On March 18, 2015, the U.S. District Court for the District of Columbia ruled on a motion to dismiss in a case that will have potentially serious consequences for D.C. employers that include written whistleblower and other anti-retaliation policies in their employee handbooks.
In Leyden v. American Accreditation Healthcare Commission, Christine Leyden brought a nine-count suit after being discharged from her position as Chief Accreditation Officer of the American Accreditation Healthcare Commission (URAC). Leyden did not have any formal employment contract or agreement.
In June 2012, URAC, a private, non-profit organization that accredits healthcare plans and providers, hired a new Chief Operating Officer (COO). Leyden claimed the new COO and his deputy “reduced her job responsibilities,” “replaced other female executives with younger men and denigrated and physically intimated her and other female executives who disagreed with them.” Leyden also had concerns about the conduct of two board members who she alleges “sought improper access to business and financial information” and “attempted to influence URAC’s accreditation review.” URAC discharged Leyden in January of 2013.
Leyden filed suit claiming gender discrimination and retaliation, breach of implied contract and promissory estoppel, and wrongful discharge. URAC argued that Leyden was an at-will employee who URAC could freely discharge because Leyden had disagreed with the new direction in which the organization was heading. In its ruling on URAC’s motion to dismiss, the court found that Leyden had alleged sufficient facts to state a claim for discrimination and retaliation. The court also held that Leyden did not identify a sufficient public policy under her wrongful discharge claim that would allow her to rebut the presumption that she was an at-will employee who could not bring a wrongful termination suit.
The court’s most consequential ruling concerned Leyden’s implied contract and promissory estoppel claims. Because Leyden did not have a written employment contract, she argued that URAC breached implied contractual duties under two of its own personnel policies and that URAC breached a covenant of good faith and fair dealing under these implied contracts. The two personnel policies at issue were a whistleblower policy and an employee grievance policy.
The whistleblower policy allowed employees “to report allegations of known or suspected Improper Activities.” The policy also included an anti-retaliation provision: “No URAC employee who in good faith reports any Improper Activities in accordance with this policy shall suffer, and shall be protected from threats of harassment, retaliation, discharge, or other types of discrimination.”
The grievance policy, which encouraged employees to raise complaints about their working conditions, also contained an anti-retaliation provision that stated, “[n]o employee will be penalized, formally or informally, for voicing a complaint with URAC in a reasonable, professional manner.”
In response, URAC argued that its employee handbook “explicitly disclaims the creation of any contractual rights,” noting that the employee handbook disclaimer states that “[t]his Handbook is not a contract of employment, and does not confer any contractual rights, either express or implied, between URAC and you.”
The court’s ruling was guided by the law of the District of Columbia, in which there is a presumption of employment at-will. However, a plaintiff can rebut the presumption of at-will employment by showing that the parties “intended that termination be subject to specific preconditions,” which can be demonstrated through an employee handbook or other policies. Typically, most courts have not inferred that anti-retaliation policies create contractual rights.
In this case, however, the court found that Leyden’s complaints implicated the whistleblower and grievance policies and that the disclaimer, which was located in a different document, was “rationally at odds” with the anti-retaliation provisions of these policies. The court also concluded that the disclaimer, “therefore does not serve to retract URAC’s commitment to protect employees from retaliation for reporting suspected improper activity.” Any other conclusion, the court concluded, “would render the [policies] meaningless.” In holding that Leyden adequately pled claims for breach of implied contract, as well as the implicit covenant of good faith and fair dealing, or in the alternative a claim for promissory estoppel, the court ruled that Leyden would be permitted to show that URAC violated its promise, and therefore breached its implied contract to protect her from retaliation for reporting these concerns.
What this Means for Employers
This decision could ultimately have serious consequences for D.C. employers that rely on disclaimers to uphold a presumption of employment at will in the face of whistleblower and other anti-retaliation policies. Employers should review all of their policies to determine whether they conflict with a contractual disclaimer (contained in any employment policy), and if so, reevaluate the risk of maintaining these policies going forward.
John S. Bolesta is of counsel in the Washington D.C. office of Ogletree Deakins.
Jenna N. Mennona is an associate in the Washington D.C. office of Ogletree Deakins.