge.”¹⁵ We further explained:

To hold that there is not a clear public policy warranting an exception to the at-will employment doctrine would ignore the beneficent nature of the Nebraska Workers’ Compensation Act. This, in effect, would allow an employer to say to the employee: “‘Although you have no right to a tort action, you have a right to a workmen’s compensation claim which, while it may mean less money, is a sure thing. However, if you exercise that right, we will fire you.’ ”¹⁶

Thus, we held that the Nebraska Workers’ Compensation Act presented a clear mandate of public policy warranting application of the exception.

Trosper now requests that we expand our cause of action for retaliatory discharge to retaliatory demotion.

Other States’ Case Law Involving Retaliatory Conduct Short of Discharge

We have not previously addressed whether our cause of action for retaliatory discharge should be expanded to include any lesser retaliatory actions against employees who file workers’ compensation claims. Other jurisdictions provide some guidance.

In Zimmerman v. Buchheit of Sparta, Inc.,17 a plurality of the Illinois Supreme Court rejected a claim for retaliatory demotion. The court first addressed this claim as a possible extension of its retaliatory discharge tort.¹⁸ In declining to expand the tort, the court cited several Illinois cases which had narrowly interpreted the cause of action.¹⁹

The Zimmerman court stated that the element of discharge was essential to the tort it had created. It explained,

In our view, adoption of plaintiff’s argument [a cause of action for retaliatory demotion] would replace the well-developed element of discharge with a new, ill-defined, and potentially all-encompassing concept of retaliatory conduct or discrimination. The courts then would be called upon to become increasingly involved in the resolution of workplace disputes which center on employer conduct that heretofore has not been actionable at common law or by statute.²⁰

The plaintiff’s recitations of the “general principles of policy” behind retaliatory discharge did not sway the court.²¹ It held that the plaintiff had not established a compelling reason to expand the cause of action.

The court also rejected the plaintiff’s claim under an Illinois statutory provision which made it unlawful for an employer to “discriminate” against an employee because he exercised his rights under that state’s workers’ compensation act. In its discussion, the court pointed out that the “plaintiff fail[ed] to explain the manner in which demotions, as distinct from terminations, relieve employers of their responsibility to compensate employees for their work-related injuries.”²²

Only two justices joined the majority decision. Two concurring justices and two dissenting justices disagreed with the plurality’s decision to treat retaliatory demotion and retaliatory discharge differently. The concurring justices stated that the courts should leave recognition of both retaliatory discharge and demotion to the legislature. The concurrence pointed out, however, that refusing to recognize a tort of retaliatory demotion while maintaining the retaliatory discharge tort created a “glaring loophole” because employers could simply retaliate by demoting rather than firing employees who file workers’ compensation claims.²³

The dissent argued the cause of action should be extended to demotion because there is “no principled way to distinguish the two situations.”²⁴ The dissent relied on an Illinois statute which made it a crime to either discharge or discriminate against workers who filed workers’ compensation claims.

In response to the concurring and dissenting opinions, the plurality wrote:

Neither the dissent nor the concurrence acknowledges that this court acts within its authority in reaffirming the well-settled and limited tort of retaliatory discharge, as an exception to the at-will employment doctrine, without being constrained to open broad new avenues of litigation for other, less defined types of retaliatory conduct in the workplace.²⁵

Similarly, the Utah Supreme Court rejected a cause of action for retaliatory harassment or discrimination against an employee who disagreed with how an employer treated employees who filed workers’ compensation claims. In Touchard v. La-Z-Boy Inc.,26 the Utah court determined that the public policy exception behind retaliatory discharge did not apply “to the same extent when the employee . . . does not have the fear of losing his or her employment.” The court also expressed concern that to recognize such a claim would expand the public policy exception beyond its intended narrow scope by implicating “a much broader range of behavior, including demotions, salary reductions, job transfers, or disciplinary actions.”²⁷

In contrast, the Kansas Supreme Court has recognized a cause of action for retaliatory demotion. In Brigham v. Dillon Companies, Inc. ,²⁸ the Kansas court analyzed the Zimmerman decision, focusing on the concurring and dissenting opinions. The Kansas court pointed out that four of seven justices on the Zimmerman court — both the concurring and dissenting justices — believed it was inconsistent to recognize a cause of action for retaliatory discharge, but not demotion.

