Working Together

On Tuesday, March 21, 2023, the Connecticut Supreme Court announced a significant new decision concerning lawsuits by employees alleging “wrongful discharge in violation of public policy.” 

Most employers in Connecticut are probably aware that since 1980 even “at will” employees may bring suit and win damages if they can show that they were discharged for a “demonstrably improper reason … derived from some important violation of public policy.”  The case that confirmed that rule was Sheets v Teddy’s Frosted Foods, Inc., and the employee there claimed that he had been fired for demanding that his employer comply with the requirements of the Connecticut Uniform Food, Drug and Cosmetic Act.  The Court held that the at will employee had stated a claim for “wrongful discharge” and was entitled to proceed with the case.

Connecticut employers may also be aware of Connecticut General Statutes Sec. 31-73(b), which generally prohibits employers from charging employees a “sum of money” either for hiring the employee or for continuing their employment.  But what happens if an employer and an employee discuss a business arrangement that is separate from, but related to, the employee’s employment, the employee then rejects the employer’s proposal, and the employee is then fired?  Has the employer violated the public policy underlying the statute?

That was the question before the Connecticut Supreme Court in Tim Dunn v. Northeast Helicopters Flight Services, LLC.  Dunn worked for the company – a helicopter flight training school -- as chief pilot.  He was an employee at will.  He became interested in becoming a FAA examiner, who tests students who seek their pilot licenses after being trained.  As an examiner, he would charge a fee that would be paid to him directly by the student.  The student would also rent a helicopter from the school.  Dunn and the company’s owner agreed that Dunn’s status as an FAA examiner would be good for business at the school.

Dunn had to attend training in Oklahoma to obtain his FAA examiner certification, and he asked the owner of the company for a loan in order to do so.  The owner said he would lend Dunn the money, but Dunn would have to repay it from the examination fees he would receive as an examiner.  Additionally, the owner said that once the loan was repaid, Dunn would have to pay the company half of any examination fees he collected in the future.  Dunn said nothing in response to this proposal, but he paid for the Oklahoma training himself, and when he returned he told the owner that he wanted to keep his FAA examiner position separate from his employment with the company, and he did not want to pay the company half the examination fees he earned.  He was immediately fired.

After the Superior Court granted summary judgment (i.e., judgement without trial) to the company, and the Appellate Court affirmed the dismissal, Dunn appealed to the Connecticut Supreme Court.  In its decision, the Court first notes that the “public policy exception” to the employment at will doctrine is a narrow one, and the court must decide whether a challenged discharge violated public policy as embodied in Sec. 31-73(b).  The Court then interpreted Sec. 31-73(b) by parsing its language in what might be considered excruciating detail.

First the Court held that a “sum of money” need not be directly related to the individual’s employment; that is, the statute does more than forbid an employer from demanding that the employee refund part of the wages they earn.  The money that the employer may not demand as a condition of continued employment may be money from another source, including a separate business arrangement between the parties.

Next, the Court considered whether the statute requires that the employer and employee have a mutual understanding that the sum of money must be paid in order for the employee to remain employed.   The Court held that the understanding need not be mutual; if the employer understands that the employee’s payment is necessary to continue employment, the statute applies.  Similarly, the “representation or … understanding” prohibited by the statute need not be express; it may be implicit.  As the Court stated:  “Such unilateral understandings or implicit representations may be evidenced when, as here, an employee was discharged immediately after, and allegedly in connection with, his refusal to comply with a demand or request for a sum of money.”

The Court acknowledged that its interpretation of Sec. 31-73(b) might discourage “the pursuit of entrepreneurial affairs between an employer and an employee outside of the employer’s primary business pursuits.”  But the court expressed the belief that such entrepreneurial endeavors should still be possible, so long as employers do not use continued employment to coerce employees into fee sharing or other wage sharing arrangements.  Moreover, the Court noted, the legislature is free to amend the statute if it disagrees with the Court’s interpretation.

Two Justices of the Court dissented, expressing their view that employers and employees are free to negotiate concerning changes to the terms of employment, and if those negotiations do not result in agreement, an at-will employee may be discharged.

As a result of the Court’s decision, Mr. Dunn will, unless the case is settled, get his day in court to attempt to prove that he was discharged because he refused to pay a sum of money that the employer understood was necessary in order for him to remain employed.

For Connecticut employers, here are a few words to the wise:

• Don’t demand money from employees as a condition of becoming or remaining employed.
• If you are considering any kind of business engagement with an employee – like a side deal for the payment of fees from another endeavor – put the proposed terms in writing and make it clear that the employee’s employment will not be affected by their decision whether or not to agree to those terms.
• If you have an employee who has income or potential income from some other source that you think ought to be shared with you, do not act impulsively!  Consult counsel before either attempting to require the employee to share the income, or taking any action against the employee for refusing to do so.