Update: On February 12, 2020, the Supreme Court of Ohio handed down a merit decision in this case. Read the analysis here.

On April 23, 2019, the Supreme Court of Ohio heard oral argument in Christine House v. Bruce Iacovelli, et al., 2018-0434. At issue is whether the statutory penalties for employers imposed by R.C. 4141 preclude an employee from bringing a common law tort for wrongful discharge in violation of public policy.

Case Background

Christine House (“House”) was a server at Riverstone Taverne, a restaurant owned and operated by Bruce Iacovelli (“Iacovelli”) and his business, Windham Enterprises. During House’s employment at Riverstone, she worked between 35 and 50 hours per week and was paid a variable hourly rate that accounted for the tips she received during her shift. House allegedly approached Iacovelli and raised concerns about inaccuracies in the payroll which underreported House’s pay and the tips she earned. Iacovelli admitted to failing to pay all of House’s unemployment compensation insurance under Ohio law. House further alleges that after she brought the matter to Iacovelli’s attention he fired her for causing “too much drama,” rather than addressing the issue. After House was terminated, she claims Iacovelli urged her to mislead the Ohio Department of Job and Family Services by stating that she was terminated for “lack of work” to qualify for unemployment benefits. In exchange for her cooperation, Iacovelli offered to pay House $150 every two weeks to offset the lower unemployment benefits she would receive due to Iacovelli’s failure to report her wages and tips accurately.

On August 7, 2015, House filed suit against Iacovelli for wrongful termination, conversion, and violations of the Fair Labor Standards Act. Iacovelli filed an answer denying House’s claims. House then filed an amended complaint solely alleging wrongful termination in violation of R.C. Chapter 4141 for failing to report House’s wages accurately and to make adequate contributions to Ohio’s unemployment compensation insurance program. In the amended complaint, House stressed that she did not agree to participate in Iacovelli’s scheme to defraud the government and cheat her out of employment benefits.

After numerous motions and responses by both parties, the trial court ruled that while House satisfied the clarity element in support of her public policy wrongful termination claim, she failed to satisfy the jeopardy element as a matter of law because R.C. 4141.27 allows for the Attorney General to bring actions for violations of R.C. 4141. The court dismissed House’s amended complaint. House appealed.

On appeal, the Ninth District, in a unanimous opinion, affirmed in part and reversed in part.  Pertinent to the Supreme Court appeal, the Ninth District held that the trial court erred in finding that House failed to satisfy the jeopardy element of the wrongful termination claim. According to the Ninth District, the jeopardy element is satisfied where there is no meaningful opportunity for a plaintiff to recover, and R.C. 4141.27 does not afford House such an opportunity. Iacovelli now appeals.

Key Precedent

R.C. 4141.27 (Proceeding Against Employer Who Fails to Comply) (The Director of Job and Family Services or the Attorney General may compel an employer to accurately disclose and pay taxes into Ohio’s unemployment insurance fund. If an employer refuses to comply, legal actions may be initiated against such an employer.)

R.C. 4141.281(A) (Right of Appeal to Director) (Any party notified of a determination of benefit rights or a claim for benefits determination may appeal within twenty-one calendar days after the written determination was sent to the party . . .)

Greeley v. Miami Valley Maintenance Constr., 49 Ohio St.3d 228 (1990) (Public policy requires an exception to the employment at-will doctrine when an employee is discharged or disciplined for a reason prohibited by statute; in such cases, employees may bring suit in tort for wrongful discharge.)

Kulch v. Structural Fibers, 78 Ohio St.3d 134 (1997) (An employee who is wrongfully discharged may maintain a statutory cause of action, a common law cause of action, or both, but the employee is not entitled to double recovery.)

Wiles v. Medina Auto Parts, 2002-Ohio-3994 (When federal statutes provide sufficient individual remedies for wrongfully discharged employees, it is unnecessary to allow a common law wrongful discharge tort claim.)

