Karen DORSHKIND, Appellee, v. OAK PARK PLACE OF DUBUQUE II, L.L.C., Appellant.
No. 11-2100.
Supreme Court of Iowa.
Aug. 2, 2013.
833 N.W.2d 293
Mark L. Zaiger and Drew Cumings-Peterson of Shuttleworth & Ingersoll, P.L.C., Cedar Rapids, for appellee.
Ryan G. Koopmans of Nyemaster Goode, P.C., Des Moines, for amicus curiae Iowa Association of Business and Industry.
WIGGINS, Justice.
In this appeal, we must decide if an internal complaint by an employee against an assisted living facility concerning forged training documents, which the state mandates, gives rise to a wrongful-termination action. The district court determined a wrongful-termination suit lies and submitted the case to the jury. The jury returned a verdict against the assisted living facility for actual and punitive damages. The facility appealed. We transferred the case to the court of appeals. The court of appeals affirmed the actual damages claim but reversed on the punitive damages issue. Both parties asked for further review, which we granted. On further review, we affirm the decision of the court of appeals (1) because the employer‘s retaliatory discharge of an at-will employee, who internally reported her employer‘s forgery of state-mandated training documents, vio
I. Facts and Prior Proceedings.
A. Facts. This appeal arose from the district court‘s denial of a motion for directed verdict. Accordingly, we review the facts in the light most favorable to the party against whom the motion for directed verdict was made.
Oak Park Place in Dubuque is an assisted living facility. Alternative Continuum of Care owns the Dubuque facility, as well as a network of other assisted living homes all named Oak Park. Headquarters for the company is in Madison, Wisconsin.1
Oak Park contains 131 beds and has fifty-five employees who provide patients with several different levels of care. The lowest level of care includes the administration of medications, assistance with bathing and dressing, and help with mobility to and from meals.
Oak Park is also certified as a dementia-specific assisted living program. This means the facility holds itself out as providing specialized care in a dedicated setting for patients with dementia but may also provide care to patients without cognitive disorders. In late 2008, Oak Park had approximately thirteen patients in its dementia program.
Because Oak Park includes a special unit for its patients suffering from dementia, Oak Park is subject to the provisions in
Dorshkind worked at Oak Park from April 10, 2006, to September 5, 2008. Dorshkind was hired as an at-will employee for the position of sales and marketing assistant. About six months later, Oak Park promoted her to marketing director. Dorshkind‘s primary responsibility was to increase the number of patients at Oak Park.
For the first two years of her employment, Dorshkind‘s supervisor was Marthe Jones, the regional marketing director. Thereafter, in April 2008, Dorshkind began reporting to Tim Hendricks, the housing director for Oak Park. Hendricks reported to Toni Carruthers, the regional director of operations. Carruthers, in turn, was supervised by Scott Frank, the CEO and majority owner of the Oak Park network.
During an unannounced inspection by the DIA on July 24, 2008, Dorshkind witnessed what she believed to be her super
Dorshkind left Hendricks’ office and returned to her own. Pat True, the director of maintenance at Oak Park, later came by and said he had also seen Niemer and Hendricks forging training documents. True had been called into Hendricks’ office to sign a paper. At that time, he observed the two forging other employees’ names. True told Hendricks he should at least use different colored pens to vary the signatures he was forging on the documents. Hendricks later laughed and recounted the comment to Denise Schiltz, the director of nursing at Oak Park, who also witnessed the incident.
Schiltz told Dorshkind she had seen Hendricks and Niemer forging staff names on the dementia training documents. During testimony, Schiltz said that none of the training certified in the documents ever occurred. Schiltz realized Hendricks and Niemer‘s conduct constituted forgery and immediately submitted her resignation on July 24.
For obvious reasons, Dorshkind did not report these concerns to her then-supervisor, Hendricks. Approximately six weeks after the incident, Dorshkind called Jones, her former supervisor who was then working as the marketing director in Madison, which was not a supervisory position and did not involve human resources responsibilities. Jones described her relationship to Dorshkind as a coworker or peer. Jones admitted that at the time of the report, there was no supervisor-subordinate relationship between her and Dorshkind.
Dorshkind told Jones about the suspected forgery. During her testimony, Dorshkind explained her rationale for doing so as follows: “Well, my concern was, number one, for the residents. If tests had been falsified, I felt that meant that the staff hadn‘t had the training. My first concern was always the residents.” Dorshkind was also concerned Oak Park would lose its license. While speaking with Jones, Dorshkind additionally communicated her belief that two employees, including her supervisor, were having an extramarital affair.
When testifying regarding her conversation with Jones, Dorshkind stated that Jones asked Dorshkind if she wanted Jones to talk to Tara Klun, the director of human resources for Oak Park at the Madison headquarters. Jones testified, “I said, Karen, I don‘t know what to do. Would you like me to go to human resources and talk to them and see what path you should take?” Later, Jones added, “I told [Dorshkind] I would talk to Tara Klun and ask her what she should do in this situation.”
Dorshkind believed the internal report was a collaborative effort, even though Jones said she was the first one to raise the question of whether it should be reported to Klun. Dorshkind had gone to Jones to get “Marthe‘s advice.” However, Dorshkind testified that Jones believed her
Jones spoke with Klun on September 3. Klun testified that “she understood at the time that Ms. Dorshkind and Ms. Jones had just completed a telephone call before [Jones] came into [Klun‘s] office to talk.” During Jones‘s conversation with Klun, Jones reported, “Karen Dorshkind called me today” and said “Kristi and Tim were falsifying documents.” Jones specifically stated that the “falsification that had occurred,” as well as “an illicit personal relationship,” “[wa]s reported by Ms. Dorshkind.” Jones said, “[W]e [meaning Dorshkind and Jones] don‘t know what to do.”
Klun informed the CEO of both allegations. Klun testified that if an employee has a problem and wants to make a report, the employee “would follow the chain of command and go to their supervisor, and if they didn‘t feel comfortable, to the next level and/or human resources.”
