In California, as in most states, most employment contracts have no terms and may be terminable “at will” at any time, for any cause, with or without any reason, as long as any state or federal law is not violated.

One major exception to this rule is the public policy exception, that is, an employer cannot use the threat of firing to pressure an employee to hide bad behavior, to perform misdeeds or to take any other action in violation of a statute or the common good.

The recent case of Yau v. Santa Margarita Ford, Inc. by the California Court of Appeals review the law of the public policy exception and found that the fired employee actually presented his case and would be able to go to a jury.

Yau v. Santa Margarita Ford -The facts

A dealership’s service manager alleged that he was fired after he reported to the general manager and then to the owner that his boss and his coworkers were running a warranty repair scheme. In addition to the fraudulent nature of the scheme, the service director, and other participants were having the service manager sign papers that were an obvious attempt in setting him up as the “fall guy” in case the manufacturer ever performed a warranty audit.

Despite numerous complaints about the scheme and attempts by the service manager to raise red flags with his managers and to extricate himself, the service manager was eventually terminating for the alleged warranty fraud-the same practice he himself was complaining about of others for months. Also, the termination itself was handled in a most humiliating manner.

Elements of claim

In order to establish a wrongful discharge in violation of public policy, the employee must establish: (1) the relationship of employer/employee; (2) the employment relationship was terminated; (3) the termination was motivated substantially by a public policy motivation; and (4) the discharge caused harm. The Yau court concentrated on the third factor.

Also, under California law, the public policy necessary to support a termination must be: (1) related to a constitutional or a statutory provision; (2) a public interest, as opposed to only an individual concern; (3) expressed at the time of the discharge; and (4) substantial and fundamental.

The Yau service manager’s public policy met all these factors. The service manager asserted that he was fired because he complained to his co-workers and his supervisors about a fraudulent warranty scheme. Such a scheme was in violation of California statutes prohibiting theft and fraud. The policy as announced by statute is certainly a public policy, even though it affects a private business.

If you are fired

Although the economy has improved, a good job can be hard to find. If you believe that you have been terminated unfairly, contact an attorney who specializes in employment law, who can look into the circumstances of your termination and discuss what options may be available.