 Ripley v. Montgomery, 2007-Ohio-7151 (10th Dist.) (There is no need to recognize a common law action for wrongful discharge if there already exists a statutory remedy that adequately protects society’s interests by discouraging the wrongful conduct.)

Iacovelli’s Proposition of Law Accepted for Review

In a common law tort claim for wrongful termination, if there is a statutory scheme to protect the public’s interest in the public policy involved, the jeopardy element is not met even if there is no relief available to the individual employee.

At Oral Argument

Arguing Counsel

Steve C. Bailey, The Bailey Law Firm, Medina, for Appellants Bruce Iacovelli and Windward Enterprises Inc.

Michael Terrence Conway, Michael T. Conway and Co., Brunswick, for Appellee Christine House

Iacovelli’s Argument

This is a case about the jeopardy element of the wrongful discharge tort. Wrongful discharge in violation of public policy is an exception to the employment at will doctrine. That exception must be clearly enough defined for the lower courts to be able to deal with it, and not so broad as to swallow the general rule. Since Greeley, all the statutes underpinning such claims have had a mechanism within the statute for protecting the employee. That’s how this case differs; that’s where the gap in this analysis is.

This case involves a statute that requires an accurate accounting by the employer to a government agency.  And the public policy that gives rise to the clarity element is that employers must report accurate numbers to that agency. Therefore, it is unnecessary to allow a common law tort action to protect that public policy, because the statute itself makes it an offense not to report accurate numbers to the Unemployment Bureau. The incentive for an employer to follow the public policy of accurate reporting is not by allowing employees to purse a common law tort claim, but with the fines imposed for failure to report accurate numbers.

The confusion in this area comes from this Court’s decision in Kulch, which the Court may need to overrule. In Kulch the emphasis was upon the adequacy of the remedy for that employee, not what was necessary to protect the public policy. The Court held that allowing the employee to go forward with a common law tort would enhance support for the public policy, not that the tort was absolutely necessary to protect that policy. That is where the analysis came off track. In other cases, in the jeopardy inquiry, the Court has asked whether the tort was absolutely necessary to protect the public policy, or whether there were other ways to do that. Kulch completely departed from that analysis, holding that although there are other ways to protect the public policy, allowing this tort would make it better; it would enhance it. That is exactly the confusion the Court needs to clear up. Is the jeopardy element going to focus on the rights of the individual employee or only on supporting the public policy?

In this case the public policy is to pay the right amount into the unemployment compensation fund. It is not prohibiting an employer from firing an employee who complains about this. Allowing a common law tort claim is not necessary. Would it enhance enforcement? Absolutely. If we are going to broaden the public policy exception to the employment-at-will doctrine for every instance in which an employee complains to an employer and is disciplined or fired for it, then so be it, but that’s not something that’s clear to the lower courts now. And it’s not consistent with the history of this tort, and may well broaden it to the point that it swallows the general rule.

House’s Argument

Ms. House was fired because she protested that her employer did not put money into her unemployment insurance fund account and did not make accurate reports. After she pointed that out to him, first he tried to buy her off with an illegal payment scheme, then he fired her in retaliation for not going along with that scheme. That retaliation is what is impermissible.

The public policy being enforced here is that an employer cannot terminate an employee in retaliation for protesting that her employer is not complying with his statutory obligation under the unemployment compensation fund. It is wrong to say that the public policy requiring these proper payments is not jeopardized in this situation. Without this wrongful termination tort, Ms. House has no remedy for her wrongful termination. There is no statute that provides her with reinstatement and back pay. And although the Attorney General may be able to sue and fine the employer, that does not get Ms. House her job back or make her whole. There must be exceptions to Ohio’s long standing employment-at-will doctrine when there is abuse. Being fired in retaliation as Ms. House was violates everything Greeley stands for.

Greeley and Collins v. Rizkana are dispositive of this case. In both those cases there were very compelling public policies and statutes, but there was no remedy for the terminated employee who was the victim of an employer’s statutory violations. This Court should not permit this kind of abuse of the employment-at-will doctrine.  The decision of the Ninth District should be affirmed.