On September 4, 2008, Klun and Carruthers went to Oak Park to investigate the claims. Immediately when Klun arrived, Dorshkind approached her and said, “Tara, I‘m glad you‘re here. Can I talk to you alone[?]” Klun responded, “not now ... let‘s wait until we can talk in private.” Klun never spoke with Dorshkind privately to inquire about what she knew regarding the allegation, which Klun admits, “that she reported.” During her testimony, Klun explained her rationale for not approaching Dorshkind as follows:
I believe that she would not have anything further than what Marthe Jones shared with me, for she shared the full conversation that she had with Karen. And at the time I did not feel that she would give me any new information on the 4th of September.
Klun later reiterated on cross-examination that she believed Jones “shared with me the entirety” of Dorshkind‘s information regarding the allegations. Jones was the first person who reported the forgery to Klun.
After conducting a two-day investigation, both Klun and Carruthers concluded therе was no validity to Dorshkind‘s report of forgery and an affair. Klun later admitted that her investigation of the forgery allegations was “very poor.”
The following day, Oak Park terminated Dorshkind‘s employment. In a letter signed by Klun and Carruthers, the basis for the termination was stated as follows:
After a long 2 day and careful investigation, speaking with many individuals, ones you specifically mentioned, we have come to a conclusion that you have not been truthful. Upon the investigation we learned of several incidents where you have not been truthful; spreading rumors regarding a false relationship between two employees, malicious statements regarding forging of documents, and false statement to a Regional Director about move in numbers, all within these two days. This is jeopardizing and affecting the working environment at Oak Park.
Due to the above issues, we are at a point where we are unable to trust you. Therefore, it is in Oak Park‘s best interest to end the relationship effective immediately.
(Emphasis added.) Jones was also fired.
On September 25 and 29, after receiving a complaint from Schiltz about the incident on July 24, the DIA conducted an on-site investigation at Oak Park. In its final report, the DIA concluded certain state-mandated documents relating to the dementia training program had been forged. Accordingly, the DIA imposed a civil penalty of $10,000 and barred the facility from
B. Prior Proceedings. On September 7, 2010, Dorshkind sued Oak Park for wrongful discharge of employment in violation of public policy. Oak Park responded by filing a motion for summary judgment, arguing no established public policy protects Dorshkind‘s activity because she did not report the alleged misconduct externally to the DIA, but rather, only internally. Thus, Oak Park urged the district court to find Dorshkind‘s termination does not jeopardize public policy. Oak Park also alleged there was an overriding business justification for the discharge.
The district court denied the motion. The matter proceeded to a jury trial on November 15, 2011. Before resting, Dorshkind moved the district court to present the issue of punitive damages to the jury. Oak Park resisted, claiming Iowa has not previously recognized the public policy asserted by Dorshkind, and thus, punitive damages are not recoverable. The district court granted Dorshkind‘s motion and rejected Oak Park‘s argument. The district court held:
There is a defined public policy to protect residents in assisted living facilities, particularly those who suffer from dementia. Toward that end, the State requires training to ensure that people with dementia receive proper care and are not abused in any manner. That is the purpose of the regulation.
Accordingly, the district court allowed the question of punitive damages to be submitted to the jury.
Oak Park then moved for directed verdict on the same grounds as the motion for summary judgment. The district court denied the motion without explanation.
The jury returned a verdict for Dorshkind, finding Oak Park terminated her in retaliation for whistleblowing and with a willful and wanton disregard for the rights or safety of others. Accordingly, the jury awarded $178,500 in compensatory damages, including $156,000 in lost pay and benefits and $22,500 in emotional distress damages. The jury award also included $178,500 in punitive damages. The district court entered judgment on November 22.
Oak Park timely filed a notice of appeal. We transferred the case to the court of appeals. The court of appeals affirmed the district court judgment in part by finding the public-policy exception protected Dorshkind‘s employment from retaliatory termination and consequently, concluded the district court properly denied Oak Park‘s motion for directed verdict. However, the court of appeals reversed the district court‘s decision to submit the issue of punitive damages to the jury. The court of appeals held “there has been no specific declaration by our courts or legislature that internal whistleblowing may be protected under certain circumstances.”
Both parties sought further review, which we granted.
II. Issues.
The first issue is whether an at-will employee, who was discharged by her employer after making an internal report of forgery regarding state-mandated documents certifying dementia training, is protected from retaliatory termination under the public-policy exception to the at-will employment doctrine. The second issue asks whether an at-will employee who is wrongfully discharged based upon a violation of administrative rules may recover punitive damages.
III. Standard of Review.
This appeal arises from the district court‘s denial of a motion for directed verdict. Thus, our review is for correctiоn
IV. Analysis.
A. At-Will Employment. Employment in Iowa is at will. Berry v. Liberty Holdings, Inc., 803 N.W.2d 106, 109 (Iowa 2011). Therefore, unless the employee has a valid contract of employment, “the employment relationship is terminable by either party ‘at any time, for any reason, or no reason at all.‘” Fitzgerald v. Salsbury Chem., Inc., 613 N.W.2d 275, 280 (Iowa 2000) (quoting Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 202 (Iowa 1997)). Yet, the employer‘s right to discharge an employee under an at-will employment contract may be limited by public policy considerations. Teachout v. Forest City Cmty. Sch. Dist., 584 N.W.2d 296, 299 (Iowa 1998).
B. Public-Policy Exception. Iowa follows the majority of states by carving out a public-policy exception to the general rule of at-will employment for wrongful-discharge claims. See Springer v. Weeks & Leo Co., 429 N.W.2d 558, 560 (Iowa 1988) (adopting the public-policy exception in Iowa).
Public policy is an elusive legal construct. We have previously said public policy is that which “generally captures the communal conscience and common sense of our state in matters of public health, safety, morals, and general welfare.” Berry, 803 N.W.2d at 110 (quoting Jasper v. H. Nizam, Inc., 764 N.W.2d 751, 761 (Iowa 2009)). Another definition includes those matters “fundamental to citizens’ social rights, duties, and responsibilities.” Id. Once identified, the public policy “becomes a benchmark in the application of our legal principles.” Jasper, 764 N.W.2d at 761.
