CLIFFORD v. CACTUS DRILLING CORP.

KAVANAGH, J.

The issue in this case is whether plaintiff-employee's allegation that he was discharged as a result of an absence from work because of a work-related injury constitutes a cause of action as a public policy exception to the employment-at-will doctrine.

We hold that plaintiff has not pleaded a public policy exception to the employment-at-will doctrine and we reverse the judgment of the Court of Appeals, Clifford v Cactus Drilling Corp, 109 Mich.App. 776; 312 N.W.2d 380 (1981), and reinstate the trial court's order of summary judgment in favor of defendant. Accordingly, it is unnecessary to address the question whether this action is barred by the exclusive remedy provision of the Worker's Disability Compensation Act, MCL 418.131; MSA 17.237(131).

The facts of this case are adequately stated in the dissenting opinion of Judge R.B. BURNS in the Court of Appeals:

"Plaintiff alleged that defendant fired him for missing work. Plaintiff further alleged that defendant had no right to so fire him since his absence from work was due to a disability arising from a work-related injury for which he had received workers' compensation benefits.

"The record reveals that plaintiff was injured on the job on December 20, 1977. He received workers' compensation benefits for a period of five weeks. He returned to work, but a recurrence of the pain caused by the injury forced him to call in sick on February 14, 1978. He was fired the next day. Plaintiff commenced suit, and defendant moved for summary judgment on the ground that plaintiff had failed to state a claim upon which relief could be granted. The motion was granted by the trial court."

The employment-at-will doctrine was recently restated by this Court in Suchodolski v Michigan Consolidated Gas Co, 412 Mich. 692, 694-695; 316 N.W.2d 710 (1982): "In general, in the absence of a contractual basis for holding otherwise, either party to an employment contract for an indefinite term may terminate it at any time for any, or no, reason". The Court went on to explain that exceptions have been engrafted onto the rule on the basis of "the principle that some grounds for discharging an employee are so contrary to public policy as to be actionable". One such exception was established by the Court of Appeals in Sventko v Kroger Co, 69 Mich.App. 644; 245 N.W.2d 151 (1976). In Sventko, the plaintiff alleged that she was discharged solely in retaliation for her filing of a workers' compensation claim. The Court held that a retaliatory discharge for the filing of a workers' compensation claim is in contravention of public policy and as such constitutes an exception to the employment-at-will doctrine.

We cannot agree, however, that an employee's protection from discharge in retaliation for filing a workers' compensation claim necessarily includes protection from discharge because of an absence from work because of a work-related injury.

Certainly an employer's power to discharge an employee at will should not prevail when that power is exercised to prevent an employee from asserting his statutory rights under the Worker's Disability Compensation Act. The case before us presented no evidence or reason to infer that plaintiff's statutorily conferred right to claim workers' disability compensation benefits was chilled in any way. Plaintiff made no claim that he was deprived of his legal rights under the Worker's Disability Compensation Act. Plaintiff did not allege that he was discharged in retaliation for filing a claim for compensation. Plaintiff alleged that he was fired because he missed work because of a work-related injury for which he had already received workers' disability compensation benefits. Plaintiff has stated that he has no further claim.

Reversed.

LEVIN, RYAN, BRICKLEY, CAVANAGH, and BOYLE, JJ., concurred with KAVANAGH, J.

WILLIAMS, C.J. (dissenting).

The issue presented in this case is whether an employee who alleges that his employment has been terminated for absence due to a work-related injury has sufficiently pleaded a cause of action to withstand a motion for summary judgment. We hold that plaintiff has pleaded a public policy exception to the employment-at-will doctrine. Additionally, we hold that this action is not barred by the exclusive remedy provision of the Worker's Disability Compensation Act, MCL 418.131; MSA 17.237(131).

I

Plaintiff, employed by defendant as a floor hand, was injured at work in December, 1977. Defendant paid workers' compensation benefits for a period of five weeks. Plaintiff subsequently returned to work for four days. However, because of an alleged recurrence of pain caused by the work-related injury, plaintiff called in sick on February 14, 1978. He was fired the next day. The parties agree that plaintiff was an "at will" employee.

Plaintiff commenced suit, alleging in pertinent part:

"5. * * * Defendant fired plaintiff for missing work.

"6. * * * Plaintiff missed work because of a work-related injury.

