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Court of Special Appeals Expands the Boundaries of the Tort of Wrongful Termination

Maryland Appellate Blog

Court of Special Appeals expands the boundaries of the tort of wrongful termination

In a case of first impression in Maryland, the Court of Special Appeals went where California’s courts have refused to go, holding “that the tort of wrongful termination may lie when an employer decides to terminate an employment relationship by declining to renew an employment agreement for which the parties anticipated the reasonable possibility of renewal.” Miller-Phoenix v. Balt. City Bd. of Sch. Comm’rs, CSA-REG-209-2019, 2020 WL 2781833, at *3 (May 29, 2020). Building on the Court of Appeals’ decisions in Adler v. Am. Standard Corp., 291 Md. 31 (1981) and Ewing v. Koppers Co., 312 Md. 45 (1988), the Court of Special Appeals gave Maryland employers the following message. If an employer allows an employment relationship to terminate—and the employer’s motivation for that termination contravenes some clear mandate of public policy—the terminated employee may have a claim for wrongful termination.

Scott Miller-Phoenix was a Baltimore City public schoolteacher. State law requires teachers to maintain professional certification, and public schoolteachers’ contracts mandate that certification as a condition of employment. Baltimore City’s School Board advised Miller-Phoenix that he had allowed his teaching certification to expire. As a result, in accordance with State law, his employment contract terminated. The State Department of Education, however, issued him a conditional certificate. The Board also “gave him instructions for seeking reinstatement of his full teaching certification, and informed him that he needed to sign a Provisional Contract … to maintain his employment.” Id. at *2.

Maryland prescribes two forms of contracts for teachers, Regular Contracts, which “continue from year to year,” and “may be terminated only for cause,” and Provisional Contracts, which “automatically terminate and expire on the thirtieth day of June next succeeding the date of [their] signing.” Id. at *1 (citations omitted) (internal quotation marks omitted). If a tenured teacher’s certification expires, the teacher’s contract automatically terminates, but if “the teacher obtains a conditional certificate, then he or she may be reemployed under a Provisional Contract.” Id. at *2 (citations omitted). This is what happened to Miller-Phoenix.

After Miller-Phoenix signed his Provisional Contract, he filed a workers’ compensation claim for post-traumatic stress disorder, which he had previously “claimed was caused by work experiences during his prior teaching assignments.” Id. About four months after Miller-Phoenix filed that claim, the Board sent him an e-mail, informing him “that his Provisional Contract would not be renewed and that, as a result, his ‘employment with City Schools will cease on June 30, 2017.’” Id.

Miller-Phoenix then filed a lawsuit in the Circuit Court for Baltimore City. The first two counts of his complaint asserted claims under the Maryland Public School Employee Whistleblower Protection Act and Baltimore City’s Whistleblower Rights and Responsibilities Ordinance. In those counts, he “alleged that the Board had discharged him in retaliation for his complaints about the Board’s misconduct.” Id. at *3. His fourth count alleged a breach of contract. This post will not address those three claims. Instead, the focus will be on Miller-Phoenix’s third count, where “he brought a claim for common law wrongful termination premised on his assertion that the Board had discharged him in retaliation for filing his workers’ compensation claim.” Id. The circuit court granted summary judgment on all four counts. “With respect to wrongful termination, the court held that the tort did not apply to the non-renewal of an employment contract.” Id. The circuit court reasoned that the Board had not discharged Miller-Phoenix. Instead, “it had the right in the agreement to not renew his employment contract when it expired … and it chose not to renew.” Id. (internal quotation marks omitted).

Miller-Phoenix appealed to the Court of Special Appeals, which affirmed the circuit court’s decision regarding the whistleblower and contract claims, but reversed the wrongful termination decision and remanded the case to the circuit court so that litigation on that claim could proceed. In an opinion authored by Chief Judge Matthew Fader, the Court reviewed the law surrounding at-will employment and the tort of wrongful termination, which is “also called wrongful discharge or abusive discharge.” Id.

Under the common law, an at-will employment contract—i.e., one of indefinite duration—“can be legally terminated at the pleasure of either party at any time.” Id. (internal quotation marks omitted) (citations omitted). In Adler, the Court of Appeals recognized an exception to that rule, adopting the tort of wrongful discharge, which “permits an employee to bring a cause of action against an employer ‘when the motivation for the discharge contravenes some clear mandate of public policy.’” Id. (quoting Adler, 291 Md. at 47). In holding that at-will employees should be allowed to sue for wrongful termination, the Adler Court concluded that an employee’s interest in job security deserves recognition when that interest is “threatened not by genuine dissatisfaction with job performance,” but by some illegitimate motivation. Id. at *4 (internal quotation marks omitted) (quoting Adler, 291 Md. at 42). The Adler Court also concluded that the public interest supported the tort’s recognition, as “society as a whole has an interest in ensuring that its laws and important public policies are not contravened.” Id. (internal quotation marks omitted) (quoting Adler, 291 Md. at 42).