An employee seeking protection under the public-policy exception in his or her wrongful-discharge claim must prove the following elements:
(1) the existence of a clearly defined and well-recognized public policy that protects the employee‘s activity; (2) this public policy would be undermined by the employee‘s discharge from employment; (3) the employee engaged in the protected activity, and this conduct was the reason the employer discharged the employee; and (4) the employer had no overriding business justification for the discharge.
Berry, 803 N.W.2d at 109-10. The first two elements constitute questions of law to be determined by the court. Fitzgerald, 613 N.W.2d at 282. If the discharged employee successfully establishes each of these elements, “he or she is entitled to recover both personal injury and property damage.” Berry, 803 N.W.2d at 110.
C. Prior Application of the Public-Policy Exception. In Iowa, we have recognized many situations where the public-policy exception applies. Below is a selection of cases to illustrate how we have previously implemented the exception.
1. Enforcing a statutory right. We have consistently held that an employee cannot be discharged in retaliation for enforcing a statutory right. The first case to do so was Springer, 429 N.W.2d 558. There, we held an employer who termi
We extended the holding in Springer to persons who filed for unemployment benefits. Lara v. Thomas, 512 N.W.2d 777, 782 (Iowa 1994). In extending Springer, we reemphasized our language in Smith by stating, “Employers cannot be permitted to intimidate ‘employees into foregoing the benefits to which they are entitled in order to keep their jobs.‘” Id. (quoting Smith, 464 N.W.2d at 686).
2. Refusal to participate in illegal activity. We have two cases allowing a wrongful-discharge claim to proceed when an employee refuses to participate in an illegal activity. The first is Fitzgerald, 613 N.W.2d 275. There, we held an employee had a claim for wrongful discharge because he intended to testify truthfully in a legal proceeding, rather than perjure himself. Id. at 285-86. In reaching this conclusion, we cited decisions from other jurisdictions that allowed such claims when an employee refused to commit perjury. Id. at 286. Although, Fitzgerald did not testify before his discharge, we said the employee must only show he had a good faith intent to testify truthfully. Id. at 287.
The second case to hold a person cannot be discharged for failing to participate in illegal activity is Jasper, 764 N.W.2d 751. In Jasper, an employee refused to work in an understaffed room at a daycare center, a situation violating the administrative rules issued by the Iowa Department of Human Services. Id. at 758-59. The daycare provider then terminated her employment. Id. at 759. In determining the appropriate public policy, we looked to the administrative regulations of this state. Id. at 765. We found the department adopted the rules for the health, safety, and welfare of children in daycare facilities. Id. at 766. Aсcordingly, we affirmed the jury verdict because Jasper had presented sufficient evidence to establish she was terminated because she refused to violate the administrative regulations. Id. at 768.
3. Whistleblowing. A third category of cases where we have said discharging an employee violates public policy is whistleblowing. We issued two cases on the same day in September 1998 to discuss this issue. The first matter was Tullis v. Merrill, 584 N.W.2d 236 (Iowa 1998). There, Tullis complained internally to the business owner that the company was not paying his insurance benefits as part of his promised wages. Id. at 237-38. Tullis claimed this failure to pay wages violated
He brought a wrongful-discharge action against his employer based on the public-
On appeal, the employer argued the public-policy exception only applied if the employee made the complaint to the labor commissioner under section 91A.10. Id. at 239. The employer claimed the statute only protected an employee who made a complaint with the commissioner. Id. The statute provided:
An employer shall not discharge or in any other manner discriminate against any employee because the employee has filed a complaint, assigned a claim, or brought an action under this section or has cooperated in bringing any action against an employer.
The other case filed that day was Teachout, 584 N.W.2d 296. There, a teacher‘s assistant claimed the school terminated her after she reported alleged child abuse to her supervising teacher and orally to the department of human services. Id. at 298-99. In Teachout, the Code did not expressly protect an employee for making a complaint of child abuse. However, the Code did provide
[c]hildren in this state are in urgent need of protection from abuse. It is the purpose and policy of this [statute] to provide the greatest possible protection to victims or potential victims of abuse through encouraging the increased reporting of suspected cases of such abuse, insuring the thorough and prompt investigation of these reports.
Another case dealing with whistleblowing was Ballalatak v. All Iowa Agriculture Ass‘n, 781 N.W.2d 272 (Iowa 2010). In Ballalatak, the employee claimed he was fired for internally complaining that the company was not properly handling a fellow employee‘s workers’ compensation claim. Id. at 275. In determining whether a сlaim existed, we favorably cited an Eighth Circuit Court of Appeals opinion where the federal court determined we would recognize a public-policy exception to the employment at-will doctrine when an employee makes an internal complaint about employee safety. Id. at 277 (citing Kohrt v. MidAmerican Energy Co., 364 F.3d 894, 902 (8th Cir.2004)). We found, however, that the Iowa workers’ compensation statutes did not provide a public-policy exception for an internal complaint based on a fellow employee‘s concern that the employer may not be complying with Iowa‘s workers’ compensation laws. Id. at 278.
D. Application of Legal Principles. With these principles and jurisprudence in mind, we turn to the case at hand. The jury returned a verdict for Dorshkind. Thus, the jury resolved the factual issues in the third and fourth elements by finding Oak Park discharged Dorshkind because of her whistleblowing and that Oak Park had no overriding business justification for the discharge. Therefore, we need only address the first and second elements,
1. Clearly defined and well-recognized public policy. To resolve the issue before us, we must ask whether a clearly defined and well-recognized public policy exists to bar Dorshkind‘s termination for internal whistleblowing relating to Oak Park‘s forgery of state-mandated training documents for its dementia program. This is a question of law. Fitzgerald, 613 N.W.2d at 282.