"7. While plaintiff's work tenure was otherwise at the discretion of defendant, the latter had no right to fire plaintiff solely for his work absence due to disability arising out of a work-related injury."

Defendant's answer raised the affirmative defense that plaintiff had failed to state a claim upon which relief could be granted.1 GCR 1963, 117.2(1). Plaintiff moved to strike the affirmative defense, citing Sventko v Kroger Co, 69 Mich.App. 644; 245 N.W.2d 151 (1976). The trial court distinguished Sventko from the present case on the facts and granted defendant's subsequent motion for summary judgment.

On appeal, the Court of Appeals reversed, with one member dissenting. 109 Mich.App. 776; 312 N.W.2d 380 (1981). The Court of Appeals majority stated that an employee's protection from discharge in retaliation for filing a workers' compensation claim necessarily included protection from termination because of an absence due to a work-related injury. The Court reasoned that the contrary result "would have a chilling effect on the filing of such claims. Public policy, therefore, dictates the opposite result". 109 Mich.App. 777-778.

Defendant disagrees that there has been any violation of public policy. Defendant argues that plaintiff, who has received his full entitlement to workers' compensation benefits, never alleged that his termination was in retaliation for seeking those benefits. Defendant contends that plaintiff has failed to plead a public policy exception to the employment-at-will rule and, therefore, the Court of Appeals erred in holding that plaintiff set forth a cause of action.

This Court granted leave to appeal. 417 Mich. 1038 (1983).

II

Generally, a contract for permanent employment, or for an indefinite term, may be terminated for any or for no reason. As this Court stated in Lynas v Maxwell Farms, 279 Mich. 684, 687; 273 NW 315 (1937):

"In general it may be said that in the absence of distinguishing features or provisions or a consideration in addition to the services to be rendered, such contracts [for permanent employment or for life] are indefinite hirings, terminable at the will of either party."

See also Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich. 579; 292 N.W.2d 880 (1980).

This common-law characterization of the employment relationship as "at will" evolved from the judiciary's unwillingness to interfere with parties' "freedom" to contract and a belief in the equality of bargaining power between employer and employee. Blades, Employment at Will vs Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum L Rev 1404, 1417 (1967). Although many workers are now protected from arbitrary discharge by collective bargaining agreements and civil service regulations which provide that employment may be terminated only for "just cause", the majority of the American work force operates under an employment "at will" relationship. Note, Protecting At-Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv L Rev 1816 (1980).

Many legislatures and courts, however, have tempered the harshness of the "at will" relationship by developing public policy exceptions to the doctrine. Where legislatures and courts have identified specific grounds for termination as being repugnant to a clearly expressed public policy, the employer's absolute freedom to terminate the employment is circumscribed pro tanto. See Anno: 12 ALR4th 544, 548.

In Michigan several public policy exceptions have been engrafted onto the "at will" doctrine. Most often, the public policy articulation appears in an explicit legislative provision granting employees protection from discharge. For example, an employee may not be discharged on the basis of religion, race, color, national origin or sex, MCL 37.2701; MSA 3.548(701), because of a physical handicap, MCL 37.1602; MSA 3.550(602), or in retaliation for filing a complaint under the Michigan Occupational Safety and Health Act, MCL 408.1065; MSA 17.50(65). In these specific instances the policy of ensuring employee job security against an improperly motivated discharge curtails the employer's prerogative to terminate employment.

Additionally, the courts have shown some willingness to recognize a public policy exception despite the lack of a statutory provision explicitly guaranteeing employees protection from discharge. For example, in Sventko v Kroger Co, supra, the plaintiff alleged that she had been discharged solely in retaliation for filing a lawful claim for workers' compensation. Although the workers' compensation act did not at that time specifically prohibit retaliatory discharges,2 the Court nonetheless found that the act conferred upon the plaintiff a right to receive compensation. The Court reasoned that the well-recognized legislative policy underlying the workers' compensation act was an equitable compromise: employees exchanged their speculative tort suits arising out of work-related injuries for guaranteed and expeditiously provided financial and medical benefits; employers exchanged their unpredictable negligence liability for more certain statutory liability under the act. The Sventko Court found that the public policy expressed in this compromise would be contravened if employers were allowed to take advantage of their exemption from general liability and yet circumvent their statutorily imposed duty to provide benefits. Hence, plaintiff's allegation that she was discharged in retaliation for exercising the statutorily granted right to compensation benefits was found to state a cause of action.3

