A recent decision by the federal Court of Appeals for the Second Circuit determined that private sector employees could be fired for refusing to be interviewed by their employer who was conducting an internal investigation of bid rigging [Gilman v. Marsh & McLennan Companies, Inc.]. The Court's decision was based both upon language in their employment contracts and the absence of Fifth Amendment (no self-incrimination) rights in the private sector workplace. This comment provides a brief and incomplete overview this judicial decision and the broader status of private sector employees' rights in the workplace. Always consult an experienced attorney in specific employment situations.
The introduction to the Gilman decision explains: "Faced with the prospect of criminal indictment premised on the actions of two employees, a company demanded that those employees explain themselves under the threat of termination. They refused, were fired, and in this suit seek to recover employment benefits they lost by termination." The Second Circuit affirmed summary judgment (a decision without a trial) for the employer.
The Second Circuit noted that the employer, as a result of a far reaching investigation by the New York Attorney General (AG) and related guilty pleas, had seen its stock price plunge and was the focus of numerous private civil lawsuits. In broad overview, the AG was asserted to have indicated that he would not criminally prosecute the employer if the employer would cooperate, including waiving (giving up) any attorney-client privilege in the contents of the employer's internal investigation. In this context, the employees in question refused to be interviewed by their employer. They instead attempted to resign and retire, making them eligible for "valuable employment benefits." Their resignation was refused and they were fired.
The employees' stock option plan stated that if they were terminated "for cause," any unvested stock benefits were forfeited, and other severance and deferred compensation were also forfeited.
The employees sued to obtain the lost benefits, alleging ERISA violations, breach of contract and a breach of the implied covenant of good faith and fair dealing. The federal District Court granted summary judgment in favor of the employer.
The Second Circuit stated that the employer's interview demands were reasonable. Applying Delaware law, the Court stated that "cause" included a refusal to "obey a direct, unequivocal, reasonable order of the employer." Furthermore, an employer may fire an employee for alleged criminal conduct even if the employee is eventually acquitted of criminal charges. When an employer "can no longer place the necessary faith and trust in an employee," the employer may fire without penalty.
The employer could seek information from the employees "to protect its standing with investors, clients, employees, and regulators." While the employees were "in the tough position of choosing between employment and incrimination," "that does not immunize them from all collateral consequences," including termination. The Court noted that the interview requests "predated" any alleged non-prosecution agreement with the AG. The definition of "cause" in the benefits package would be meaningless if an employee could preemptively resign.
The Second Circuit found the employees' constitutional self-incrimination argument to be a "Hail Mary pass." The employer is not a government actor against whom self-incrimination protections apply. Government in this situation was not compelling the employer to conduct the interviews. Finally, "a company is not prohibited from cooperating [with government,] and typically has supremely reasonable, independent interests for conducting an internal investigation and for cooperating with a government investigation, even when employees suspected of crime end up jettisoned."
As this decision illustrates, typically private sector employees have limited federal constitutional rights in the workplace. In contrast, public sector (governmental) employees have these constitutional rights since the U.S. Constitution only limits actions by government. State constitutional law frequently follows this pattern.
Private sector employees have legal rights based upon legislation, an employment contract, or a court's determination that public policy requires that the right be granted.
The National Labor Relations Act and the Civil Rights Act illustrate legislative protection. This brief comment cannot list all federal and state legislative protections for employees. Consult an experienced attorney as there may be relevant legislation that addresses a specific situation. However, it is a misunderstanding for an employee to believe that, for example, a private sector employee has an unlimited right of "free speech" in the workplace. An employer, in contrast, may misunderstand the protections granted employees engaged in "concerted activity" under the National Labor Relations Act to discuss among themselves, in person or via social media, issues related to wages, hours, and other terms and conditions of employment.
A recent divided decision by the D.C. Court of Appeals upheld a National Labor Relations Board (NLRB) determination that employees could not be terminated for publically airing their pay grievances on local TV news [DirectTV, Inc. v. NLRB]. The employer had argued that the statements were "maliciously untrue and flagrantly disloyal," allowing termination for cause. The two justice majority opinion upheld an NLRB finding of protected concerted activity. The dissenting justice believed that the employees' statements crossed the line into disloyalty when they accused their employer of deceptive business practices. This is an example of a close case involving legislatively protected employee speech.
In this election year, the issue of workplace political discussion arises. There are no inherent First Amendment protections in the workplace for private sector employees, and in fact, workplace speech could create a hostile work environment if the topics involve race, color, sex, national origin, religion, age, or disability. Employers might consider creating an at-work political discussion policy, although this is a delicate and situationally specific managerial decision.
Employment contracts may grant or restrict rights. There is much litigation concerning what constitutes an employment contract. Typically, employment handbooks and other guidelines are not contracts. Additionally, a prudent employer will expressly state that these documents do not constitute a contract and may be altered or abolished at any time in the sole discretion of the employer. Furthermore, a variety of promises of continual employment have been held by courts not to create a contract. Of course, unionized employees typically have a labor agreement employment contract. Sports commissioners, for example, frequently have broad powers that are essentially based upon contracts.
In a few situations, public policy, a somewhat vague concept that courts may apply in the interest of the public good, may protect employees. An illustration of public policy might be a court's refusal to allow an employee to be fired based upon the employee's reporting for required jury duty rather than to work, or, in an old example, a refusal by the employee to commit perjury. One must research the potential application of public policy in a given state.
The U.S. employment-at-will legal doctrine allows a private sector employee to quit at-will and to be fired at-will. An employer may terminate private sector employment for arbitrary and irrational reasons, provided the termination does not violate legislative, contractual, or public policy protections. Much of the industrialized world has more employment protections than the U.S. Hence, a company operating with employees in a foreign nation must understand that nation's employment laws.
There is much commentary concerning potential revisions to existing U.S. labor laws, especially in light of the movement from industrialization to the current technology and service based economy, the decline of labor unions, concerns about privacy, and in general the changing social understandings of appropriate conduct. Should there be a broad based employee "Bill of Rights"? This is unlikely to occur at the federal level in the foreseeable future although possibly a very few states may act. Several states have enacted legislation entitled a "Domestic Workers' Bill of Rights" to fill a lack of coverage of domestic workers under the National Labor Relations Act. So, the "Bill of Rights" terminology does exist. However, there is not a contemporary continuing broad-based social and political movement by U.S. employees that compares to the historic labor movement. One may observe the relative political power of employers and employees at a given point in time and predict the likely legislative and legal environment. "The Law" is not some unchangeable force like the laws of nature. It is very much a human enterprise.
This comment provides a very brief and incomplete educational overview of a complex topic and is not intended to provide legal advice. Always consult an experienced attorney in specific situations.