UPDATES & ANALYSIS

Iowa Supreme Court expands exception to at-will employment

by Fran Haas | August 7, 2013

By Fran Haas

On Friday, the Iowa Supreme Court issued a sharply-divided opinion that expands the scope of whistleblower claims in Iowa. In Dorshkind v. Oak Park Place of Dubuque II, L.L.C., Plaintiff argued that she was wrongfully terminated in violation of public policy when she lodged an internal complaint with her employer about forged records. The forged records were required for the employer, an assisted living center, to maintain a dementia-specific certified  program in Iowa. Plaintiff reported the alleged forgery to another employee. Following an investigation, the employer terminated Plaintiff’s employment because of “malicious statements regarding forging of documents.” Plaintiff filed a wrongful discharge claim. At trial, the jury awarded $178,500 in compensatory damages and $178,500 in punitive damages.

On appeal, the Court found there was a clearly defined and well-recognized public policy in Iowa to protect Plaintiff’s internal complaint. The Court relied heavily on administrative rules promulgated by Iowa’s Elder Affairs Department, which require personnel employed by a dementia-certified assisted living center to receive dementia-specific training and education. In a more controversial part of the opinion, the Court’s held Plaintiff’s termination undermined public policy, reasoning that  her “internal report” of “what she believed were two coworkers forging state-mandated training documents pertaining to the care of dementia patients.
. . advances a clear public policy.” The Court held that Plaintiff’s termination “punish[ed] her for reporting conduct jeopardizing the health, safety, and welfare of dementia patients” and had a chilling effect on other
employees who reported similar workplace illegalities.

The Court paid special attention to the “internal” nature of the plaintiff’s complaint. The Court held that “whether the employee makes the complaint internally or externally does not change the public-policy considerations of our state,” and that firing an employee who lodges an internal complaint may still undermine public policy. The Court concluded that it was sensible to assume an employee would first lodge an internal complaint before turning the complaint over to a governmental agency, because “[b]y first bringing the problem to the attention of the employer without outside intervention, the matter can be handled quickly and in a less costly manner.” The Court also ruled that Plaintiff was not entitled a punitive damages award because at the time Plaintiff’s termination occurred, the Court had not recognized administrative rules as a source of public policy.

Justice Cady concurred specially, clarifying that the tort of wrongful discharge does not protect employees who lodge internal complaints over an employer’s legitimate business practices—only internal complaints over
violations of statutes and regulations. Justice Cady also wrote that public policy underlying elder care in Iowa “is important enough that it implies protection for internal whistleblowing” and that operators of assisted living facilities must be prepared to “embrace internal complaints of regulatory or statutory violations.”

Justices Mansfield, Waterman, and Zager dissented on the issue of liability. Justice Mansfield expressed concern that “any time a worker tells a coworker about an alleged violation of law related to health, safety, or
welfare, the employer is at risk of litigation if the employer subsequently terminates that worker’s employment.” Justice Mansfield pointed out that “there are myriad laws and regulations relating to ‘health, safety, and welfare,” that range “from the serious to the trivial.”  Justice Mansfield recognized that an “employee still must prove the complaint was the reason for the discharge,” but because “questions of causation are often disputed and difficult to disprove,” he noted that businesses “may be reluctant to replace one employee with another person, whom it believes will do a better job, out of fear of litigation.”  “This,” Justice Mansfield wrote, “will be a new cost of doing business in Iowa.”

The practical effect of Dorshkind’s holding has yet to be seen. However, employers may reasonably expect to see an increase in whistleblower claims arising out of internal complaints that implicate any type of health or safety issue. Employers may also expect confusion over whether a plaintiff must engage in a protected activity to bring a wrongful discharge claim. Previously, an employee needed to engage in the activity protected by the public policy at issue, such as exercising a right to file a worker’s compensation claim, in order to have a viable wrongful discharge claim.  Dorshkind muddies the water on this particular point.

[Disclosure: Nyemaster Goode attorney Ryan Koopmans represented the Iowa Association of Business and Industry  as amicus curiae in this case.]

Tags: Iowa Supreme Court, Iowa Supreme Court Opinions