Hawaii Employment Law Basics: Wrongful Termination Claims

April 29th 2010

The majority of all employment relationships can be divided into three categories:

  1. Collective Bargaining Agreement: Wages, hours, and other terms and conditions of employment are set forth in a collective bargaining agreement which is the product of negotiations between the employer and the union.
  2. Employment Contracts: Employment contracts for a definite duration are subject to certain termination conditions ( i.e., good cause) and are usually negotiated on an individual basis.
  3. Employment-at-Will: Either the employee or the company may terminate the employment relationship at any time for any reason (or even no reason).

Employment At Will Doctrine

The traditional doctrine of at-will employment permits an employer to terminate an employee “for good cause, for no cause, or even for cause morally wrong without being thereby guilty of legal wrong.”  To avoid the harsh impact of the well-established doctrine of at-will employment, state, federal courts and legislatures have created or enacted many laws to restrict this otherwise unfettered right.

Judicial Exceptions to “At Will” Doctrine

Despite the growing acceptance of several judicial exceptions to the at-will doctrine, the presumption of at-will employment remains the starting point for analyzing nearly all wrongful termination claims.  The Hawaii Supreme Court has recognized certain exceptions to the employment-at-will doctrine—public policy, implied contract, and promissory estoppel.

Public Policy Exception

The most well established exception to the at-will doctrine involves claims alleging that adverse employment action was taken in violation of public policy. There is general agreement that while an at-will employee may be terminated for no reason, or for an arbitrary or irrational reason, employers should not be allowed to discharge employees for reasons that are contrary to a clearly established policy of the state.  Public policy theories most commonly arise in cases involving claims of discriminatory discharge or discharge in retaliation for the employee’s exercise of a legal right; fulfillment of a legal obligation; refusing to engage in illegal activity at the behest of the employer; or opposition to unlawful employer conduct.

The public policy exception prohibits an employer from discharging an employee if the discharge violates a clear mandate of public policy (constitutional, statutory, regulatory, or judicial policy).  Private issues, regardless of their statutory foundation, cannot form the basis of wrongful discharge actions.

The Hawaii Supreme Court has ruled that absent a prior legislative or judicial expression of the public policy, the lower courts should be cautious in creating any new public policy.  The limits of public policy, however, are not clear.

The discharged employee bears the burden of proving that the employer violated a clear mandate of public policy in terminating the employee.  If the employee satisfies this burden, the employee may receive an award of compensatory and punitive damages, in addition to backpay and lost benefits.

Implied Contract Exception

Hawaii courts recognize an implied-in-fact contract exception to the at-will doctrine.  Under this theory, an employee may argue that the employer, by its conduct, implicitly agreed to terminate “only for cause.”  Among other factors, courts have based implied-in-fact contracts or terms of employment on oral promises and representations by an employer, company personnel policies and procedures, and the “totality of the circumstances” of the employment relationship, including the parties’ course of dealing with one another.

An implied-in-fact contract may be created even when neither party is bound by an express employment contract.  Even if an express employment contract does not exist, under appropriate circumstances, courts may imply a legally enforceable contract based upon the intent of the parties.

For example, if an employer issues policies and procedures promising specific treatment in specific situations and encourages reliance upon them, the policies and procedures may be enforceable as an implied employment contract.  A handbook, policy, or other document which limits the right of the employer to alter or terminate the employee’s employment, or provides specific review procedures prior to termination, may bind an employer to follow those exact policies or procedures, or become liable for breach of contract.

Usually, damages for breach of an implied contract do not include punitive damages.

Promissory Estoppel

The Hawaii Supreme Court has held that an employer’s promises may be legally enforceable under a promissory estoppel theory.  This type of claim is similar in proof to an implied contract claim.  However, in a promissory estoppel claim involving fraud or negligent misrepresentation, a plaintiff can seek punitive damages.  To prevail, the employee must show that the employer: (1) made a promise which the employer should reasonably have expected to induce action or forbearance by the employee; (2) the employee acted or omitted to act in reliance on the promise; and (3) the employee sustained an injury which can be avoided only by enforcement of the promise.

For example, if an employer offers work to an individual and if the individual quits a current job to accept the job offer, but the employer then rescinds the job offer, the employer may be liable to the employee if justice requires enforcement of the promise.

Legislative Exceptions

Specific Statutes

Congress and the Hawaii legislature have enacted a variety of statutes which limit an employer’s right to change conditions of employment or terminate the employment relationship.  A few examples of laws imposing restrictions on termination include: Title VII, Fair Labor Standards Act. National Labor Relations Act, Rehabilitation Act, Occupational Safety and Health Act, Age Discrimination Employment Act, Veterans Reemployment Act, Americans With Disabilities Act, Workers’ Compensation Act, and the Hawaii Employment Practices Act.

Whistleblowers’ Protection Act

The Whistleblowers’ Protection Act prohibits an employer from threatening to discharge discharging, or otherwise discriminating against any employee or a person acting on behalf of the employee, who reports or is about to report an employer’s violation of the law to any state public body (agency, department, commission, or the judiciary), or participates in an investigation, hearing or inquiry by a public body or court action, and requires employers to post notices informing employees of their rights.  The coverage of employee complaints includes “ordinance, or regulation adopted pursuant to law of this State, political subdivision of this state, or the United States,” and “contracts executed by the State, a political subdivision of the State, or the United States.”  The statute of limitations for filing a claim is two (2) years.

If an employer violates this statute, an employee may file a lawsuit seeking injunctive relief and damages (reinstatement, back wages, reinstatement of all fringe benefits, seniority, attorney’s fees and costs).  The state also may seek a $500 to $5,000 fine for each violation.  The statute does not preempt the employee’s common law right to punitive and special damages or to rights under the terms of a labor relations collective bargaining agreement if the agreement provides greater rights and remedies than those provided by this law.

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