Additionally, the plight of employees forced to choose between their job and an employer's direction to act in violation of the law has been recognized. In Trombetta v Detroit, T & I R Co, 81 Mich.App. 489, 496; 265 N.W.2d 385 (1978), for example, the plaintiff alleged that he was discharged for refusing to manipulate sampling results used for pollution control reports which were filed with the state pursuant to statute. Such tampering violated state law. MCL 323.10; MSA 3.529(1). The Court concluded that the plaintiff had set forth a cause of action based on a public policy exception: "[i]t is without question that the public policy of this state does not condone attempts to violate its duly enacted laws". 81 Mich.App. 495.

In contrast, this Court was unable to find the contravention of "a clearly mandated public policy" in Suchodolski v Michigan Consolidated Gas Co, 412 Mich. 692, 696; 316 N.W.2d 710 (1982). In that case the plaintiff alleged that he had been discharged in retaliation for reporting improper accounting practices and poor internal management of defendant public utility to his superiors. The plaintiff proffered two sources of public policy: the Code of Ethics of the Institute of Internal Auditors and the extensive regulations of the accounting systems of public utilities. This Court rejected both: the code of ethics of a private association is not a statement of public policy, and the regulation of the accounting system of a public utility does not (in contrast to the workers' compensation statute) confer rights on employees. Thus, the Court concluded that the plaintiff had failed to allege a public policy exception to the employment-at-will doctrine.4

It becomes clear from this recitation of cases that the Court has acted with circumspection in carrying out public policy exceptions to the "at will" doctrine. Each recognized exception involves either an employee's exercise of a statutorily or constitutionally granted right or an employee's refusal to violate a law. Thus, each public policy exception is grounded on a clearly articulated, well-accepted public policy.

This close consideration of proffered public policy exceptions is essential, given the important competing interests at stake. An employer's ability to make and act upon independent assessments of an employee's abilities and job performance as well as business needs is essential to the free-enterprise system. However, the Court is also cognizant that social conditions have changed since the development of the employment-at-will doctrine. As noted above, although a large sector of the work force is protected against discharge without just cause, the majority of today's work force does not enjoy the protection of a collective bargaining agreement or civil service regulation; such employees' integrity and job security remain at the whim of the employer under common law.

Of course, it is not this Court's function to legislate employee job security. Nonetheless, the employee does have an interest in protection from discharge based solely on refusal to act in an unlawful manner or attempt to exercise a statutorily or constitutionally conferred right. Likewise, society has an interest in ensuring that its laws and important public policies are not contravened. These interests can be equitably balanced by recognizing an action for retaliatory discharge only when important and concretely articulated public policies are contravened. See Adler v American Standard Corp, 291 Md. 31; 432 A.2d 464 (1981).

III

We must evaluate plaintiff's allegations in light of this review of the development of the public policy exceptions to the employment-at-will doctrine. Plaintiff asserts that he was fired because he missed work because of a work-related injury for which he had received workers' disability compensation benefits. He alleges that the defendant-employer had no right to fire him for this absence.

In evaluating the sufficiency of a complaint, all well-pleaded allegations are accepted as true, Bielski v Wolverine Ins Co, 379 Mich. 280, 283; 150 N.W.2d 788 (1967), as well as any reasonable inferences that may be drawn therefrom. Burnett v City of Adrian, 414 Mich. 448, 457; 326 N.W.2d 810 (1982) (MOODY, J., concurring).

Three elements of a cause of action based on a public policy exception to the employment-at-will rule may be distilled from the cases cited. First, plaintiff engaged in protected activity. The activity's protection may stem either from a constitutional or statutorily granted right or from an obligation favored by statutory policy. Second, plaintiff was discharged. Third, a causal connection exists between the plaintiff's protected activity and the discharge. See Schlei & Grossman, Employment Discrimination Law, ch 15, p 534 (Washington, D.C.: Bureau of National Affairs, 1983).

While plaintiff has clearly alleged the second and third requirements, the crux of this case is whether plaintiff has alleged a protected activity. Plaintiff asserts that absence from work because of a work-related injury is protected activity. He cites Sventko v Kroger Co, supra, to support this position.

