What is wrongful termination in violation of public policy?

The basic concept of wrongful termination in violation of public policy is that employers cannot terminate an otherwise at-will employee if the termination would violate the “public policy”. What does that mean? To be the basis of a wrongful termination action, the policy in question must be well established and substantial and it must be based on either a statute or constitutional provision. There are obvious violations of “public policy,” such as terminating an employee for refusing to fire another employee because that employee is black and over 40 years of age.  But there is plenty of “gray area” as well.  A typical scenario is when an employee engages in a “protected activity” and the employer fires him or her “because of” or in “retaliation” for engaging in that protected activity”.

The reason that these types of terminations violate public policy is because it is good public policy to encourage employees to refuse to engage in activities that violate the law, or to allow their employers to engage in such activities. Protecting employees in the event they witness or are pressured into engaging in illegal actitivies, or in the event they act to protect their own rights, promotes respect for the law by employers and encourages lawful behavior. It also allows employees to protect themselves and fight for their own rights without fear of retaliation from employers.

Protected activities: Wrongful termination claims usually are based on one of the following categories of “protected activities”:

(1) Terminations expressly prohibited by statute;

(2) Terminations where the employee has exercised a constitutional or statutory right or privilege;

(3) Terminations for refusing to engage in conduct that is unlawful; and

(4) Terminations for reporting alleged unlawful conduct by the employer. This is sometimes called “whistleblowing.” For more information, read our section on the subject.

Case Studies: Utilizing Insurance in Wrongful Termination Violating Public Policy Cases

Case Study 1: Employment Practices Liability Insurance (EPLI)

Sarah, an employee at a manufacturing company, witnesses her supervisor engaging in fraudulent activities and decides to report it to the appropriate authorities. Shortly after, she is terminated from her position, which she believes is in retaliation for her whistleblowing. Sarah decides to pursue a wrongful termination claim based on violation of public policy.

Fortunately, the company has an Employment Practices Liability Insurance (EPLI) policy, which covers claims related to wrongful termination. The EPLI coverage provides financial protection for the company in defending against Sarah’s claim and potentially compensating her if the court finds in her favor.

Case Study 2: General Liability Insurance

Mark, an employee at a retail store, suffers an injury at work due to the employer’s failure to maintain a safe working environment. He reports the incident and requests necessary safety improvements, but instead of addressing the issue, the employer terminates his employment. Mark believes he was wrongfully terminated for reporting unsafe working conditions. In this case, Mark can file a wrongful termination claim based on violation of public policy.

The employer’s General Liability Insurance policy may come into play in this situation. If the court finds the employer liable for the unsafe working conditions and wrongful termination, the General Liability Insurance can cover the legal expenses and potential damages associated with Mark’s case.

Case Study 3: Directors and Officers (D&O) Insurance

Lisa, an executive at a financial institution, uncovers fraudulent accounting practices within the company and reports it to the appropriate regulatory agencies. As a result, she faces retaliation from her superiors, including wrongful termination. Lisa decides to pursue legal action against the company and the directors and officers involved.

In this case, the company’s Directors and Officers (D&O) insurance can play a crucial role. The D&O insurance provides coverage for legal defense costs and potential damages in claims against the company’s executives. It ensures that Lisa has the necessary resources to fight her wrongful termination case and holds the responsible parties accountable.