We look primarily to our statutes to determine whether an implied or exprеss public policy exists but such policies may also be found in our constitution. Id. at 283; see also Kohrt, 364 F.3d at 899 (applying Iowa law). The court does not look only to statutes expressly mandating protection for at-will employees. Fitzgerald, 613 N.W.2d at 283. “[W]e [also] look to other statutes which not only define clear public policy but imply a prohibition against termination from employment to avoid undermining that policy.” Id. However, we do not divine public policy from internal company policies or agreements. Ballalatak, 781 N.W.2d at 278. Administrative regulations are another source of public policy “when adopted pursuant to a delegation of authority in a statute that seeks to further a public policy.” Jasper, 764 N.W.2d at 764. Courts in other jurisdictions also recognize professional rules as sources of public policy. See, e.g., Rocky Mountain Hosp. & Med. Serv. v. Mariani, 916 P.2d 519, 523 (Colo.1996) (holding state-accountancy-board rules may constitute articulations of public policy in case where a CPA was terminated in retaliation for complaining to supervisors about questionable accounting practices).
We cautiously identify policies to support an action for wrongful discharge under the public-policy exception. We do so because
[a]ny effort to evaluate the public policy exception with generalized concepts of fairness and justice will result in an elimination of the at-will doctrine itself. Moreover, it could unwittingly transform the public policy exception into a “good faith and fair dealing” exception, a standard we have repeatedly rеjected.
Fitzgerald, 613 N.W.2d at 283 (citations omitted); accord Lloyd v. Drake Univ., 686 N.W.2d 225, 230-31 (Iowa 2004) (rejecting a wrongful-discharge claim lodged by a security guard who was fired after forcibly restraining a student suspected of assault because the asserted public policy against crime is generalized, not “clearly defined“). Thus, the exception is narrowly circumscribed to only those policies clearly defined and well-recognized to protect those with a compelling need for protection from wrongful discharge. See, e.g., Harvey v. Care Initiatives, Inc., 634 N.W.2d 681, 685 (Iowa 2001) (rejecting an independent contractor‘s claim for wrongful discharge by finding “no compelling need, as we did for at-will employees, to support a wrongful termination tort“). The “well recognized and clearly defined” requirement ensures “employers have notice that their dismissal decisions will give rise to liability.” Fitzgerald, 613 N.W.2d at 282-83.
We have previously held that an employer cannot discharge an employee because he or she whistleblows if there is a public policy to protect the integrity and employment of those who uphold the law by reporting illegalities in the workplace. Teachout, 584 N.W.2d at 300-01. In other words, whistleblowing is an exception to the at-will employment doctrine if the pub
We find the Code and our administrative rules support a clearly defined and well-recognized public policy under the exception to the at-will employment doctrine.
1. The general assembly finds that assisted living is an important part of the long-term care continua in this state. Assisted living emphasizes the independence and dignity of the individual while providing services in a cost-effective manner.
2. The purposes of establishing an assisted living program include all of the following:
a. To encourage the establishment and maintenance of a safe and homelike environment for individuals of all income levels who require assistance to live independently but who do not require health-related care on a continuous twenty-four-hour per day basis.
b. To establish standards for assisted living programs that allow flexibility in design which promotes a social model of service delivery by focusing on independence, individual needs and desires, and consumer-driven quality of service.
c. To encourage public participation in the development of assisted living programs for individuals of all income levels.
3. It is the intent of the general assembly that the department of elder affairs establish policy for assisted living programs and that the department of inspections and appeals enforce this chapter.3
The legislature, by including a findings, purpose, and intent provision in chapter 231C, demonstrated a clearly defined and well-recognized public policy to make assisted living available throughout the state and to ensure the safety of persons residing in assisted living facilities. Other provisions of chapter 231C supporting this public policy include rulemaking authority by the elder affairs department for certification of assisted living facilities and requiring compliance with fire and safety standards.
Turning to the administrative rules, we find the legislature clearly authorized the elder affairs department to promulgate rules regarding the certification of assisted living facilities “to ensure, to the greatest extent possible, the health, safety, and well-being and appropriate treatment of tenants.”
25.34(1) All personnel employed by or contracting with a dementia-specific program shall receive a minimum of six hours of dementia-specific education and training prior to or within 90 days of employment or the beginning date of the contract.
25.34(2) The dementia-specific education or training shall include, at a minimum, the following:
a. An explanation of Alzheimer‘s disease and related disorders;
b. The program‘s specialized dementia care philosophy and program;
c. Skills for communicating with persons with dementia;
d. Skill for communicating with family and friends of persons with dementia;
e. An explanation of family issues such as role reversal, grief and loss, guilt, relinquishing the care-giving role, and family dynamics;
f. The importance of planned and spontaneous activities;
g. Skills in providing assistance with instrumental activities of daily living;
h. The importance of the serviсe plan and social history information;
i. Skills in working with challenging tenants;
j. Techniques for simplifying, cueing, and redirecting; and
k. Staff support and stress reduction.
25.34(3) All personnel employed by or contracting with a dementia-specific program shall receive a minimum of two hours of dementia-specific continuing education annually.
25.34(4) An employee who provides documentation of completion of a dementia-specific education or training program within the past 12 months shall be exempt from the education and training requirement of subrule 25.34(1).
Thus, the administrative rules specifically articulated a concern for the health, safety, and welfare of dementia patients in assisted living facilities. Acting on this concern, the elder affairs department required the implementation of a training program with accompanying state-mandated training documents to safeguard dementia patients’ health, safety, and welfare.
In Teachout, we found language in a statute similar to the language in chapter 231C and the administrative rules promulgated under chapter 231C supported a public policy that made the reporting of child abuse a protected activity. 584 N.W.2d at 300-01; see also Trombetta v. Detroit, Toledo & Ironton R.R., 81 Mich. App. 489, 265 N.W.2d 385-88 (1978) (stating, in dicta, that it would have been impermissible for the employee to be discharged for refusing to falsify pollution control reports that are required to be filed with the state). As in Teachout, based on the plain language found in the statutes and rules, we find a strong public policy to ensure the proper care of dementia patients.