In Sventko, the plaintiff alleged that she had suffered a disabling injury while employed by the defendant, for which she filed a workers' compensation claim. While she was being treated for her disability she was notified of her discharge. The plaintiff alleged that she had been discharged solely in retaliation for filing a workers' compensation claim. The Court of Appeals held that the plaintiff had sufficiently alleged an exception to the common-law right of the employer to discharge the employee at will.

In the present case, the complaint alleges wrongful termination for "absence due to a work-related injury". Plaintiff does not specifically mention "retaliation for filing a workers' compensation claim".

Nonetheless, it would be myopic of this Court to narrowly define "retaliation for filing a workers' compensation claim" to exclude retaliation for absence because of a work-related injury.

The remedial purpose of the Worker's Disability Compensation Act is to compensate the victims of occupational disabilities. As mentioned above, the act embodies a compromise: employees exchanged their common-law tort actions against their employers for certain, expeditiously provided financial and medical benefits; employers exchanged their uncertain negligence liability for limited statutory liability. Whetro v Awkerman, 383 Mich. 235, 242, 249; 174 N.W.2d 783 (1970); Lahti v Fosterling, 357 Mich. 578, 585-586; 99 N.W.2d 490 (1959). In this way, industry absorbs the cost of compensating disabled workers and incorporates this cost into the production costs of the product. Crilly v Ballou, 353 Mich. 303, 308-309; 91 N.W.2d 493 (1958). Thus, responsibility for workers' disability compensation has been placed squarely on the employers under the workers' compensation act.

In order to maintain the balance struck by the act, this Court and the Legislature have checked attempts of employers to shirk their duty to pay disability compensation. Thus, the Legislature enacted MCL 418.125; MSA 17.237(125), which prohibits an employer from "consistently discharg[ing] employees within the minimum time specified in this chapter and replac[ing] such discharged employees without a work stoppage". The statute establishes the presumption that such conduct is intended "to evade the provisions of this act" and imposes misdemeanor sanction. See also MCL 418.301(11); MSA 17.237(301)(11) (prohibiting retaliatory discharge for filing a workers' compensation claim). Likewise, in Bower v Whitehall Leather Co, 412 Mich. 172, 193; 312 N.W.2d 640 (1981), this Court refused to allow an employer to terminate an employee's benefits when the employee reasonably refused an offer of favored work. These few examples demonstrate the sustained efforts of the courts and Legislature to enforce the quid pro quo schema of the workers' compensation act.

In light of this recognized and often-affirmed protective policy, the employers' expansive right to terminate an employment at will is properly and necessarily circumscribed. If an employer may discharge an employee with impunity in retaliation for seeking to exercise his rights under the workers' compensation act, he is able to evade his statutory duty to provide compensation while retaining immunity from tort suit. Such action clearly contravenes the public policy of the state.

However, no less violation occurs when an employer creates an atmosphere of reprisal which chills the employees' exercise of their rights under the act. If an employee may be discharged for an absence because of a work-related disability for which the employee may receive compensation, the employee will be reluctant to jeopardize his job security by filing a workers' compensation claim in conjunction with taking time off to attend to a disability. Such a practice effectively hampers an employee's right to workers' compensation and thus contravenes public policy.

Of course, termination on the basis of absence because of a work-related disability is a more subtle form of discrimination than that addressed in Sventko. The employer who brazenly threatens an employee with termination if he files a workers' compensation claim openly defies the statute. Nonetheless, employees must be protected from both subtle and blatant infringements on their statutorily granted rights.

Thus we find that plaintiff's allegation that he was fired because of an absence due to a work-related injury constitutes a cause of action as a public policy exception to the employment-at-will rule. The holding in this case, however, is in no way meant to curtail the employer's option of asserting, as an affirmative defense, the existence of a just cause for dismissal.

In recognizing this cause of action, we are guided by the experience of our sister states.

In New York, the Legislature and judiciary have been wrestling for more than ten years with the problem of discharge based on absence because of a work-related disability. In 1973, the Legislature enacted Workmen's Compensation Law, § 120, which prohibited discharge or discrimination of an employee for filing a workers' compensation claim.5 In In the Matter of Griffin, 80 A.D.2d 689; 436 N.Y.S.2d 441, 442 (1981), an appellate court held that a discharge "triggered" by an employee's absence because of injuries sustained in a work-related accident violated the statute. The court explained:

"A contrary conclusion would tend to discourage employees who have received warnings concerning absenteeism from reporting work-related injuries and seeking medical attention and compensation."

