“It is less likely that a wrongful-termination-in-violation-of-public-policy claim is necessary when remedies for statutory violations are included in the statutory scheme.”

Justice Fischer, Majority Opinion

“I fail to see how the administrative remedies in R.C. Chapter 4141 adequately protect the public policy of ensuring an employer’s accurate and honest wage reporting without allowing a remedy for appellee, Christine House, and others like her, who may have been fired for reporting this kind of employer misconduct.”

Justice Stewart, Dissenting Opinion

On February 12, 2020, the Supreme Court of Ohio handed down a merit decision in House v. Iacovelli,  2020-Ohio-435. In an opinion written by Justice Fischer, in which Chief Justice O’Connor and Justices French and DeWine joined in full and Justice Kennedy concurred in judgment only, the Court rejected a wrongful-termination-in-violation-of public-policy claim for failure to meet the jeopardy element of that tort.  Justice Stewart dissented, joined by Justice Donnelly.  The case was argued April 23, 2019.

Case Background

Christine House worked as an employee at Riverstone Taverne, a restaurant owned and operated by Bruce Iacovelli and his business, Windham Enterprises (Collectively, “Appellants”).  House alleged in her complaint that she approached Iacovelli about the inaccuracy of the payroll, and that he fired her shortly thereafter for creating “drama.” House claimed that Iacovelli had underreported her wage and tip income, which meant she would receive less unemployment compensation than she would otherwise have been entitled to receive.

House filed suit against Iacovelli for wrongful termination, conversion, and violations of the Fair Labor Standards Act. House then filed an amended complaint, adding Windham Enterprises as a defendant, and 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.

Upon  motion by the appellants, which House opposed, 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 provides a remedy for violating the public policy reflected in the statute, and that remedy adequately protects society’s interests. The court dismissed House’s complaint, and she appealed.

On appeal, the Ninth District held that the trial court erred in finding that House could not satisfy the jeopardy element.  The appeals court found that the statutory remedies in R.C. Chapter 4141 were insufficient to give House a meaningful opportunity to return to the job she previously held. The appeals court further found that a decision in favor of the employers here could have a chilling effect on the willingness of employees to report such violations.

Read the oral argument preview of the case here and an analysis of the argument here.

Key Statutes and 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 accurately to 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.)

Collins v. Rizkana, 73 Ohio St.3d 65 (1995) (To establish a wrongful-termination-in-violation-of-public-policy-claim, a plaintiff must establish four elements: (1) that a clear public policy existed and was manifested either in a state or federal constitution, statute, or administrative regulation, (2) that dismissing employees under circumstances like those involved in the plaintiff’s dismissal would jeopardize the public policy, (3) the plaintiff’s dismissal was motivated by conduct related to the public policy, and (4) the employer lacked an overriding legitimate business justification for the dismissal.)

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.)

 Pytlinski v. Brocar Prods., Inc., 94 Ohio St.3d 77 (2002) (The Ohio public policy favoring workplace safety is an independent basis upon which a cause of action for wrongful discharge in violation of public policy may be prosecuted.)

Bickers v. W. & S. Life Ins. Co., 2007-Ohio-6751 (An employee who is terminated from employment while receiving workers’ compensation has no common-law cause of action for wrongful discharge in violation of public policy because R.C. 4123.90 provides the exclusive remedy for employees claiming termination in violation of rights conferred by the Workers’ Compensation Act.)

Leininger v. Pioneer Natl. Latex, 2007-Ohio-4921 (A wrongful-termination-in-violation-of-public-policy claims is not necessary when remedy provisions are an essential part of the statutes upon which the plaintiff depends for the public policy claim and when those remedies adequately protect society’s interest by discouraging the wrongful conduct.)

Kaminski v. Metal Wire Prods. Co., 2010-Ohio-1027(It is not the role of the courts to establish their own legislative policies or to second-guess the policy choices made by the General Assembly.)

Miracle v. Ohio Dept. of Veterans Servs., 2019-Ohio-3308 (Neither the civil service probation statute nor the civil service investigation statute provides the clear public policy necessary to underpin a wrongful-discharge tort claim by a probationary public employee.)

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

 Does the Court Adopt Iacovelli’s Proposition of Law?

Yes

Merit Decision

Executive Summary

House failed to meet the jeopardy element of her public policy wrongful discharge tort claim (also called the Greeley claim) because the remedies in R.C. Chapter 4141 sufficiently protect society’s interest in the public policy of having employers accurately report employee wages and tips to the Bureau of Unemployment Compensation.  The fact that there is no remedy for an individual employee doesn’t change that.

Analysis

Traditional Rule in Employment Termination Cases

Employment-at-will is the general rule in Ohio. An employee without a contract may be fired or may quit at any time, for any reason, or no reason.

Exception to Employment-at-Will

An employee may not be fired for a reason that violates public policy. This is an exception to the employment-at-will doctrine. In order to prove such a claim, a plaintiff must establish four elements, adopted by the court from a law review article by Henry H. Perritt, Jr. The Future of Wrongful Dismissal Claims: Where Does Employer Self Interest Lie?  Those elements are (1) clarity, (2) jeopardy, (3) causation and (4) overriding justification for a wrongful discharge tort. The first two elements are questions of law; the last two are questions of fact. Only the jeopardy element is at issue in the case.