We should not allow an employer to ignore the substance either of a statute or administrative regulation or the statement of public policy that it represents. “There is no public policy more important or more fundamental than the one favoring the effective protection of the lives and property of citizens.” Palmateer v. Int‘l Harvester Co., 85 Ill.2d 124, 52 Ill.Dec. 13, 421 N.E.2d 876, 879 (1981). Accordingly, we find Dorshkind‘s whistleblowing, which involved reporting violations of law that jeopardized the health, safety, and welfare of dementia patients in an assisted living
2. Discharge undermines public policy. Under the second element, we must determine whether Dorshkind‘s discharge from employment undermines this public policy. Again, this is a question of law. Fitzgerald, 613 N.W.2d at 282. We consider the impact of the discharge on both the dismissed employee and other employees. Id. at 288. “An essential element of proof to establish the discharge undermines or jeopardizes the public policy necessarily involves a showing the dismissed employee engaged in conduct covered by the public policy.” Id. at 287. If it can be shown the whistleblower engaged in conduct in furtherance of public policy and was dismissed for doing so, and that discharge will discourage other employees from engaging in the same conduct, then public policy is undermined. Id. at 288.
Considering such factors, we conclude Dorshkind‘s discharge did undermine the public policy at stake. Dorshkind‘s conduct involved internally reporting what she believed were two coworkers forging state-mandated training documents pertaining to the care of dementia patients. Such an act advances a clear public policy. Moreover, the impact of the dismissal affected Dorshkind by punishing her for reporting conduct jeopardizing the health, safety, and welfare of dementia patients.
We next examine the impact of the discharge on other employees. Dorshkind‘s dismissal chills reporting by other employees for similar workplace illegalities. Cf. Smith, 464 N.W.2d at 685 (holding the discharge for asserting a workers’ compensation claim violated public policy, even though there was no direct interference with the payment of benefits, because it would chill the claiming of workers’ compensation rights and erode the employer‘s obligation to pay valid claims). As the Eighth Circuit accurately observed when applying Iowa law,
If employers were permitted to discharge employees for such conduct, then employees would be hesitant to articulate safety concerns because to do so would potentially put their jobs at risk. Clearly, a public policy that encourages employees “to institute [a] new and [to] perfect existing safety programs” is undermined when an employee can be discharged for doing exactly what the policy encourages.
Kohrt, 364 F.3d at 902 (quoting
An additional consideration is that Dorshkind made her complaint internally. We believe such a claim for internal whistleblowing stands for a number of reasons.4 First, we have previously held internal reporting is actionable, even
Finally, it makes more sense that an employee would first discover the problem and report it internally before lodging a complaint externally.5 Moreover, this allows the employer to correct the deficiency in a reasonably prompt manner. When the government becomes involved, the employer may take the position that the conduct does not violate a statute or rule to avoid sanctions. Then, the only resolution is a legal battle. By 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. However, if the employer does not correct a perceived problem, then the authorities can intervene to determine the extent of the problem and its amelioration.
Accordingly, we find Dorshkind‘s internal report of Oak Park‘s violations of law and regulations relating to the forgery of state-mandated documents for the dementia program is a protected activity as a matter of law. Preventing the retaliatory termination of internal whistleblowers not only shields the employee from tortious conduct, but also protects the public by ensuring “infractions of rules, regulations, or the law pertaining to public health, safety, and the general welfare” are properly reported. Palmer, 752 P.2d at 689.
V. Punitive Damages.
Regarding the second issue, the crux of Oak Park‘s argument is that we have not previously recognized a claim for wrongful discharge arising from an employee reporting a violation of the administrative rules in question. For authority, Oak Park cites Jasper, where we said,
Although the tort of wrongful discharge in violation of public policy has been recognized in Iowa for over twenty years, this case is the first time we have specifically recognized a cause of action for wrongful discharge arising from the refusal of the employee to violate administrative rules. Additionally, there has otherwise been no declaration that the subject matter of the administrative rules in dispute in this case were of the type thаt would support a tort of wrongful discharge.
764 N.W.2d at 774. In Jasper the public policy involved was derived solely from an administrative rule. Id.
Here, we derived the public policy from chapter 231C. We used the administrative rules to show the agency recognized the public policy and passed rules to protect the patients in assisted living facilities. In fairness, however, the training requirements were contained in an administrative rule. See
Therefore, the district court erred in submitting Dorshkind‘s punitive damages claim to the jury.
VI. Conclusion and Disposition.
We conclude that an employer‘s retaliatory discharge of an at-will employee, who internally reported her employer‘s forgery of state-mandated training documents for a dementia program in an assisted living facility, in contravention of state statutes and administrative regulations, violated public policy. Therefore, we affirm that part of the court of appeals decision and the district court judgment regarding actual damages. We also affirm the court of appeals decision, finding the district court should not have submitted the punitive damages claim to the jury because at the time of Dorshkind‘s discharge, we did not recognize a public-policy exception to the at-will employment doctrine based upon a violation of administrative rules. Thus, on the punitive damages issue, we reverse the district court judgment and conclude Dorshkind is not entitled to punitive damages. We remand the case to the district court to enter judgment consistent with our decision.
DECISION OF COURT OF APPEALS AFFIRMED; DISTRICT COURT JUDGMENT AFFIRMED IN PART AND VACATED IN PART, AND REMANDED WITH DIRECTIONS.
All justices concur except CADY, C.J., who specially concurs, and MANSFIELD, WATERMAN, and ZAGER, JJ., who concur in part and dissent in part.
CADY, Chief Justice (concurring specially).
I concur in the majority opinion, but write separately to explain two important points.
Second, our law protects whistleblowing that is either expressly protected by statute or impliedly protected by public policy. Our statute obviously only expressly protects external whistleblowing. But, our public policy impliedly protects internal whistleblowing because it is a clear public policy of this state to provide the elderly in Iowa who reside in assisted living homes a safe and dignified environment. This clear public policy is important enough that it implies protection for internal whistleblowing. Employers who сhoose to operate assisted living centers, as full partners in this public policy, must be expected to embrace internal complaints of regulatory or statutory violations by the business if the public policy is truly to be met. The public policy can be served by internal whistleblowing just as much, if not more, as by external whistleblowing.