What Was On Their Minds

Kulch

To agree with the employer’s argument would the Court have to distinguish or overrule Kulch, asked Justice French?

Incentives to Employees to Come Forward

If the employee is not able to pursue a cause of action, where is the incentive to come forward to report and then lose your job, asked Chief Justice O’Connor, noting that an audit of employer practices is often impossible given the staffing available, so agencies often rely on employees coming forward in order to ensure compliance. Isn’t it the actions of the individual employee that allows the public policy to be served?

Public Policy/Jeopardy

Is the public policy protected by the fact that there can be a $1000 fine, asked Justice Stewart? For what? Every day there was a violation? For every dollar that it happened? Every instance? One thousand dollars, period?

Isn’t the deterrent effect of a fine only effective if the employer believes he or she is going to get caught, asked Justice Donnelly? And isn’t the only way that usually happens by someone who knows about it in that employment context reporting it to the AG?

In this case clarity has been determined, hasn’t it, asked Justice Fischer? Isn’t the public policy we are enforcing to accurately and properly report and make payments to the unemployment compensation fund? The only issue here is jeopardy?

Ultimately, don’t we generally look at the legislature as the one who makes public policy, asked Justice DeWine? They have a pretty comprehensive scheme here, they certainly know how to provide a private remedy, they chose not to do so, why shouldn’t we defer to that judgment? Why shouldn’t we let them make public policy instead of us?

How It Looks From The Bleachers

To Professor Emerita Bettman

Like a bad re-run of Greeley. Iacovelli’s argument sounds a lot like what Mr. Greeley’s employer argued in Greeley-my bad, the statute imposes a fine of up to $500 for failure to withhold child support.  We had to pay that fine. End of story. But the Greeley Court decided that wasn’t the end of the story because that statutory fine didn’t do a thing for Mr. Greeley, and thus this common law tort was born. I completely agree with Mr. Conway that Greeley should determine this case. Wrongful firing, but no remedy in the statute for the wronged employee.

But as unsympathetic as my notorious plaintiff’s heart is to Iacovelli’s argument, I think he has a point that the jeopardy element has since gotten muddled up with the issue of the adequacy of employee remedies for statutory violations, although not in this case, because there are no statutory remedies for House.  I also think that the public policy of the state is jeopardized when the only remedy in a statute is penalizing an employer with no remedy in that statute for an employee. The Chief alluded to this when she asked whether it wasn’t the actions of the individual employee that allows the public policy to be served.

How the Justices feel about this is another matter, as the bench was surprisingly cold. In fact, I wondered why the Court agreed to hear this case. The Chief, and Justices Stewart and Donnelly seem to lean toward House. Justice DeWine seems clearly to favor Iacovelli,  and I suspect Justice Fischer does, too, but I’m judging that in part from a very cramped view the 2 took of the clarity element of this tort while appellate judges in McGowan v. Medpace, which the Supreme Court later heard, (with both recused) but dismissed as improvidently accepted.

Justice French may add the fourth vote to find in favor of House, depending on how she feels about Kulch. But I think adding some clarity (no pun intended) to the interplay between the jeopardy element and employee remedies would be a good thing. And the usual silence from Justice Kennedy, although I think she will side with Justice DeWine’s view.

To Student Contributor Paul Taske

Initially, I thought this case was hard to read. Counsel for Iacovelli seemed reluctant to even commit to a stance on the law or the outcome of the case. During House’s argument the bench appeared colder than normal and harder to read. However, upon a second viewing I think this case looks like a win for House. The justices were highly critical of Iacovelli’s proposals and the ramifications that a ruling would have on later cases. Where the justices did question House the questions appeared more conciliatory or geared to seeking clarity about the issues.

If Greeley stands for anything it is the proposition that an employee may seek remedies when discharged for reasons which violate a statute. In such cases, Greeley says that a judgment in favor of the employee is appropriate. This simple holding, combined with public policy concerns provides strong justification to find in House’s favor.