See also In the Matter of Lo Dolce, 77 A.D.2d 697; 429 N.Y.S.2d 505 (1980).

In addition to interpreting the retaliatory discharge statute to include termination for absences because of work-related injuries, the appellate court in Lo Dolce rejected as irrelevant evidence that the employer had followed its policy of discharging employees because of excessive absenteeism. This holding led to criticism that the courts had eliminated the requirement of a causal connection between the protected activity and the discharge.6

In response to these cases, the Legislature amended § 120 in 1983. Under the current statute, a violation of § 120 cannot be found if the employer has a valid reason to discharge or discriminate against the employee.

In California, the Supreme Court also interpreted a statute which prohibited discharge in retaliation for filing a workers' compensation claim to permit a cause of action for wrongful discharge based upon absence because of a work-related injury. Judson Steel Corp v Workers' Compensation Appeals Board, 22 Cal.3d 658; 150 Cal.Rptr. 250; 586 P.2d 564 (1978). The court relied on the broad policy statement of the act which declared: "there should not be discrimination against workers who are injured in the course and scope of their employment". Cal Labor Code, § 132a. The court found that this policy could only be effectuated if employers were prohibited from discharging employees absent from their jobs as a consequence of a work-related injury. 22 Cal.3d 668. The court added:

"[W]e emphasize that our present holding in no way mandates that an employer retain all employees who sustain injuries on the job. * * * Section 132a does not compel an employer to ignore the realities of doing business by `reemploying' unqualified employees or employees for whom positions are no longer available." 22 Cal.3d 667.

Finally, in Oregon, an employee's right to be rehired after an absence because of a compensable injury was established by statute. In pertinent part, Or Rev Stat, § 659.415 states:

"A worker who has sustained a compensable injury shall be reinstated by the worker's employer to the worker's former position of employment upon demand for such reinstatement, provided that the position is available and the worker is not disabled from performing the duties of such position."

In construing this statute, the Oregon Supreme Court noted: "nothing in [this act] prevents an employer from discharging a worker for just cause". Vaughn v Pacific Northwest Bell Telephone Co, 289 Or. 73, 79-80; 611 P.2d 281 (1980).

Thus, in each of these states, and now in Michigan, the employee's right to sue for wrongful discharge is carefully circumscribed by the employer's right to discharge employees for "just cause". In this way both the employee's interest in exercising his right under the workers' compensation act and the employer's right to exercise his business judgment in the selection and retention of employees are protected.7

IV

Additionally, defendant argues that the exclusive remedy provision of the workers' compensation act bars plaintiff's present claim. This argument was implicitly rejected in Sventko, supra, and Suchodolski, supra; we explicitly reject it here.

The exclusive remedy provision, MCL 418.131; MSA 17.237(131) states:

"The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer."

Defendant argues that "the cause of damages claimed all flow from the fact that plaintiff suffered a compensable personal injury for which workers' compensation benefits are recoverable". This argument misperceives the nature of plaintiff's claim.

Plaintiff's action focuses not on his receipt vel non of compensation benefits, but on the employer's attempt to avoid his statutory duty under the act through intentional retaliatory action. The workers' compensation act was not intended to insulate employers from independent actions totally divorced from any physical or mental disability arising out of or in the course of employment. Milton v Oakland County, 50 Mich.App. 279, 283; 213 N.W.2d 250 (1973); Moore v Federal Department Stores, Inc, 33 Mich.App. 556; 190 N.W.2d 262 (1971); 2A Larson, Workmen's Compensation Law, § 68.10. Accord, Kelsay v Motorola, Inc, 74 Ill.2d 172, 183-184; 384 N.E.2d 353 (1979).

V

Thus we would hold that an employee's allegation that he has been terminated because of absence from work due to a work-related injury sets forth a public policy exception to the employment-at-will doctrine. Plaintiff's complaint sufficiently pleads a cause of action to withstand a motion for summary judgment. This action is not barred by the exclusive remedy provision of the Worker's Disability Compensation Act.

The judgment of the Court of Appeals should therefore be affirmed.