Our law must assume employers want to comply with the statutory and regulatory scheme and want to know when their employees are failing to do so. Accordingly, the public policy of this state promotes and protects internal whistleblowing.
MANSFIELD, Justice (concurring in part and dissenting in part).
I. Introduction.
The majority opinion significantly and, in my view, ill-advisedly broadens the scope of Iowa‘s tort of wrongful discharge in violation of public policy. Under the majority opinion, any time a worker tells a coworker about an alleged violation of law related to health, safety, or welfare, the
Until today, our law was clear:
To prevail on an intentional tort claim of wrongful discharge from employment in violation of public policy, an at-will employee must establish the following elements: (1) the existence of a clearly defined and well-recognized public policy that protects the employee‘s activity; (2) this public policy would be undermined by the employee‘s discharge from employment; (3) the employee engaged in the protected activity, and this conduct was the reason the employer discharged the employee; and (4) the employer had no overriding business justification for the discharge.
Berry v. Liberty Holdings, Inc., 803 N.W.2d 106, 109-10 (Iowa 2011). We had reiterated that standard many times. See Ballalatak v. All Iowa Agric. Ass‘n, 781 N.W.2d 272, 275 (Iowa 2010); Jasper v. H. Nizam, Inc., 764 N.W.2d 751, 761 (Iowa 2009); George v. D.W. Zinser Co., 762 N.W.2d 865, 871 (Iowa 2009); Lloyd v. Drake Univ., 686 N.W.2d 225, 228 (Iowa 2004); Davis v. Horton, 661 N.W.2d 533, 535 (Iowa 2003); Fitzgerald v. Salsbury Chem., Inc., 613 N.W.2d 275, 282 n. 2 (Iowa 2000).
This test was not difficult to apply, which was one of its virtues. The tort required both “the existence of a clearly defined and well-recognized public policy that protects employee‘s activity” and that “the employee engaged in the protected activity.” Berry, 803 N.W.2d at 109-10; accord Ballalatak, 781 N.W.2d at 275; Jasper, 764 N.W.2d at 761; George, 762 N.W.2d at 871; Lloyd, 686 N.W.2d at 228; Davis, 661 N.W.2d at 535; Fitzgerald, 613 N.W.2d at 282 n. 2. In other words, the employee had to have engaged in the activity that the statute or regulation protected. In the whistleblowing context, this meant the employee‘s activity (i.e., reporting) had to be the subject of a clearly defined and well-recognized public policy, not merely that the employee reported on something that was the subject of such a policy. The clearly defined and well-recognized policy had to cover reporting itself.
Consistent with that law, we had allowed internаl whistleblowing claims to go forward where an applicable statute or regulation expressly recognized internal reporting. See Tullis v. Merrill, 584 N.W.2d 236, 239-40 (Iowa 1998) (finding that an internal complaint about the withholding of wages was protected activity because the statute and regulations provided that “‘an employee would be protected against discharge or discrimination caused by the complaint to the employer‘” (quoting
The majority now sweeps away that previously clear legal standard and replaces it with a series of platitudes about health, safety, and welfare. Thus, the majority eliminates any distinction between external reporting and internal reporting with the broad-brush statement, “[W]hether the employee makes the complaint internally or externally does not change the public policy considerations of our state.” The majority also says, “We should not allow an employer to ignore the substance either of a statute or administrative regulation or the statement of public policy that it represents.” Quoting an out-of-state case, the majority adds, “‘There is no public policy more important or more fundamental than the one favoring the effective protection of the lives and property of citizens.‘” Palmateer v. Int‘l Harvester Co., 85 Ill.2d 124, 52 Ill.Dec. 13, 421 N.E.2d 876, 879 (1981).
These are noble sentiments, but the upshot is: Whenever an employee speaks to a coemployee about a violation of some law or regulation that relates to health, safety, or welfare, the employer puts itself in legal jeopardy if it later discharges that employee. I recognize the employee still must prove the complaint was the reason for the discharge, but questions of causation are often disputed and difficult to prove or disprove. Thus, a business may be reluctant to replace one employee with another person, who it believes will do a better job, out of fear of litigation. This will be a new cost of doing business in Iowa.
We have been willing to accept that cost, and ought to continue to accept that cost, when the employee engaged in clearly defined and well-recognized protected activity. But there are myriad laws and regulations relating to “health, safety, and welfare.” There are also many types of violations, ranging from the serious to the trivial. This case falls somewhere in the middle. The nursing home‘s employees acted deceitfully in falsifying training records, but there is no indication that the care received by any resident was affected. Also, employees participate in workplace discussions all the time. If we make the tort available whenever an employee brings an alleged health, safety, or welfare violation to the attention of a coemployee, we have truly changed the nature of that tort in Iowa.
Previously, we said on many occasions that the public-policy exception in Iowa is a “narrow” exception to employment at will. See, e.g., Berry, 803 N.W.2d at 109; Ballalatak, 781 N.W.2d at 275; Jasper, 764 N.W.2d at 762; Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 202 (Iowa 1997); Lara v. Thomas, 512 N.W.2d 777, 781-82 (Iowa 1994). This is consistent with the basic policy in Iowa that employers who do not engage in discrimination and have not entered into collective bargaining or other express or implied contractual relationships with their employees should generally be free to hire and fire employees without fear of having those decisions second-guessed in court. The majority opinion, I respectfully submit, is inconsistent with this characterization.
II. The Plaintiff Only Engaged in Internal Reporting, Not External Reporting.
Oak Park Place is an unsympathetic defendant, and Karen Dorshkind is a sympathetic plaintiff. Still, I would like to high
On July 24, 2008, during a site visit by the DIA, two employees of Oak Park, Tim Hendricks and Kristi Niemer, were apparently engaged in falsifying training records. They had the office door open and did not make any effort to conceal their actions from fellow employees. Dorshkind was one of several employees who observed this activity. Dorshkind mentioned immediately what she saw to twо other employees.
