Top 10 Legal Issues Facing Entrepreneurs in Pennsylvania

Topic 4: Terminating the Employment Relationship

Pennsylvania, like most states, follows the employment-at-will doctrine. In upholding this doctrine for more than a century, Pennsylvania Courts have clearly stated that employers may discharge their employees “at any time, for any reason, or for no reason at all.”¹ Therefore, the employment-at-will doctrine states that employment relationships may be terminated by either party at any time and for any reason, unless there is a contractual, statutory, or public policy provision to the contrary.²

In Pennsylvania, there is a strong presumption that an employment relationship is at-will. Therefore, as a general rule, when an at-will employee is fired in Pennsylvania, they have no cause of action against their employer.³ Even though this is the general rule, there are certain limited exceptions which bring the employee beyond “at-will” and into the more protective status of “for cause”. It should be noted that in general, it is difficult to rebut the presumption of at-will employment in Pennsylvania by showing one of the recognized exceptions. However, it is imperative for entrepreneurs to be aware of these exceptions in order to maintain the level of control over the employment relationship that they so desire. In order to rebut the presumption of at-will employment, the employee must establish one of the following:

• An agreement for a definite duration
• An agreement specifying that the employee will be discharged for a just cause only
• Sufficient additional consideration
• An applicable recognized public policy exception⁴

Exceptions to At-Will Employment

Contractual Obligations
An exception will be made to an employee’s at-will status, when there is a clear written or oral representation made by the employer of a nature that communicates that the employee cannot be terminated without just cause.⁵ The employee who makes the claim that their employer made a representation that they were not to be terminated without just cause, bears the burden of identifying a very clear statement intended to modify the presumed at-will employment relationship.⁶ Absent the employee being able to specify a very clear and precise statement of intent to modify the general at-will presumption, a Pennsylvania Court will not find this exception.

Sufficient Additional Consideration Exception (Additional Consideration)
Another exception to the general rule of at-will employment in Pennsylvania is where the employee or employer has supplied “additional consideration”. This exception is proper if the employer has received a substantial benefit or the employee has suffered an undue hardship beyond the services he or she was originally hired to perform.⁷ If additional consideration is found, courts will infer that the employer and employee intended to modify the terms of their employment contract because of the nature of their actions in excess of that original contract. In such a case, an implied contract for a reasonable amount of time will be found.⁸ Such acts that are sufficient to meet this limited exception are: an employee’s act of relocating his family to another city⁹, purchasing a home in a new city¹⁰, and devoting full time to the selling of a manufacturer’s products.¹¹

Statutory Exceptions
Numerous state and federal statutes restrict an employer’s right to terminate its employees. Such statutes include federal anti-discrimination laws (see Topic 8 below) and the Pennsylvania Human Relations Act.¹² For purposes of this handbook it should be noted that the Pennsylvania Human Relations Act generally provides a remedy for employees discharged because of their age, sex, race, religion or disability. If an employer terminates an employee on the basis of an impermissible ground listed in the statute, the employer can subject itself to litigation resulting in damages and possible reinstatement. In short, you cannot terminate an employee for an impermissible reason that is protected by statute.

Public Policy Exceptions
Pennsylvania courts have also found an exception to the at-will doctrine where the termination of employment is in violation of public policy. This exception is construed extremely narrowly and applies “in only the most limited circumstances, where discharge of at-will employees would threaten clear mandates of public policy”.¹³ Generally, the Pennsylvania courts analyze this exception with a two-part test. First, the court will decide whether a public policy has been threatened by the discharge at issue. Second, even if a public policy has been threatened, the court will not reverse the termination if the employer articulates a separate, plausible and legitimate reason that supports the employer’s decision to discharge.¹⁴ As is plain from this stringent two-part test, it is very difficult for an employee to prove this exception in court. However, Pennsylvania courts have held that the discharge of an at-will employee violated public policy when the employee was discharged for serving on a jury¹⁵, for refusing to take a polygraph test¹⁶, for refusing to participate in an allegedly illegal price-fixing scheme¹⁷, for reporting motor vehicle code violations¹⁸, and for filing a workers’ compensation claim¹⁹.