The Kansas court, in recognizing a cause of action for retaliatory demotion, reasoned:

The employers’ violation of public policy and the resulting coercive effect on the employee is the same in both [termination and demotion]. The loss or damage to the demoted employee differs in degree only. We do not share the employers’ concern that a torrent of litigation of insubstantial employment matters would follow in the wake of our recognition of a cause of action for retaliatory demotion and, even if we did, it does not constitute a valid reason for denying recognition of an otherwise justified cause of action.

We conclude that the recognition of a cause of action for retaliatory demotion is a necessary and logical extension of the cause of action for retaliatory discharge. To conclude otherwise would be to repudiate this court’s recognition of a cause of action for retaliatory discharge. The obvious message would be for employers to demote rather than discharge employees in retaliation for filing a workers compensation claim or whistleblowing. Thus, employers could negate this court’s decisions recognizing wrongful or retaliatory discharge by taking actions falling short of actual discharge.²⁹

Bag ’N Save cites several cases refusing to expand the public policy exception to other retaliatory actions short of discharge.³⁰ But we do not find that authority persuasive. Here, we address only demotion. Moreover, most of the cases cited did not involve retaliatory actions for filing a workers’ compensation claim and thus, did not address the same policy concerns now before us.³¹ Although one of the cases cited is a workers’ compensation case, it is distinguishable because it involved the unique circumstance where the plaintiffs had filed for workers’ compensation under a different state’s statute.³² Finally, one other jurisdiction has taken the opposite view and allowed claims for lesser retaliatory actions.³³

Nebraska Recognizes a Cause of Action for Retaliatory Demotion for Filing a Workers’ Compensation Claim

Focusing on our rationale in Jackson, we conclude that a cause of action for retaliatory demotion exists when an employer demotes an employee for filing a workers’ compensation claim. When we recognized a retaliatory discharge claim, we reasoned that “a rule which allows fear of retaliation for the filing of a claim undermines [the important public policy of the Nebraska Workers’ Compensation Act].”³⁴ And we stated that “ ‘the employee must be able to exercise his right in an unfettered fashion without being subject to reprisal.’ ”³⁵

An employee’s right to be free from retaliatory demotion for filing a workers’ compensation claim is married to the right to be free from discharge. Demotion, like termination, coercively affects an employee’s exercise of his or her rights under the Nebraska Workers’ Compensation Act. If we fail to recognize a claim for retaliatory demotion, it would create an incentive for employers to merely demote, rather than discharge, employees who exercise their rights. To promote such behavior would compromise the act and would render illusory the cause of action for retaliatory discharge. Thus, we believe that extending the tort created in Jackson to include retaliatory demotion is a logical step, and one which gives vitality to that decision.

We disagree with Bag ’N Save’s contention that our case law advises against recognizing a tort for retaliatory demotion. Bag ’N Save cites our refusal in White v. Ardan, Inc.,36 to adopt claims of “malicious termination” or “bad faith discharge” as indicating that we narrowly interpret the public policy exception. But in White, the plaintiffs’ terminations did not implicate a clear public policy. The plaintiffs simply alleged that their employer fired them because an executive falsely accused them of dishonesty. In White, the plaintiffs failed to show that a constitutional, statutory, or regulatory provision or scheme warranted an exception to the “ ‘terminable-at-will’ rule.”³⁷ Our refusal to recognize a cause of action in White is easily distinguishable from the present case because we have already determined that the Nebraska Workers’ Compensation Act provides a clear public policy mandate.³⁸ And an employer’s conduct in demoting an employee contravenes this policy, just as discharge does.