Approximately six weeks later, Dorshkind telephoned her former supervisor, Marthe Jones, and brought up the incident. As Jones recalled, Dorshkind “was worried that the State would find out and that there would be repercussions for Oak Park, and she said she did not know what to do.” Dorshkind was “afraid” that Oak Park was “going to lose [its] license.” Dorshkind also told Jones that it appeared Hendricks and Niemer were having an affair. This was a “feeling” based on her observations and things she had heard. Jones agreed to contact the company‘s human resources director, and Dorshkind went along with that plan. Dorshkind never contacted the DIA, nor did anyone relay her observations to the DIA.
The next day, September 4, 2008, the human resources director and another manager, also based in Madison, went to Dubuque to investigate the matter. After two days of interviewing and reviewing documents, they handed a termination letter to Dorshkind that alleged she had “not been truthful” in several respects, including the relationship between the two employees, the falsification of training records, and a matter related to Dorshkind‘s own job duties.
Meanwhile, another witness to the July 24 events, Oak Park‘s director of nursing Denise Schiltz, was so upset at what she saw that she turned in a thirty-day notice of resignation that day. When her term of employment officially ended, Schiltz contacted the DIA and filed an anonymous complaint of what she had seen.8 This caused the DIA to launch another inspection. Following a site visit in late Septembеr 2008 brought on by Schiltz‘s anonymous complaint, the DIA ultimately concluded that training documents had indeed been falsified. The DIA fined Oak Park $10,000 and issued a conditional certificate that temporarily prohibited Oak Park from admitting new residents.
III. Under Our Whistleblowing Precedents, the Employee Must Have Engaged in Protected Activity as Measured by a Statute or Regulation.
Let me now turn to our whistleblowing precedents. The first reporting or “whistleblowing” case we decided was Tullis. See 584 N.W.2d 236. There we held an employee who had been terminated for seeking reimbursement of amounts wrongfully withheld from his paycheck had a cause of action for wrongful discharge.
The key point in Tullis was that the employee‘s internal demand to his employer for unpaid wages amounted to a prоtected complaint under the statute. “We are convinced, as was the district court, that Tullis‘s formal letter to Merrill constituted a complaint related to unpaid wages for purposes of applying section 91A.10(5).” Id. at 240. Tullis was thus an internal reporting case where the statute protected internal reporting.
The same day we decided Tullis, we also decided Teachout v. Forest City Community School District, 584 N.W.2d 296 (Iowa 1998). Teachout should be viewed as an external reporting case where the law protected external reporting. In Teachout, a teacher‘s assistant was terminated after reporting alleged child abuse both within her school and orally to the Department of Human Services (DHS), although the school was unaware she had already contacted DHS at the time of her termination. Id. at 298-99. We emphasized that Iowa law mandated reporting of suspected child abuse to DHS and provided immunity from civil or criminal liability for individuals making such reports. Id. at 300 (quoting
Although [the relevant statute] does not specifically mandate protection for an employee who in good faith makes a report of suspected child abuse, we think the forceful language of the statute articulates a well-recognized and defined public policy of Iowa from which such protection can be implied.
Id. at 300-01. Having found a “well-recognized and defined public policy,” we then concluded the school‘s knowledge that Teachout intended to report child abuse to the authorities could support a wrongful-discharge claim. Id. at 301. As we explained:
It would be contrary to the public policy articulated in our child abuse laws to allow an employer to take adverse employment action on the basis of an employee‘s intent to report child abuse. That is because the employer‘s action would have the effect of discouraging the reporting of suspected abuse in direct opposition to the public policy of encouraging the reporting of child abuse. Consequently, if Teachout had a subjective good-faith belief that child abuse had occurred, she is protected from any retaliatory action by her employer causally related to her intent or threat to report the abuse.
However, we concluded that Teachout failed to establish a jury question on the element of causation. She had demonstrated only that her “termination occurred after the District learned she had engaged in a protected activity,” not that her conduct was a determinative factor. Id. at 302.
Teachout does not support the proposition that mere internal reporting of child
In Harvey v. Care Initiatives, Inc., 634 N.W.2d 681 (Iowa 2001), we rejected a wrongful-termination whistleblowing claim brought by an independent contractor against a nursing home. 634 N.W.2d at 685-86. The contractor there had “produced documents suggesting she was terminated for allegedly filing a complaint about the nursing home with the state‘s Department of Inspection and Appeals.” Id. at 682. We observed that the relevant statutes allowed anyone to file a complaint, which would be kept confidential, but only protected employees and residents from retaliation or discrimination. Id. at 685-86. As we put it,
Our legislature has made it clear through section 135C.46 that the prohibition against retaliatory discharge only applies to residents and employees of the health care facility. If our legislature wished to extend the prohibition to all persons, it would have used the term “persons.”
Id. at 686. We also commented more generally that “[w]e find no compelling need, as we did for at-will employees, to support a wrongful-termination tort for independent contractors.” Id. at 684.
