Minnesota Supreme Court Kills Employment at Will

On October 11, 2017, the Minnesota Supreme Court issued a decision in Burt v. Rackner, Inc., No. A15-2045 (October 11, 2017), that may have effectively abrogated the long-standing rule of “employment at will” in Minnesota. By creating a claim for retaliation under the Minnesota Fair Labor Standards Act (MFLSA)—a statute which does not contain an express retaliation provision—a 5-2 majority of the court held that other provisions of the MFLSA could be read to permit a restaurant employee who refused to share tips in apparent violation of the law (and who was later discharged) to sue for wrongful discharge under the statute. The court’s majority articulated a new and expansive principle for finding legislative intent to allow a claim based on a statute.

Background

Todd Burt was a bartender at Bunny’s Bar & Grill, where the employer had directed that tips be shared with bussers. The employer told him that “there would be consequences if that did not happen.” Burt refused and was discharged because, his employers informed him, he “was not properly sharing his tips with other staff.” The MFLSA prohibits mandatory tip-pooling or tip-sharing arrangements, although employees may voluntarily and without the involvement of their employers agree to share tips amongst themselves.

After he was discharged, Burt sued claiming that the employer had wrongfully terminated his employment in violation of the MFLSA. He had not shared any tips, so he had not lost any pay. Burt sought damages, however, for the income he lost due to his becoming unemployed when his employer wrongfully terminated his employment. The state district court granted the employer’s motion for judgment on the pleadings, ruling that the MFLSA “does not contemplate an action for wrongful discharge.” The district court reasoned that “if the Legislature had intended for employees [to] be able to sue for wrongful discharge, it would have included that language explicitly in the MFLSA, as it has done in numerous other statutes.” Burt appealed the district court’s decision.

Minnesota Court of Appeals Decision

A three-judge panel of the Minnesota Court of Appeals reversed. In an opinion authored by Judge Rodenberg, the Court of Appeals held that Burt had stated a viable claim upon which relief could be granted. Based on a reading of the MFLSA’s “employer liability” provision, section 177.27, subdivision 7, the court focused on the statute’s inclusion of the term “back pay,” which the court called “an item of damages that typically flows from a wrongful termination.” The Court of Appeals held that where “an employee claims to have been discharged in violation of the MFLSA, resulting in lost wages by reason of the employee’s resulting unemployment, the remedies available for violation of the MFLSA include the ordinary wrongful-discharge money damages.”

The Minnesota Supreme Court’s Decision

Affirming the Court of Appeals, the Minnesota Supreme Court went further: It held that while the MFLSA does not contain an express provision for a “wrongful discharge” claim, its language nevertheless could be read to expressly provide for such a claim. To better understand the court’s analysis, here are the relevant portions of sections of the MFLSA upon which the opinion relied:

Section 177.24, Subdivision 3. Sharing of gratuities

For purposes of this chapter, any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee. No employer may require an employee to contribute or share a gratuity received by the employee with the employer or other employees or to contribute any or all of the gratuity to a fund or pool operated for the benefit of the employer or employees. This section does not prevent an employee from voluntarily sharing gratuities with other employees.

Other sections of the MFLSA authorize the Commissioner of the Minnesota Department of Labor and Industry to commence an administrative proceeding to recover unpaid wages, liquidated damages, and certain costs of the proceeding, and authorize private parties to commence court actions seeking the same types of relief. One such section of the statute, Minn. Stat. section 177.27, subdivision 8, provides, “In addition, in an action under this subdivision the employee may seek damages and other appropriate relief provided by [another section] and otherwise provided by law.”

Based on its reading of these provisions of the MFLSA, the Minnesota Supreme Court majority concluded that the legislature had intended to provide for a claim of wrongful discharge for an employee’s refusal to work in violation of the statute and that the employee could seek a wide range of damages. Agreeing with Burt’s position, and affirming the Court of Appeals, the majority held that “the language of the MFLSA expressly provides a cause of action for an employee who is terminated for failing to share tips.”

The majority rejected the major argument put forward by Rackner, namely, that while the MFLSA prohibits an employer from requiring employees to share tips, it does not provide a remedy for an employee who was fired for refusing to do so. Notably, the Minnesota Supreme Court had already found a common law cause of action for wrongful discharge for refusing to perform an unlawful act in Phipps v. Clark Oil & Refining Corp., 408 N.W.2d 569 (Minn. 1987). Moreover, in 1987, the Minnesota Legislature enacted a whistleblower statute, Minn. Stat. section 181.932. The court found it unnecessary to rely on either of these possible alternatives.

