Wisconsin has No
Common Law Duty of Honesty in Employment
In Production Components-Cloren, Inc. v. Shakal, et al. (Wis.
Ct. App. 2002), the court ruled that absent a contract or other
specific legal obligation, there is no general duty for an employee
to disclose information that may harm the company. “There
is no general duty to refrain from misrepresentation in an employment
context.”
In MacKenzie v. Miller Brewing (Wis. S.Ct., 2001), the
court decided that an employer has no general duty to reveal information
to its employees. An employer could misrepresent or mislead
in its interaction with employees. The court held that honesty
is not a compelling “public policy” in the employment
setting.
However,
Promissory Estoppel
There are cases in which the law will hold an employer (or any
party) liable if its misrepresentations are designed to create
reliance, and another person is harmed by acting in “reasonable
reliance” on the misrepresentations. Mere promises
or “hollow puffery” are not enough; a promise is generally
not legally enforceable. The information must have been made
to induce another’s action, be the sort of information and
a situation which would induce a reasonable person to act, and
tangible harm must have resulted. Smith v. Beloit Corp. (Wis.
S.Ct. 1968); Reimer v. Badger Wholesale Co. (Wis. Ct.
App. 1988). (But in MacKenzie, the court refused
to find a cause of action for misleading the employee to induce
continued employment, since this would interfere with the Employment
At Will doctrine.)
Conspiracy, Intentional Interference,
Defamation
Deliberate lies, done for the purpose of harming a person’s
employability, business or reputation can be actionable under Wisconsin
and many other state’s laws (and sometimes for public sector
employees under 42 U.S. Code §1983).
Fiduciary Duty Does Create an Obligation
of Honesty
Fiduciary: A person or entity holding the trust and confidence
of others, having a duty of scrupulous good faith and honesty to
act for the benefit of others.
The Sarbanes-Oxley Act of 2002 on management disclosure
and accounting oversight emphasizes this duty, in the wake of scandals
involving executives who profited from “insider” information
while keeping their employees and shareholders in the dark. Some
other laws imposing fiduciary obligations are: The Securities
Exchange Act (stock options); Employee Retirement Income Security
Act (benefit plans, including retirement plans).
Duty to Inform Laws
Some laws impose a duty to reveal information to employees, such
as the Workers Adjustment and Retraining Notification Act (WARN)
(60 days advance notice of plant closing or mass layoff) and the
OSHA Hazardous Chemical Exposure rules.
Don’t Lie to Employees About Discharge
Don't lie. Tell employee the real reason for discharge. It's
hard to fire someone. Frequently, employers want to "let
them down easy," or "don't want to hurt feelings." So,
instead of telling the truth, the employer gives a nicer sounding
reason for discharge. This frequently blows up in the employer's
face.
Often in trying to come up with a nice sounding reason for the
discharge, the employer will blunder into setting itself up for
a case. Employers have tried to "soften the blow" with
statements like the following:
-
"You’re getting to the time of life when you should
take it easier and not do such hard work."
-
"We picked you for layoff because your husband has a
good job, and it won't be as hard on you as on other workers."
-
"We're cutting your position because you are eligible
for early retirement, and so you have a cushion that others
don't."
These are clear statements of illegal age or sex discrimination. Once
an employer makes those statements, it creates a prima facie case
of discrimination and becomes difficult, if not impossible, for
the employer to prove the real reasons for discharge. After
having told the "white lie," everything they say afterward
seems to be a pretext.
The company has failed to give Due Process. If the fired
employee can find legal grounds to challenge the discharge, then
the employer is in trouble. The employer's "little white
lie" can come back in later litigation. Rather than "ease
the pain" for the employee, the company's failure to honestly
confront the poor work issue has, in fact, cheated the employee
out of the fair chance to correct problems and keep the job.
Instead of getting the bad employee "eased out," the
employer may end up stuck with permanent reinstatement of the employee,
with full back pay, and paying all the employee's legal fees for
the case.
Pretext Loses the Case
In general the burden of proof is placed on a plaintiff
in an employment case. The employer “evens up” the
case, and can win by stating a valid business reason for its actions. However,
the plaintiff gets to cross-examine the employer’s stated
reasons. If the employer’s reasons are found to be “pretextual” (false),
then the court can rule for the plaintiff, even where the plaintiff’s prima
facie case is not very strong. So, honesty can be very
important.
A Legal Defense Does Not Have to be True,
as Long as it is Honest
An employer’s honest belief in facts which later proved
to be untrue can be sufficient to win a discrimination case.
In Dvorak v. Mostardt Platt Association (7th Cir., 2002),
the company fired an employee it believed had misused its computers. The
facts later showed he had not. Yet, when the employee filed
an ADA case, the company won. The court found the reason
for discharge was not disability, but rather the honest
belief, at the time, about computer misuse.
Discrimination cases require the showing of a “discriminatory
improper motive.” Though it may not be “correct” or “factual,” an honest misbelief
is not a “discriminatory improper motive.” Joostherns
v. UPS, Inc. (6th Cir. 2006) Clay v. Holy Cross
Hospital, (7th Cir. 2000); Scamando v. Scott County,
(8th Cir. 1999).
Reasonableness
It is not enough to just claim that one had an honest belief. It
must be a “reasonable” belief, based on some
reasonable interpretation of the facts and circumstances that the
decision maker was aware of at the time. Flores v. Preferred
Tech Group, (7th Cir. 1999); Smith v. Chrysler Corp.,
(6th Cir. 1998). Otherwise, defendant employers could just
claim a “belief,” or beliefs could be based on stereotypes
and biased presumptions. So, the “honest belief” must
have some reasonable underpinning.
The Truth “As Far As We Know It” Defense
If there is a validly perceived threat of present violence, warranting
a call to the police or security, the case of Aviles v. Cornell
Forge Co., 241 F.3d 589, 592(7th Cir. 2001) is instructive. A
company suspended an employee for five days. He refused to
leave, and security was called to escort him out. Later that
day the employee was seen sitting in his car across from the company’s
entrance. A worried supervisor called the police and reported
that the suspended employee was outside. The police dispatcher
asked if the employee was armed. The supervisor replied, “I
don’t know, but he might be.” A police squad
car came and removed the employee from the car, at gunpoint, injuring
his arm when he resisted. The employee turned out to be unarmed. He
sued the company.
The company won. The Court decided that the supervisor acted
reasonably based on the situation. There was no defamation. When
asked about a weapon, the supervisor gave a factual response,
without exaggeration, without embellishment: “I don’t
know, but he might be.” The Court’s opinion stated, “...if
an employer had to face liability for truthfully reporting to the
police, ...we might discourage employers from
taking the most prudent actions to protect themselves and others
in the workplace.”
The Lesson
- Report facts
- Do not embellish
- Do not exaggerate “for effect”
- Do not speculate
- Be open about what you do not know, and
- Do not “fill in the gaps”
Bob Gregg is a partner at
Boardman Law Firm of Madison, Wisconsin. He has over 30 years of
experience in employment relations and has conducted over 2,000
seminars on employment law. Bob’s career has encompassed
canoe guide, carpenter, laborer, Army Sergeant, social worker,
educator, business owner and EEO officer. Bob’s emphasis
is to help employers identify and resolve problems before they
generate legal action. He has designed pay and absence policies,
and solved salaried position issues, for numerous private and public
employers.
Copyright © 2006 by Robert E. Gregg.
All rights reserved. |