In Ewing, the Court of Appeals extended the tort to cover employees who “serve under a contract,” but who are terminated “in the middle of their contractual terms.” Id. (internal quotation marks omitted) (quoting Ewing, 312 Md. at 49-50). The Ewing Court also held that dismissing an employee solely because the employee filed a worker’s compensation claim contravened a clear mandate of public policy. Id. In extending the tort’s reach to include contractual employees, the Ewing Court “noted that the first consideration mentioned in Adler was inapplicable,” but acknowledged the significance of the public policy underlying the tort. Id. at *4-5. The Court concluded that “recognition of the availability of this cause of action to all employees, at will and contractual, will foster the State’s interest in deterring particularly reprehensible conduct.” Id. at *5 (internal quotation marks omitted) (quoting Ewing, 312 Md. at 49).

Relying on the rationales provided by Adler and Ewing, the Court of Special Appeals found the “societal interest discussed in Ewing pertains equally to a case of non-renewal of a term contract,” and also cited an employee’s individual interest noted in Adler, “because employees who are at the end of the term of a renewable contract are similarly vulnerable to those employed at will.” Id. Given that similar vulnerability, it would not be logical “to deprive an employee whose term contract is up for renewal” of the same rights as those given an at will employee. Id.

The Board argued that termination of employment resulting from the non-renewal of a contract “should not be subject to challenge in tort because, in those circumstances, it is the predetermined termination date of the contract, and not any action by the employer, that causes the employment relationship to end.” Id. at *6. The Court rejected the Board’s position, countering that the “argument fails to appreciate that many term employment contracts are entered with the reasonable possibility, if not the mutual expectation, that they will be renewed if the employee’s job performance is adequate.” Id. (emphasis added). In those instances, “it is the employer’s decision not to renew the agreement that causes the employment relationship to end.” Id. As the Court went on to explain, this “reasonable possibility” of renewal is a crucial component of the Court’s analysis.

The Court then addressed the second major aspect of its reasoning and the rationale underlying the expansion of the tort, i.e. the employer’s motivation. Although firing an at will employee “requires an affirmative act” and the nonrenewal of a term contract is “passive,” the Court did “not think that distinction dispositive where the employer makes a conscious decision not to renew the contract. The ‘wrongful’ element of the tort of wrongful termination lies not in the fact of termination but in the motivation for it.” Id. (emphasis added). The Court elaborated:

Whether a termination is accomplished passively (by choosing to forgo renewal of a renewable contract) or actively (by firing an employee), if an employer’s motivation for ending the employment relationship “contravenes some clear mandate of public policy,” … we can think of no reason why the law should tolerate it.

Id. (quoting Adler, 291 Md. at 35) (footnote omitted).

The Court acknowledged that “not all term employment contracts come with an expectation that renewal is reasonably probable,” and reiterated that an employee “pursuing a claim for wrongful termination by non-renewal must plead and prove that the contract was subject to a reasonable possibility of renewal.” Id. But that “reasonable probability” requirement is met when the employer makes “an affirmative choice not to renew” the contract. Id. An employer’s choice “not to renew the parties’ employment relationship at the end of the contractual term is, for these purposes, equivalent to an employer’s exercise of discretion to terminate an at will employment relationship.” Id.

The Court rebuffed the Board’s reliance “on a handful of out-of-state cases to support its position.” Id. at *7. The Court rejected an Ohio federal court’s decision that gave “significance to the term ‘discharge’ that is not supported by the public policy rationale that underlies the tort.” Id. The Board also cited a number of California cases, which the Court of Special Appeals found “similarly unconvincing.” Id. California generally precludes an employee’s suit “for tort damages where the employment contract is for a fixed term and expires.” Id. (internal quotation marks omitted) (citation omitted). As with the Ohio court’s reasoning, the Court found the reasoning of the California court “unpersuasive and inconsistent with the purpose of the tort in this State.” Id. Moreover, “in related contexts, courts have treated the non-renewal of a term contract as similar to a termination, most notably in connection with applying federal and state antidiscrimination statutes.” Id. (footnote omitted) (citations omitted).

Thus, if the other elements of the tort are satisfied, “an employee may bring a claim for wrongful termination when, despite the parties having anticipated the reasonable possibility of renewing the employment relationship, the employer decides not to renew the contract for a reason that contravenes a clear mandate of public policy.” Id. at *8. An initial comment—Maryland law now affords employees a cause of action that California courts have rejected. That said, a key takeaway from this opinion is the Court’s disdain for employers’ decisions that are motivated by something that runs counter to an important public policy. If an employer takes a step short of terminating an employee, or makes some other decision affecting the employment relationship, and the employer’s motivation contravenes some clear mandate of public policy, will tort liability arise? What other claims may exist if an employer acts, or fails to act, when so motivated? Another key takeaway is the requirement that the employee, whose employment contract has not been renewed, must establish that the parties anticipated a “reasonable possibility” that the contract would be renewed. How will the employee go about doing that? And what steps will employers take in an effort to show that the parties, when they entered the contract, did not anticipate renewal? How may employers show their actions were not motivated by improper concerns? We can expect further guidance on these from the Court of Special Appeals and ultimately the Court of Appeals.

Brad McCullough represents businesses and individuals in a wide variety of cases in federal and state trial and appellate courts, as well as before arbitration panels and in mediation proceedings. For more information, contact him at at 301-657-0734 or jbmcullough@lerchearly.com.

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