Bag ’N Save also refers us to Collins v. Baker’s Supermarkets,39 where we held that an employee’s demotion did not violate Neb. Rev. Stat. § 81-1932 (Reissue 1999). Section 81-1932 prohibits an employer from terminating an employee based on the results of the employee’s polygraph examination. Under the plain language of the statute, it only prohibited termination. Thus, the statute simply did not apply to demotion. Collins is not controlling.

We recognize that demotion may not be as severe as discharge in that it affects only the terms of employment, rather than the “essence” of the employment.⁴⁰ But this is not a compelling distinction. Although Jackson specifically addressed discharge, more broadly, the intent in Jackson was to protect the important public policy and beneficent purpose of the Nebraska Workers’ Compensation Act. Although demotion is less harsh than dismissal, nevertheless, it would shrink an employee’s right to pursue workers’ compensation. Allowing employers to demote an employee for filing a workers’ compensation claim would circumvent the policy in Jackson.

We acknowledge that allowing a cause of action for retaliatory demotion could result in claims for other retaliatory conduct. As usual in common-law adjudication, we will deal with those concerns case-by-case. Today, we address demotion, and nothing more. Further, we do not believe that the courts will be flooded with suits over insubstantial employment matters resulting in excessive judicial entanglement. But even so, an increase in litigation would “not constitute a valid reason for denying recognition of an otherwise justified cause of action.”⁴¹

CONCLUSION

Here, Trosper’s petition alleged that Bag ’N Save demoted her in retaliation for reporting a work-related injury. Because we recognize that a cause of action exists, we reverse, and remand for further proceedings. We note that to the extent Trosper’s petition lacks factual allegations, she should be given leave to amend.

Reversed and remanded for FURTHER PROCEEDINGS.

1 Jackson v. Morris Communications Corp., 265 Neb. 423, 657 N.W.2d 634 (2003).

2 See Neb. Rev. Stat. §§ 48-101 to 48-1,117 (Reissue 2004 & Cum. Supp. 2006).

3 Jackson v. Morris Communications Corp., supra note 1.

4 See id.

5 Id.; Malone v. American Bus. Info., 262 Neb. 733, 634 N.W.2d 788 (2001).

⁶

7 Id.; Ambroz v. Cornhusker Square Ltd., 226 Neb. 899, 416 N.W.2d 510 (1987).

8 Schriner v. Meginnis Ford Co., 228 Neb. 85, 421 N.W.2d 755 (1988).

9 See Ambroz v. Cornhusker Square Ltd., supra note 7.

10 See Schriner v. Meginnis Ford Co., supra note 8.

11 Malone v. American Bus. Info., supra note 5, 262 Neb. at 739, 634 N.W.2d at 793. Accord Ambroz v. Cornhusker Square Ltd., supra note 7.

12 See Neb. Rev. Stat. §§ 48-1228 to 48-1232 (Reissue 2004).

13 Cf. Malone v. American Bus. Info., supra note 5.

14 See, Hansen v. Harrah’s, 100 Nev. 60, 675 P.2d 394 (1984); Murphy v. City of Topeka, 6 Kan. App. 2d 488, 630 P.2d 186 (1981).

15 Jackson v. Morris Communications Corp., supra note 1, 265 Neb. at 431, 657 N.W.2d at 640.

16 Id. at 432, 657 N.W.2d at 640, quoting Leach v. Lauhoff Grain Co., 51 Ill. App. 3d 1022, 366 N.E.2d 1145, 9 Ill. Dec. 634 (1977).

17 Zimmerman v. Buchheit of Sparta, Inc., 164 Ill. 2d 29, 645 N.E.2d 877, 206 Ill. Dec. 625 (1994).

18 See Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 384 N.E.2d 353, 23 Ill. Dec. 559 (1978) (adopting exception for retaliatory discharge for filing workers’ compensation claim).

19 See, e.g., Hartlein v. Illinois Power Co., 151 Ill. 2d 142, 601 N.E.2d 720, 176 Ill. Dec. 22 (1992); Hinthom v. Roland’s of Bloomington, Inc., 119 Ill. 2d 526, 519 N.E.2d 909, 116 Ill. Dec. 694 (1988); Hindo v. University of Health Sciences, 237 Ill. App. 3d 453, 604 N.E.2d 463, 178 Ill. Dec. 207 (1992) (court of appeals rejected retaliatory demotion as cause of action); Scheller v. Health Care Service Corp., 138 Ill. App. 3d 219, 485 N.E.2d 26, 92 Ill. Dec. 471 (1985) (declining to expand tort to constructive discharge).

