The California Court of Appeal delivered a strong reminder to employers on the value of maintaining an at-will employment relationship with employees. The Court in McGrory v. Applied Signal held that a manager’s uncooperative and allegedly untruthful conduct during an investigation initiated in response to a subordinate’s complaint against the manager was a legitimate reason to terminate an at-will employee. The outcome may well have been different had the employee not been employed on an at-will basis.
John McGrory (McGrory) held a management position at Applied Signal Technology (the Company). In that role, he supervised a number of employees. McGrory provided a verbal warning to Dana Thomas, one of the employees he supervised, and placed her on a Performance Improvement Plan. Thomas responded by lodging a complaint with the Company’s Human Resources department against McGrory, accusing him “of discriminating against her on the basis of gender and sexual orientation . . .” The Company retained an outside investigator – a female attorney – to conduct an investigation. The investigator interviewed McGrory and others and prepared a report to the Company concluding that McGrory did not discriminate against Thomas and that Thomas in fact had work performance problems. However, the investigator found that McGrory had been uncooperative and untruthful during the investigation. Specifically, McGrory had refused to answer questions regarding how he ranked employees who reported to him and about who had complained about Thomas. The investigator also concluded McGrory had violated the Company’s policies by making jokes based on race or sex.
After receiving the investigator’s report, the Company terminated McGrory, citing his violation of Company policies, his misconduct during the investigation and the Company’s concern that McGrory’s conduct had exposed the Company to potential future liability in the form of lawsuits by Thomas or others. McGrory responded to his termination by filing suit against the Company, alleging, among other claims, that he was terminated in violation of public policy for being a male and for participating in a workplace investigation.
He also alleged the Company defamed him when the Company’s Vice President of Human Resources told another employee why McGrory was terminated. The trial court granted the Company’s motion for summary judgment; McGrory appealed.
The Court of Appeal found no support for McGrory’s contention he was terminated for being a male, rejecting his contention that the investigator had an anti-male bias, pointing out that in fact the investigator had concluded that the female employee who complained did have work performance problems.
The Court found that the Company did not defame McGrory when an HR employee allegedly told another employee that McGrory had been terminated for being uncooperative in the investigation, finding a conditional privilege when an employer explains to co-workers why an employee was disciplined and further finding that the statement regarding why he was terminated was made without malice.
At-Will Employment: Termination for any Reason that Is not Illegal
The Court also rejected any contention that California public policy shields “. . . anyone participating in an investigation of discrimination from the possibility of retaliation,” presumably even if the participant is uncooperative and untruthful. The Court instead found that California law “does not shield an employee against termination or lesser discipline for either lying or withholding information during an employer’s internal investigation of a discrimination claim. In other words, public policy does not protect deceptive activity during an internal investigation. Such conduct is a legitimate reason to terminate an at-will employee.”
This conclusion that an employee may be disciplined for failing to cooperate during an investigation was greatly bolstered by the fact that McGrory was an at-will employee and thus could be terminated for any reason not illegal. Had McGrory been subject to termination only for “good cause” the standard may well have been whether the termination was objectively reasonable. The court noted “[McGrory] would like to make this action depend on whether [the Company’s] stated reasons for terminating him were adequately substantiated, in other words, whether [the Company] actually had good cause to terminate him.” The Court rejected this contention and stated: “Since an employer does not require good cause to terminate an at-will employee, in the normal course of events an employer need not either articulate or substantiate its reasons, except to provide an advance refutation for any inference that the true reason was illegal.”
Employers wishing to avoid being drawn into the quagmire of defending termination or discipline of an employee against the nebulous standard of whether the termination or discipline was “reasonable” under a good cause standard would be well-advised to maintain the at-will status of employees through the use of written acknowledgements of at-will status executed by employees and to avoid adoption of any policies that undermine the at-will status.