Clarity Element In This Case

The trial court found that there is a clear public policy manifested in  R.C. Chapter 4141 that employers should accurately report employee pay and tips to the Bureau of Unemployment Compensation. Because the appeals court left this finding undisturbed, so did the Ohio high court.  But the majority noted in passing that there may be “some question” whether that public policy was sufficient to establish the clarity element in light of the court’s recent decision in Miracle v. Ohio Dept. of Veterans Servs, 2019-Ohio-3308. (In Miracle, the court held that  R.C. 124.27(B)  and Ohio’s civil- service scheme as a whole do not express a clear public policy that would support recognizing a wrongful-discharge tort for probationary employees).

Jeopardy Element 

The key inquiry with this element is whether there are any alternative means of promoting the particular public policy which would be vindicated by the tort claim.  Greeley claims are less necessary when there are remedies for the statutory violation within the statute, and those remedies “adequately protect society’s interest by discouraging wrongful conduct.” (quoting Leininger).

House’s Greeley claim was based on various provisions of R.C. Chapter 4141. But after reviewing that chapter, the majority concludes that the legislature created remedies that discourage inaccurate reporting of employee pay to the Bureau of Unemployment Compensation and punish employers who fail to comply. So, the majority says, the question becomes whether those statutory remedies that provide no remedy at all for the aggrieved employee are strong enough to discourage this type of employer conduct and protect society’s interest in making sure employers do report accurately. House argued they are not because of that very lack of a personal remedy protecting employees like herself who were fired after confronting her boss about the inaccurate reporting. But the majority disagrees.

Public Policies Protecting Substantial Employee Rights

What’s the difference in the jeopardy analysis in past cases that were allowed to go forward and this one? Cases like Wiles, Kulch, Collins and Leininger involved public policies that “protect substantial rights of the employee” such as family and medical leave, workplace safety, age discrimination and sexual harassment and discrimination. The situation in this case, says the majority, is different.  In this circumstance, a personal remedy is not necessary to discourage wrongful conduct by employers, namely the inaccurate reporting of employee wages to the Bureau of Unemployment Compensation, because the statutory remedies sufficiently protect the public interest.

As a further justification for its finding the jeopardy element was not met here, the majority posits that if the court were to order damages or reinstatement for House, while that kind of personal remedy might discourage retaliation, it might not be sufficient to prevent the public policy from being jeopardized because appellants like Iacovelli and his company might still decide not to pay properly into the fund.

“Simply stated, the public policy recognized by the trial court is sufficiently protected by the remedies in R.C. Chapter 4141,” wrote Fischer.

Case Outcome

The court finds the trial court properly dismissed House’s case and reverses the court of appeals judgment. Justice Kennedy concurred in judgment only.

Justice Stewart’s Dissent

Short Version

Justice Stewart fails to see how the administrative remedies in R.C. Chapter 4141 adequately protect the public policy of making sure employers accurately report employee wages without some kind of remedy for employees like House who are fired for reporting this misconduct.

Challenging the Majority’s Public Policy Distinctions

Stewart disagrees with the majority decision in two ways. First, she does not agree with the majority’s reasons for distinguishing this case from the court’s jeopardy analyses in past decisions by treating public policies protecting substantial employee rights differently from public policies protecting only particular governmental interests.

And secondly, Stewart would find that even if this distinction is valid, the public policy behind accurately reporting employee wages does protect a substantial right of the employee—that of receiving her fair share of unemployment compensation benefits if wrongfully fired. She criticizes the majority for failing to explain adequately why the public policy at issue here does not involve the protection of an employee right.

Inadequacy of the Statutory Remedies

Stewart details just how inadequate the statutory remedies are in R.C. Chapter 4141, consisting mostly of modest and sometimes waivable fines if the Director of the Department of Job and Family Services even discovers the wrongdoing.

“Given the mild penalties involved, it is not difficult to imagine a scenario in which an unscrupulous employer might choose to forgo its legal obligations by underreporting employee wages when the benefit outweighs the risk,” Stewart wrote, adding, “If employees know they can be terminated with no recourse for reporting a potential violation or for cooperating with the Bureau of Unemployment Compensation to uncover a potential violation, it is highly unlikely that they will ever report or cooperate…because employee reporting in this instance is necessary for the effective enforcement of the public policy, employees must be protected from retaliatory discharge either by remedies contained in the statutory provisions or by remedies in a common-law tort claim for wrongful termination.”

The Particulars of House’s Case

In the rest of her dissent, Stewart goes on to apply the law to the facts alleged in this case to underscore what she sees as the majority’s error. She particularly faults the majority for leaving out of its opinion other allegations of House’s complaint, namely the fact that after House was terminated, Iacovelli contacted her and urged her to misrepresent the true reason for her termination to the Bureau of Unemployment Compensation 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, and that House refused to participate in this scheme. Stewart goes on to explain the significance of House’s refusal to engage in what was essentially unlawful conduct.

“In light of the circumstances in which House was dismissed, I find the majority’s assurances that the administrative remedies in R.C. Chapter 4141 protect the public from an employer’s wage-reporting violations entirely unconvincing,” Stewart concluded. Justice Donnelly signed on to this dissent.

Concluding Observations

I think this is a bad decision and agree with everything Justice Stewart wrote. I found the entire majority rationale completely unconvincing. I’m sorry to see the court chipping away at this tort, which provides some balance to Ohio’s harsh, longstanding employment-at-will doctrine.

Here’s what I wrote after argument:

“ 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 (House’s lawyer) that Greeley should determine this case. Wrongful firing, but no remedy in the statute for the wronged employee.”

I thought this position would get a majority of the votes. I was wrong; it didn’t even get three.  I also thought the Chief was leaning toward House.  She wasn’t. It was clear from a surprisingly cold bench that Justices Fischer and DeWine favored Iacovelli’s position. That was not surprising, as they both took a  narrow view of the clarity element this tort as appellate judges in  McGowan v. Medpace.