Maryland Appellate Court Finds Non-Renewal of Employment Agreement to Constitute Wrongful Termination
In Miller-Phoenix v. Baltimore City Board of School Commissioners, the Maryland Court of Special Appeals held for the first time that an employee may bring a claim for wrongful termination (also known as “wrongful discharge” or “abusive discharge”) when an employer decides to terminate an employment agreement for a specific period where the parties anticipated the reasonable possibility of renewal.
Facts of the Case: Following the expiration of his teaching certificate for failure to submit renewal documentation, a middle school teacher was issued a conditional certificate and given instructions for reinstatement of his full certificate. He was informed that his regular contract was consequently terminated and he needed to sign a provisional contract with a one-year term in order to maintain his employment. The day after signing the provisional contract, he emailed his principal, stating that he intended to submit a workers’ compensation claim for post-traumatic stress disorder. He submitted the claim two months later. Four months after that, in April 2017, the School Board informed the plaintiff his provisional contract would not be renewed and that, as a result, his employment would end on June 30, 2017.
The employee filed a lawsuit alleging, among other claims, that he was wrongfully terminated because the School Board had discharged him in retaliation for filing his workers’ compensation claim. The trial court held that a wrongful termination claim could not be based on the non-renewal of a contract.
The Court’s Decision: Under Maryland law, employment is at will, which means, absent a contract to the contrary, either the employer or the employee may terminate the employment relationship at any time, with or without cause or notice. An exception to the at will rule is when the motivation for the termination “contravenes some clear mandate of public policy.” Courts have held that terminating an employment relationship for filing a workers’ compensation claim is a violation of public policy.
The Board argued that Maryland appellate courts have applied the tort of wrongful termination only to employees at will and contractual employees in the middle of their contractual terms. The Court found, however, that the distinction did not matter. The Court explained that that “society’s interest in deterring conduct that contravenes important public policies is no less important at the end of a contract’s term than during it.” The Court further stated that employees who are at the end of the term of a renewable contract are similarly vulnerable as those employed at will because, in both circumstances, the employee lacks any contractual rights or other protection against the termination of the employment relationship for any reason, or no reason at all.
The Board also argued that terminations caused by the non-renewal of a term employment contract should not be subject to wrongful termination claims because it is the predetermined termination date of the contract, and not any action by the employer, that causes the employment to end. The Court rejected that argument because it did not account for the fact that many term employment contracts are entered with the reasonable possibility or mutual expectation that they will be renewed if the employee adequately performs the job. The Court stated that in those circumstances, it is the employer’s decision not to renew the contract that causes the employment to end. The Court further stated that “[w]hether a termination is accomplished passively (by choosing to forgo renewal of a renewable contract) or actively (by firing an employee), if an employer’s motivation for ending the employment relationship ‘contravenes some clear mandate of public policy’ . . . we can think of no reason why the law should tolerate it.” The Court explained that if it were to adopt the Board’s argument, “employers who engage employees under renewable term contracts would be free to terminate those relationships antithetical to public policy, while employers who engage employees on an at will basis would not.”
Importantly, the Court recognized that not all term employment contracts are entered with the reasonable possibility that they will be renewed. Term contracts may be seasonal, tied to a project of limited duration, designed only for short-term employment or training on a non-continuing basis, or entered into with an expectation that they will not be renewed. Accordingly, the Court held that in order for plaintiffs alleging a claim for wrongful termination by non-renewal to satisfy the element of causation, they “must plead and prove that the contract was subject to a reasonable possibility of renewal.”
What This Means for Employers. It is likely that this case will be appealed, which means that Maryland’s highest state court will weigh in on whether an employee may bring a claim for wrongful termination based on an employer’s decision to not renew a term employment contract. For the time being, however, employers should approach non-renewal decisions with care.