20 Zimmerman v. Buchheit of Sparta, Inc., supra note 17, 164 Ill. 2d at 39, 645 N.E.2d at 882, 206 Ill. Dec. at 630.

21 Id.

22 Id. at 44, 645 N.E.2d at 884, 206 Ill. Dec. at 632.

23 Id. at 46, 645 N.E.2d at 885, 206 Ill. Dec. at 633 (Bilandic, C.J., concurring).

24 Id. at 52, 645 N.E.2d at 888, 206 Ill. Dec. at 636 (Harrison, J., dissenting).

25 Id. at 45-46, 645 N.E.2d at 885, 206 Ill. Dec. at 633.

26 Touchard v. La-Z-Boy Inc., 148 P.3d 945, 955 (Utah 2006).

27 Id. (emphasis supplied).

28 Brigham v. Dillon Companies, Inc., 262 Kan. 12, 935 P.2d 1054 (1997).

29 Id. at 20, 935 P.2d at 1059-60.

30 See, Sanchez v. Philip Morris Inc., 992 F.2d 244 (10th Cir. 1993) (failure to hire); Warnek v. ABB Combustion Eng’g, 137 Wash. 2d 450, 972 P.2d 453 (1999) (failure to rehire); White v. State, 131 Wash. 2d 1, 929 P.2d 396 (1997) (wrongful transfer); Mintz v. Bell Atlantic Systems Leasing, 183 Ariz. 550, 905 P.2d 559 (Ariz. App. 1995) (failure to promote).

31 See, Sanchez v. Philip Morris Inc., supra note 30 (involving national origin discrimination); White v. State, supra note 30 (retaliation in violation of First Amendment right to freedom of speech); Mintz v. Bell Atlantic Systems Leasing, supra note 30 (retaliation for filing sex discrimination claim). See, also, Ludwig v. C & A Wallcoverings, Inc., 960 F.2d 40 (7th Cir. 1992) (refusing to recognize cause of action for retaliatory demotion when employee reported supervisor’s alleged misconduct).

32 See Warnek v. ABB Combustion Eng’g, supra note 30.

33 See, Lawson v. AK Steel Corp., 121 Ohio App. 3d 251, 699 N.E.2d 951 (1997) (recognizing wrongful demotion cause of action when employer fired employee for whistleblowing); Powers v. Springfield City Schools, No. 98-CA-10, 1998 Ohio App. LEXIS 2827 (Ohio App. June 26, 1998) (unpublished opinion) (recognizing wrongful denial of promotion cause of action for whistleblowing). See, also, Kulch v. Structural Fibers, Inc., 78 Ohio St. 3d 134, 162, 677 N.E.2d 308, 328 (1997) (recognizing common-law tort action for “wrongful discharge/discipline” in violation of public policy).

34 Jackson v. Morris Communications Corp., supra note 1, 265 Neb. at 432, 657 N.W.2d at 640-41.

35 Id. at 429, 657 N.W.2d at 639, quoting Hansen v. Harrah’s, supra note 14.

36 See White v. Ardan, Inc., 230 Neb. 11, 16-17, 430 N.W.2d 27, 31 (1988).

37 Id. at 15, 430 N.W.2d at 30.

38 See Jackson v. Morris Communications Corp., supra note 1.

39 Collins v. Baker’s Supermarkets, 223 Neb. 365, 389 N.W.2d 774 (1986).

40 See Mark A. Rothstein, Wrongful Refusal to Hire: Attacking the Other Half of the Employment-at-Will Rule, 24 Conn. L. Rev. 97, 143 (1991).

41 Brigham v. Dillon Companies, Inc., supra note 28, 262 Kan. at 20, 935 P.2d at 1059.