Public Employers Beware New Rule: Violate a Policy, Your Employee May Sue You

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Robert Joyce

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Every once in a while, the North Carolina appellate courts put forward a totally new interpretation of some aspect of the law of employment, an interpretation that has the potential to change the way employers act.

It happened in 1985

The Court of Appeals did that, for instance, in 1985 in Sides v. Duke Hospital, 74 N.C. App. 331, when it created something that had not existed before in North Carolina law—the tort of wrongful discharge.

A nurse at Duke Hospital claimed that she was dismissed in retaliation for testimony she had given in a medical malpractice lawsuit against Duke.  She claimed she was fired because her truthful testimony under oath had cost Duke money.  The superior court judge threw her case out, saying that she was alleging a tort—wrongful discharge—that simply did not exist in North Carolina.  Even if what she claimed was true, Duke could dismiss her for that reason if it wanted to.

The court of appeals, when the case reached it in 1985, for the first time recognized the wrongful discharge tort as an exception to employment at will.  To allow employers to punish their employees for testifying truthfully, the court said, would be “an affront to the integrity of our judicial system, an impediment to the constitutional mandate of the courts to administer justice fairly, and a violation of the right that all litigants in this State have to have their cases tried upon honest evidence fully given.”

So, the court said, “while there might be a right to terminate a contract [of employment] at will for no reason, or for an arbitrary or irrational reason, there can be no right to terminate such a contract for an unlawful reason or purpose that contravenes public policy.”

The “public policy” implicated in this case was the policy that every citizen should testify fully and truthfully at court.  The public policy exemption to the doctrine of employment at will was given birth and the tort of wrongful discharge is alive and active today.

It may have just happened again

It is possible that the North Carolina Supreme Court has done it again, in 2018.  It appears to have ruled that a public employee has a claim that the North Carolina Constitution is violated if (1) a public employer has a clear employment rule or policy, (2) the employer violates that rule or policy, and (3) the employee suffers an adverse consequence.

That is, a failure to follow your own policy can, in itself, give rise to a constitutional violation.  You may be sued for depriving your employees of “the fruits of their own labor.”

The case is Tully v. City of Wilmington, decided in March of 2018.

This is not a due process case, the Court was clear to say.  It does not turn on property interests.  It applies to at-will employees.  Violate your own employment rules and cause your employee an adverse result and you may face constitutional consequences.

Kevin Tully was an officer in the Wilmington Police Department.  In 2011 he sought a promotion to the rank of sergeant.  Because of the procedural status of the case, Supreme Court based its opinion solely on Tully’s version of the facts.

In seeking the promotion, Tully took a written exam, but he did not achieve a passing score.  That prevented him from proceeding in the promotion process.  He received a copy of the official examination answers and determined that the official answers were based on outdated law.  He filed a grievance.  He was told that the test answers were not something that could be the subject of a grievance.

He got that denial even though the Police Department Policy Manual—which had not been adopted as a city ordinance—provided that “[c]andidates may appeal any portion of the selection process.”  It also provided that “[i]f practical, re-application, re-testing, re-scoring and/or re-evaluation of candidates may be required if an error in the process is substantiated.”

Tully filed a lawsuit in the superior court, alleging, among other things, that the city had violated his rights under Article I, Section 1 of the North Carolina Constitution.  That section states:

“We hold it to be self-evident that all persons are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness.”

By denying his promotion due to his answers on the exam and then determining that such a reason could not be a subject of a grievance, Tully said, the city had deprived him of “the fruits of” his own labor.  He asked the court for a declaration that he had been deprived of his constitutional right to the fruits of his labor and he asked for money damages.

After the case had made its way through the superior court and the Court of Appeals (just on Tully’s allegations—there has not yet been a determination that the allegations are true), the Supreme Court agreed with Tully.  Taking Tully’s claims as true, the Court said:

“[W]e conclude that the City’s actions here implicate Tully’s right under Article I, Section 1 to pursue his chosen profession free from actions by his governmental employer that, by their very nature, are unreasonable because they contravene policies specifically promulgated by that employer for the purpose of having a fair promotional process.”

A public employee in North Carolina, the Court said, “has adequately stated a claim that his employer unconstitutionally burdened his right to the enjoyment of the fruits of his labor,” by alleging three things:

(1) a clear, established rule or policy existed regarding the employment promotional process that furthered a legitimate governmental interest;

(2) the employer violated that policy; and

(3) the plaintiff was injured as a result of that violation.

By alleging these three things, the public employee adequately states a claim.  Of course, the employee still has the burden to prove that all three things are true.

This decision concerns promotions.  The three-part test that the Court sets out specifically applies to promotions.  But the reasoning of the Court would seem to apply to all kinds of employment policies.

The implications are worthy of note.  If a public employer has a clearly established rule or policy concerning an employment matter, and it violates that rule, and an employee is injured as a result of the violation, the employee has a claim that the North Carolina Constitution has been violated.

Time will tell whether the decision is as consequential as the 1985 Sides decision.

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