Alaska Employment Law

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Court addresses NLRA pre-emption, good faith claims, misrepresentation, and probationary status

The Supreme Court issued an important employment opinion this past Friday.  The Court unanimously (per Bryner, with Eastaugh not participating) upheld some, but not all summary judgment rulings by Anchorage Superior Court Judge Mark Rindner. 

Plaintiff Willard claimed that Khotol Services Corporation had breached his employment contract, breached the covenant of good faith and fair dealing, and misrepresented the terms of his employment contract. 

The Supreme Court held as follows:

NLRA Pre-emption: The NLRA pre-empts Willard’s original claim that Khotol fired him because of his efforts to unionize the workplace, but doesn’t pre-empt his later-amended claims that Khotol fired him for other reasons, such as anger at his safety-related whistle blowing. 

More significantly, the Court held that the trial court could admit Khotol’s internal documents showing animus at Willard’s union-organizing efforts if Willard’s purpose in introducing such was solely to impeach Khotol’s claim that it fired Willard for insubordination; Willard could not introduce such evidence to show that Khotol’s motive was anti-union bias (a claim reserved for NLRB jurisdiction).

Covenant of good faith/fair dealing: The covenant protects employees who suffer retaliation for asking for safety equipment (ala Reed v. Mun. of Anchorage).  Here, Willard produced sufficient evidence that he requested such equipment in good faith, and that Khotol responded in bad faith, both subjectively and objectively.   As to objective bad faith, the Court held that a supervisor’s statement that he had investigated Willard’s internal complaint was impeached by evidence that he had relied on second-hand information about an earlier complaint.  The Court emphasized that the internal investigation approved in Holland v. Unocal Oil Co. relied on two investigators who had “interview[ed] all of the parties involved.”   If the Willard Court has ruled that an employer may terminate an at-will employee only if it directly interviewed all material witnesses, the Court has established a test with teeth.    

There’s no ambiguity about two other rulings on aspects of implied covenant claims.  In footnote 19, the Court stated as follows:

Willard also asserts that Khotol breached the implied covenant when it failed to treat like employees alike regarding alleged health and safety rule violations and that this disparate treatment was objectively unfair.  . . . Because we hold below that Willard was a probationary employee, we conclude that the implied covenant did not entitle Willard to be treated equally [to non-probationary employees] by Khotol when it sanctioned him for violating health and safety rules.  For the same reason, we conclude that Khotol’s alleged failure to follow its own policies regarding non-probationary employees did not result in a breach of the implied covenant.

The general rule, recently adopted by the Ninth Circuit in Beck v. UFCW Local 99, 2007 WL 3197089 (9th Cir. Nov. 1, 2007), is that “whether two employees are similarly situated is ordinarily a question of fact.”  In Willard v. Khotol, the Court implicitly acknowledged what must be a common exception to that rule - that true probationary and non-probationary employees are dissimilar vis-a-vis disciplinary measures, as a matter of law.  I say “true probationary,” because an employer may forfeit the typical (presumed?) at-will status of probationary employees if it adopts rules that set objective standards for discontinuing their employment.  See, e.g., Univ. of Alaska v. Tovsen, 835 P.2d 445 (Alaska 1992); Stanfill v. City of Fairbanks, 659 P.2d 579 (Alaska 1983).

Probationary status: Given an at-will disclaimer in the employment application and related language in the (38-page) employee manual, Willard was a probationary employee, as a matter of law, despite a) the absence of any post-hiring re-affirmation of Willard’s probationary status; b) Khotol’s failure to provide Willard with two evaluations required during the probationary period (bec. Willard was fired before he completed the period, and the manual didn’t specify when during the period the employer would issue the evaluations); and c) Khotol’s issuance (inadvertently?) to Willard of a benefit (holiday pay) apparently reserved for non-probationary employees (no explanation from the Supreme Court on why this mistake did not matter, but see May v. State, CFEC, discussed recently in AEL).

Misrepresentation: Willard’s misrepresentation claim failed because he didn’t produce evidence of justifiable reliance on Khotol’s (mis)representations.  The Court doesn’t mention whether Willard’s claims were statutory (AS 23.10.015) or common law, but a clue lies in the fact that Willard claimed that the misrepresentations arose from the employee manual (received at a pre-hire meeting 10 days after he accepted the employment offer), not from hiring promises.  AS 23.10.015 applies only to certain promises (kind/character of work, and amount/character of pay) made at the point of hiring (so as to “induce an individual to change from one place to another in this state, or bring an individual into this state”). 

The Court remanded for further proceedings on Willard’s implied covenant claim.

Comment:  Willard may have made several missteps in the prosecution of his case, including failing to decide at the outset how to handle the union angle.  He first filed an unfair labor practice with the NLRB, then withdrew the charge, but then filed a state-law claim alleging retaliation for union activities.  The pre-emption dispute could easily have been avoided.

But Willard’s case got a good boost with the discovery of Khotol’s draft response to the NLRB charge, which included an incriminating statement of Khotol’s anti-union animus.  That document apparently surfaced only after the withdrawal of the ulp, and maybe only in response to an order to compel. 

If the draft response represents the truth of the matter (that Khotol fired Willard at least partly for anti-union animus), could Khotol now successfully defend against the non-pre-empted state law claims by asserting (truthfully) that it acted with anti-union animus?  Willard could presumably avoid summary judgment on that defense by relying on Khotol’s formal statement to the Board that it had no such animus. 

Willard, too, will face charges of inconsistency when he gets to the jury.  He initially claimed (via the ulp) that anti-union animus played a substantial role in his firing, and now claims that other factors played substantial roles.  Both explanations may be true, of course, but a jury may end up wondering at the credibility of both parties.

Willard v. Khotol Services Corp., 2007 WL 3317679 (Alaska Nov. 9, 2007).

Andrew Fierro of Anchorage represents Willard.  Timothy Seaver of Seaver & Wagner, Anchorage, represents Khotol.