Instead, the majority found that the MFLSA “expressly” provided for a cause of action that is nowhere mentioned in the text of the statute. The Minnesota Supreme Court acknowledged that its long-standing canons of statutory construction require that courts begin their analyses with the words of statutes. The Minnesota Supreme Court also recognized that employment at will is, and remains, the general rule in Minnesota, but that the legislature “can regulate and modify the common-law at-will doctrine and create statutory exceptions,” which it has done previously. The court has found legislative intent to create exceptions to employment at will where a statute does so by either “express wording or necessary implication.”

Responding to a critique in a dissenting opinion authored by Chief Justice Gildea, the majority boldly asserted that it was not relying on “necessary implication” to reach its decision. Instead, it held that the MFLSA “expressly provided” such a cause of action in section 177.27, subdivision 8:

“The MFLSA contains no language prohibiting an employee from suing an employer for wrongful discharge resulting from the employee’s refusal to share tips,” the majority wrote. “To the contrary, Minn. Stat. § 177.27, subd. 8, unambiguously allows an aggrieved employee to sue for any violation of the statute, which creates a broad, private right of action in favor of employees harmed by an employer’s violation of the MFLSA.” (Emphasis in the original.)

The majority found support for its conclusion in other Minnesota statutes, such as the polygraph statute, Minn. Stat. § 181.75, which it held provided a cause of action for wrongful discharge despite a similar absence of express language in the statute. It also found support in another provision of the MFLSA that prohibits displacing full-wage employees with new employees who can be hired for a brief period of time at a lower “training wage.” Taking these disparate threads of the law and weaving them into a new quilt, the court concluded:

“Accordingly, we hold that the MFLSA, by express wording, provides a cause of action for an employee who is terminated for refusing to share tips, because Minn. Stat. § 177.27, subd. 8, offers an aggrieved employee a broad, private cause of action for any violation of the MFLSA and allows the employee to recover any damages or appropriate relief provided by law, including back pay.” (Emphasis in the original.)

A Powerful Dissent

In a dissenting opinion, Chief Justice Gildea, joined by Justice Anderson, wrote that the majority had violated a basic principle of the separation of powers: Legislatures make policy, and courts interpret and apply the law. The legislature, the dissenters wrote, knows how to draft legislation that modifies or abrogates the employment-at-will doctrine—and it had not done so in drafting the MFLSA. In a pointed rejoinder to the majority opinion, the dissenting opinion stated:

“Unconstrained by the plain language of the statutes or by our precedent, the majority supports its desired outcome by concluding that because the MFLSA ‘contains no language prohibiting an employee from suing an employer for wrongful discharge resulting from the employee’s refusal to share tips,’ the statute must permit an employee to sue. This conclusion—looking at whether there is specific language that expresses the Legislature’s intention to retain the common law rather an intention to abrogate the common law—represents a drastic shift in ‘express-wording’ analysis.” (Emphasis in the original.)

Implications for Minnesota Employers

The Minnesota Supreme Court’s decision goes far along the path to an ultimate undermining and eventual elimination of Minnesota’s general rule of employment at will. Employees may find in the MFLSA or other statutes arguable points of law upon which to ground a dispute and refuse to continue to work because an employer is arguably violating the law. Employers may need to choose between discharging an employee who makes such a claim or acceding to the employee’s interpretation of the law. This is not far-fetched, and, indeed, Chief Justice Gildea alluded to this possibility:

“Even more alarmingly,” Justice Gildea wrote, “the majority’s rationale will result in the judicial creation of a cause of action for wrongful discharge for the violation of any MFLSA provision that imposes a requirement on an employer—and indeed, virtually any statutory provision that imposes a requirement on an employer—without the requisite showing of express wording or necessary implication to abrogate Minnesota’s employment-at-will rule. In sum, the majority makes a drastic change to the common-law employment-at-will rule in Minnesota that undermines our precedent and exceeds our authority.” (Footnote omitted.)

Employers in Minnesota should be prepared for a wide variety of disputes with employees asserting claims rooted in their own readings of statutes that pertain to the workplace, even in a tangential way, that can be used as bases to challenge employers’ decisions. In addition, discharging an employee in Minnesota has now become a riskier proposition requiring a more searching analysis of the surrounding circumstances of a proposed discharge. Providing a reliable record will be critical to showing that a discharge is unrelated to a dispute over a particular provision of a statute that even arguably affords protections limiting an employer’s employment-at-will right to discharge an employee for “a good reason, a bad reason, or for no reason at all.”

Bruce Douglas was the lead author of an amicus brief filed in Burt v. Rackner, Inc. on behalf of the Minnesota Management Attorneys Association, which urged the Minnesota Supreme Court to reverse the Court of Appeals and overrule its earlier decision in Phipps v. Clark Oil & Ref. Corp.