UPDATES & ANALYSIS

Employees with employment contracts can sue for wrongful termination, the Iowa Supreme Court rules for the first time

by Rox Laird | June 19, 2018

The Iowa Supreme Court ruled that employees working under an employment contract can sue their employer for wrongful discharge in violation of public policy.

The ruling in Ackerman v. State of Iowa was one of two handed down June 15 by the Court involving former Workforce Development employees who say they were fired in retaliation for their criticism of the agency. In the second case, Walsh v. Wahlert and State of Iowa, the Court ruled unanimously that former Chief Administrative Law Judge Joseph Walsh can proceed in his wrongful-termination lawsuit under the State’s whistleblower statute but not under a common law claim for wrongful termination in violation of public policy.

Former Administrative Law Judge Susan Ackerman sued after she was fired by former Iowa Workforce Development Director Teresa Wahlert. Ackerman argued she was fired in retaliation for testifying under subpoena to an Iowa Senate committee about what she viewed as improper efforts by administrators to push for unemployment-benefits decisions favorable to businesses.

The issue on appeal was whether Ackerman could sue for wrongful discharge even though she was protected by a collective-bargaining agreement as well as by Iowa’s whistleblower statute. The Court, in a 5-2 decision written by Chief Justice Mark Cady joined by Justices Brent Appel, David Wiggins, Daryl Hecht and Bruce Zager, said those alternative paths do not preclude Ackerman from proceeding directly to district court.

Justice Thomas Waterman, joined by Justice Edward Mansfield, dissented. Waterman argued that since Ackerman was protected by both the collective-bargaining agreement and the whistleblower statute, this was not the case for the Court to consider extending the right to sue beyond at-will employees.

The Iowa Supreme Court 30 years ago recognized for the first time that at-will employees have a right to sue if they are fired in retaliation for actions that are considered to be in the public interest. For example, an at-will employee can contest a termination for exercising the right to pursue a workers’ compensation claim, or for testifying truthfully in a legal proceeding.

The Court has said this common-law principle not only protects at-will employees from being wrongfully terminated but it discourages employers from abusing their power in a way that undermines declared public policy and principles established in legislation.

The question in Ackerman was whether the option of suing for wrongful discharge in violation of public policy is open to an employee working under an employment contract, such as a collective-bargaining agreement that provides employees with a remedy for resolving grievances.

The State argued that option was never meant to be available to those other than at-will employees, but the Court disagreed, saying a right extended to one group does not necessarily exclude other groups from the right. Employees covered by an employment contract are entitled to the same right as at-will employees, the Court said, because claims under employment contracts are limited to the interests of the parties whereas tort claims for retaliatory discharge address larger public policy concerns.

“Nowhere in our law does a contractual employee surrender, by virtue of signing an employment contract, the right to bring a claim for tortious conduct that harms not only the employee, but also the state’s clear public policy,” Cady wrote.

Although the Court held that contract employees in general may bring retaliatory discharge claims, this ruling left open the question whether Ackerman, as a state employee protected by a whistleblower statute, is precluded from bringing her common-law claim. The Court left that question, which was not fully litigated or raised on appeal, for the trial court to resolve on remand.

Tags: Employment Law, Iowa Supreme Court, Iowa Supreme Court 2017-18, Wrongful Termination