Despite finding exceptions in the above cases, Pennsylvania courts have explained that public policy exceptions to the employment-at-will doctrine generally must be articulated in legislation, administrative regulation, or judicial decision.²⁰ It should be noted, however, that in most cases raising a public policy claim the courts generally do not find that one exists.

The Whistleblower Law
Pennsylvania, like most states, has a whistleblower law which provides protection to employees who report their employer’s wrongdoing and, as such, provides a statutory exception to the at-will employment doctrine. Generally, the whistleblower law provides that no employer may discharge, threaten, or otherwise take retaliatory action against an employee because the employee, or a person acting on behalf of the employee, made a good faith report or was about to report, orally or in writing, to the employer or appropriate authority, an instance of wrongdoing or waste.²¹ The law also provides that no employer may discharge, threaten or otherwise retaliate against an employee who is requested by an appropriate authority to participate in an investigation, hearing or inquiry held by an appropriate authority or any court action.²²

An example of a violation of the whistleblower law is as follows:

An employee who works on the shop floor believes that the machine he is entrusted to work with everyday is unsafe and not up to OSHA (Occupational Safety and Hazard Administration) standards. The employee then reports what he believes to be a violation to OSHA officials. His employer finds out of his reporting to that agency and subsequently fires him on this basis. This is a violation of the whistleblower law because the employee, in good faith, sought out an appropriate outside agency for what he or she believed to be a violation of the law. It should be noted that it is irrelevant whether there actually was a violation. Therefore, because it is in violation of the whistleblower law to fire on these grounds, the employer may not legally terminate under the general at-will doctrine.

Conclusion
Generally, if Pennsylvania employers make clear at the outset that their employment relationships are at-will (see Topic 5), the courts in this State will be reluctant to find contrary to that assertion. Even if this is not stated up front, employers should feel comforted in the strong presumption in Pennsylvania towards finding employment relationships within the at-will context. However, it is important for business leaders to understand the exceptions to the general rule of at-will employment, in order to best manage the employees under them.

¹ Darlington v. General Electric, 350 Pa. Super. 183, 189 (1986).

² Paul v. Lankenau Hospital, 524 Pa. 90 (1990).

³ Shick v. Shirey, 552 Pa. 590 (1998).

⁴ Rapagnani v. Judas Co., 1999 Pa. Super. 203 (1999).

⁵ Moyer v. Heilveil, 159 Pa. Super. 610 (1946).

⁶ DiBonaventura v. Consolidated Rail Corp., 372 Pa. Super. 420 (1988).

⁷ Darlington v. General Electric, 350 Pa. Super. 183 (1986).

⁸ Gorwara v. AEL Indust., 784 F. Supp. 239 (E.D. Pa. 1992).

⁹ Cashdollar v. Mercy Hospital, 406 Pa. Super. 606 (1991).

¹⁰ News Printing Co. v. Roundy, 409 Pa. Super. 64 (1991).

¹¹ Bravman v. Bassett Furniture Industries, 552 F.2d 90 (3d Cir. 1977).

¹² Pa. Stat. Ann. tit. 43 §952.

¹³ Clay v. Advanced Computer Applications, Inc., 522 Pa. 86, 89-90 (1989).

¹⁴ Betts v. Stroehman Bros., 355 Pa. Super. 195 (1986).

¹⁵ Reuther v. Fowler & Williams, Inc., 255 Pa. Super. 28 (1978).

¹⁶ Kroen v. Bedway Security Agency, Inc., 430 Pa. Super. 83 (1993).

¹⁷ McNulty v. Borden, 474 F. Supp. 1111 (E.D. Pa. 1979).

¹⁸ Shaw v. Russell Trucking Lines, Inc., 542 F. Supp. 776 (W.D. Pa. 1982).

¹⁹ Shick v. Shirey, 552 Pa. 590 (1998).

²⁰ Jacques v. Akzo Int’l Salt, Inc., 422 Pa Super. 419, 429 (1993).

²¹ Pa. Stat. Ann. tit. 43, §1423(a).

²² Id. at §1423(b).

Topic 5: Protecting Your Business With Employment Agreements ›