George, another whistleblowing case, involved a statute that protected external reports and an employee who lost his job for making such an external report. See 762 N.W.2d at 871-72. The employee there alleged he had been terminated for complaining to the division of labor services about his employer‘s failure to take certain safety precautions during lead abatement jobs. Id. at 866-67. We found the employee had engaged in protected activity and had a common law cause of action because
In 2004, the United States Court of Appeals for the Eighth Circuit, applying Iowa law, held that an electrical utility employee who had been fired for openly disputing the safety of certain work procedures could pursue a public-policy wrongful-discharge claim against his employer. Kohrt v. MidAmerican Energy Co., 364 F.3d 894, 902 (8th Cir.2004). The court noted that the Iowa Occupational Safety and Health Act has a stated policy of “[e]ncouraging employers and employees in their efforts to reduce the number of occupational safety and health hazards at their places of employment, and to ... institute new and perfect existing programs for providing safe and healthful working conditions.‘” Id. at 899 (quoting
Thus, although the Eighth Circuit found the issue “not free from doubt,” it concluded that “the public policy expressed in IOSHA would be undermined if [the utili
By contrast, in Ballalatak, we refused to find a cause of action where no statute covered the internal reporting in question. That case involved an employee who was fired after “relaying concerns” that his employer was not fulfilling its workers’ compensation obligations to two fellow employees. Ballalatak, 781 N.W.2d at 278. We seemingly approved the Eighth Circuit‘s Kohrt decision, and commented that ”Kohrt and Jasper suggest internal whistle-blowing may be protected in certain circumstances.” Id. at 277. However, we found that Iowa‘s workers’ compensation statutes do not “provide support for internal complaints based on a concern that the employer may not be complying with workers’ compensation laws.” Id. at 278. As this court put it, “The public policy found in Iowa‘s workers’ compensation statutes strongly protects injured employees, but does not extend to coworkers or supervisors who express concerns regarding whether the injured employees will be properly compensated.” Id.
Just two years ago, we decided Berry, our most recent (until now) public-policy, wrongful-discharge case. This was not a whistleblowing case; rather, the case involved an injured employee who had been fired for bringing a personal injury lawsuit against an affiliate of his employer. See Berry, 803 N.W.2d at 108-09. We found that ”
Berry‘s emphasis on the term of the statute to define the scope of the tort was not new. In the absence of statutory authority, we had disallowed wrongful-discharge claims brought by employees who complained about wrongs against fellow workers. See, e.g., Ballalatak, 781 N.W.2d at 278. Likewise, we had denied an independent contractor‘s wrongful-termination claim where the statute specifically protected only employees. See Harvey, 634 N.W.2d at 686. “The use of statutes maintains the narrow public-policy exception and ‘provide[s] the essential notice to employers and employees of conduct that ... can lead to tort liability.‘” Ballalatak, 781 N.W.2d at 277 (quoting Jasper, 764 N.W.2d at 763).
Under our precedent until now, an employee who internally reported an observation of illegal workplace conduct, in the absence of some statute or regulation recognizing or protecting such reporting, had not engaged in protected activity for purposes of the wrongful-discharge tort. If mere internal reporting of illegality were sufficient, then Ballalatak should have had a wrongful-discharge claim. See id. at 278 (finding no protection for “internal complaints based on a concern that the employer may not be complying with workers’ compensation laws“). In Ballalatak, we reiterated that “Iowa‘s workers’
All of this was consistent, as noted above, with our bedrock rule in Iowa that the employee must have engaged in the protected activity. See Berry, 803 N.W.2d at 110; Ballalatak, 781 N.W.2d at 275; Jasper, 764 N.W.2d at 761; George, 762 N.W.2d at 871; Lloyd, 686 N.W.2d at 228; Davis, 661 N.W.2d at 535; Fitzgerald, 613 N.W.2d at 282 n. 2.
IV. No Legislation or Regulation Recognized the Internal Reporting That Occurred in This Case; It Cannot Be Considered Protected Activity.
With the foregoing caselaw in mind, I return to this case.
Dorshkind, however, did not complain to the DIA. Nor is there evidence she intended to complain to the DIA, or threatened to go to the DIA, or wanted her internal complaints passed along to the DIA. To the contrary, she was worried the state would find out and there would be repercussions for Oak Park. Additionally, there is no evidence that any of Dorshkind‘s actions even unwittingly led to the DIA investigation. In short, this not a case where an employee made, or intended to make, a statutorily recognized or protected complaint. Cf. George, 762 N.W.2d at 871-72; Teachout, 584 N.W.2d at 300-01; Tullis, 584 N.W.2d at 239-40.
The majority notes accurately that Iowa has a strong statutory policy of protecting residents of assisted living homes. The stated purposes of chapter 231C are:
a. To encourage the establishment and maintenance of a safe and homelike environment for individuals of all income levels who require assistance to live independently but who do not require health-related care on a continuous twenty-four-hour per day basis.
b. To establish standards for assisted living programs that allow flexibility in design which promotes a social model of service delivery by focusing on independence, individual needs and desires, and consumer-driven quality of service.
c. To encourage public participation in the development of assisted living programs for individuals of all income levels.
But again, our precedents require a clearly defined and well-recognized public policy that protects the activity in question, i.e., internal reporting. Just because external reporting is the subject of a clearly defined and well-recognized statutory policy, it does not follow that internal reporting would be, at least when the employee‘s actions did not result in and were not intended to result in an outside report.
It bears emphasis, as we pointed out in Berry, that a statute covering a particular activity does not have to directly bar employer retaliation in order to qualify as a clearly defined public policy. 803 N.W.2d at 111. “There need not be an express statutory mandate of protection....” Teachout, 584 N.W.2d at 300. It is sufficient if the statute explicitly recognizes the activity such that an employer‘s retaliatory discharge for engaging in the activity would “conflict with” achievement of the legislative goal. Lara, 512 N.W.2d at 782. Hence, even if chapter 231C did not contain section 231C.13 prohibiting retaliation against whistleblowers to the DIA, section 231C.7(1) authorizing confidential reports to the DIA likely would be enough to sustain a wrongful termination claim if Dorshkind had been let go for reporting the records falsification to that agency.
Still, there must be enough in the statute to “clearly imply the statute protects the specific employment activity in question from employer retaliation.” Berry, 803 N.W.2d at 111 (emphasis added).
An additional consideration here is that the legislature made a specific decision in 2003 to facilitate the bringing of complaints before the DIA. See 2003 Iowa Acts ch. 166, §§ 14, 20 (codified at
V. Conclusion.
For the foregoing reasons, I respectfully dissent in part. In my view, the defendant‘s motion for directed verdict on liability should have been granted.
WATERMAN and ZAGER, JJ., join this concurrence in part and dissent in part.