Individual May Bring Wrongful Termination Action for Violation of Public Policy

In the case of Yau v. Santa Margarita Ford, Inc., a mechanic brought suit for his wrongful termination after he reported that his employer was submitting false warranty repair claims to Ford Motor Company. Nos. G048013, G048343 (Cal.App.4th August 26, 2014).

Facts of the Case

Eddie Yau was employed at Santa Margarita Ford for 17 years, starting as a mechanic and becoming a service manager, until he was terminated in February, 2009. Yau alleged that his supervisor was the mastermind behind the submission of the false warranty repair claims to Ford Motor Co. and that other dealership employees were involved in the fraud. Yau inadvertently became involved in the fraudulent activities when his supervisor directed Yau to sign certain warranty claims as the supervisor.

Yau reported the suspicious activities to the management at the dealership. However, Yau himself was accused of committing the fraud himself and was terminated. Yau brought a wrongful termination suit against Santa Margarita Ford based on the premise that his termination violated the public policy provisions of the laws intended to prevent theft and fraud. In addition to the claims of wrongful termination, Yau also included a claim for intentional infliction of emotional distress based on the fact that the dealership called the police to the scene when they terminated Yau. The lower court dismissed his case entirely, without leave to refile, and entered judgments in favor of the defendants.

The Court of Appeal reversed the determination of the lower court, finding that Yau had pled his claim of wrongful termination properly. The appellate court based its decision on the fact that Yau did sufficiently plead violations of laws intended to protect against criminal conspiracy, retaliation against an employee who refuses to participate in a criminal conspiracy, fraud, and other laws. However, the appellate court did affirm the lower court’s dismissal of Yau’s claim for intentional infliction of emotional distress.

Legal Arguments

The dealership’s legal argument was based on an assertion that the protections against wrongful termination based on the public interest required a broader set of impacted interests beyond that of the employer that terminated the employee, as determined in American Computer Corp. v. Superior Court, 213 Cal.App.3d 664, 261 Cal. Rptr. 796 (1989). Counsel for Yau argued that the public policy at issue in his case satisfied the elements of the analysis, involving the prevention of theft, pursuant to Penal Code sections 484 and 487, and the prevention of fraud, pursuant to Civil Code sections 1572 and 1709. The defendants countered that the only interests that were harmed due to the alleged wrongful actions were Santa Margarita Ford and Ford Motor Co., which was not sufficient to demonstrate a public interest, relying on the previously cited American Computer decision.

Appellate Court Decision

The appellate court in Yau determined that the dealership’s arguments were not persuasive and held that the American Computer decision was factually distinguishable from the facts of the present case. American Computer involved the theft of the employer’s property through embezzlement, while the fraudulent activity that Yau reported harmed Ford Motor Co., which was a third party in the eyes of the court. The court also determined that there was a greater public interest in maintaining a workplace that was not rife with criminal activities.

In reaching its decision, the appellate court interpreted the holding of Casella v. SouthWest Dealer Services, Inc., 157 Cal.App.4th 1127 (2007). This case considered whether the alleged violation of a public interest was sufficient to find that there was a wrongful termination based on protection of a public policy. The court determined that the analysis must look at the following factors:

  • Was there a public policy that was founded in constitutional or statutory provisions;
  • Was the policy public in that it benefitted the broader public interests rather than the interest of an individual;
  • Was the policy referenced at the time of the termination of the employee – a person cannot look back and bootstrap alleged violations in order to bring a
  • claim against his or her former employer; and
  • The public policy that is being protected must be substantial and fundamental.

Based on the facts that were presented in Yau, the court did find that Yau met his burden and that the lower court erred in dismissing his wrongful termination claims.

Impact of the Decision

Although it remains to be determined whether or not Yau ultimately will succeed on the merits of his case, this decision does ensure that employees who become aware of wrongful or illegal activities in their workplaces may feel secure in reporting the activities to their supervisors as the public policy protections are more expansive than older interpretations might suggest.

If you have been subjected to retaliatory behavior after reporting corporate or employee wrongdoing that may have been a violation of public policy, contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside, and Los Angeles. Call 714-937-2020.