The Minnesota Court of Appeals recently held that employees are not protected from retaliation by their employers for seeking unemployment benefits. Although an uncommon situation, employees may be considered “unemployed” under Minnesota law, even where they are technically working for an employer. The Court of Appeals decision indicates that employers that terminate employees in retaliation for seeking unemployment benefits are not subject to liability for wrongful discharge in violation of public policy (commonly known as a Phipps cause of action under Phipps v. Clark Oil & Refining Corp., 408 N.W.2d 569 (Minn. 1987)). The Court of Appeals decision demonstrates a narrow interpretation of the circumstances under which a claim for wrongful discharge in violation of public policy may exist. It also reveals that courts are reluctant to create additional exceptions to the doctrine of at-will employment (allowing an employment relationship to be terminated for any reason or no reason at all).

The Minnesota Unemployment Insurance Law
Under the Minnesota Unemployment Insurance Law (“UI Law”) (Minn. Stat. §§ 268.001 et seq.), individuals who are unemployed through no fault of their own may qualify for temporary partial wage replacement benefits to assist them to become reemployed. Minn. Stat. § 268.03. An applicant may qualify as being “unemployed”: (1) in any week that the applicant performs less than 32 hours of service in . . . covered employment . . . and (2) any earnings with respect to that week are less than the applicant’s weekly unemployment benefit amount.” Minn. Stat. § 268.035, subd. 26.

Therefore, even if an individual is technically employed, the individual may be able to apply for unemployment insurance benefits. The UI Law does not expressly prohibit employers from retaliating against employees who apply for benefits.

In Dukowitz v. Hannon Sec. Servs., Civ. No. A11-1481, 2012 Minn. App. LEXIS 63 (Minn.Ct. App. July 9, 2012), the appellant was employed as a security officer. Id. at *2. She worked varying shifts at two different facilities, and eventually accepted a seasonal position in order to obtain daytime hours. Id. Eventually appellant learned that her seasonal position would be ending, and her hours were reduced. See id. When appellant informed her employer that she would have to apply for unemployment insurance benefits, prior to her employment ending, her direct supervisor turned to the other supervisor and stated, “should we term her” meaning terminate her employment. Id. at *3. Soon thereafter, appellant applied for unemployment insurance benefits, and about three months later she was terminated. Id.

Appellant filed a lawsuit against her former employer alleging unlawful termination in retaliation for her application for unemployment benefits. Dukowitz, at *4. The district court granted summary judgment in favor of the employer and appellant filed an appeal. Id.

Wrongful Discharge in Violation of Public Policy
The Court of Appeals affirmed that an employee seeking unemployment benefits cannot bring a cause of action for wrongful discharge in violation of public policy. Dukowitz, at *9-10. Under Phipps v. Clark Oil & Refining Corp., 408 N.W.2d 569 (Minn. 1987), the Minnesota Supreme Court recognized, as a narrow exception to the general at-will employment rule, that an employer may be liable for wrongful discharge if it terminates an employment relationship because the employee refuses to participate in an activity that the employee, in good faith, believes violates the law. Id. at 571. In this case, the Court of Appeals noted that appellant did not refuse to violate the law and therefore it declined to recognize a new cause of action. See Dukowitz, at *7.

Appellant argued that a case interpreting Phipps indicates that her claim is viable even if the conduct is beyond the scope of Phipps. Id. at *7. The Court of Appeals disagreed, holding that the Minnesota Supreme Court has not yet determined whether to recognize a cause of action for wrongful discharge in violation of public policy beyond the situation in which an employee is fired for refusing to violate the law. Dukowitz, at *7 (citing Nelson v. Productive Alternatives, Inc., 715 N.W.2d 452, 454 (Minn. 2006)).

Therefore, the Phipps claim of wrongful discharge in violation of public policy appears to be narrowly defined by Minnesota courts to circumstances where the employee refuses to participate in an activity that the employee, in good faith, believes violates the law. In rejecting appellant’s argument to expand the Phipps cause of action to cover any termination that might be inconsistent with public policy, the Dukowitz case noted that “[the Minnesota Supreme Court] has generally been reluctant to undertake the task of determining public policy since this role is usually better performed by the legislature.” Dukowitz, at *8 (quoting Nelson, at 457, n.5).

No Implied Private Right of Action for Retaliatory Discharge
The appellant in Dukowitz also argued that the UI Law implies a private right of action against employers for unlawful retaliation. Dukowitz, at *10. The Court of Appeals concluded, however, that a private right of action cannot be implied from the statutory text of the UI Law. Id. at *12.
First, the Court of Appeals differentiated between retaliation against an employee for applying for benefits, and employer obstruction or interference with an individual’s application for benefits. The UI Law is silent as to the former actions of retaliation, but the UI Law specifically prohibits the latter actions of obstruction or interference. See Dukowitz, at *12-13; Minn. Stat. § 268.192, subd. 1. The UI Law also creates an express, criminal remedy for conduct that is actually proscribed by the statute. Minn. Stat. § 268.192, subd. 1. Therefore, the Court of Appeals held that legislature did not intend to imply a private cause of action for unlawful retaliation under the UI Law because it had expressly provided other remedies for proscribed conduct.

Second, the Court of Appeals held that there is no implied private cause of action for unlawful retaliation because the purpose of the UI Law “is not to prevent employees from becoming unemployed, but rather to provide them with interim benefits when they do.” Dukowitz, at *14.

Lessons for Employers and Employees
The Dukowitz case reveals several important lessons for employers and employees.

First, employers should be careful not to interfere with or obstruct an individual’s application for unemployment benefits because it is expressly prohibited by the UI Law. Even if an employee is still working for the company, the employee has the right to seek unemployment benefits.
Second, although the Court of Appeals rejected appellant’s claim of wrongful retaliation for seeking unemployment benefits, employers should be careful not to retaliate against employees in other ways that may be unlawful. For example, if an individual alleges in good faith that the employer has violated the UI Law in any fashion, the employer should not take any adverse action against such individual for making the complaint. Under this scenario, the employee conceivably would have a claim under Phipps as well as the Minnesota Whistleblower Act.

Third, employers and employees should note that the Dukowitz case indicates the great reluctance of Minnesota courts to carve out additional exceptions to the doctrine of at-will employment. The doctrine of at-will employment generally provides that when an individual has been hired for an indefinite period of time, and the parties have not contractually agreed to limit the circumstances under which the employee can be terminated, either the employer or employee can terminate the employment relationship at any time, for any reason or no reason at all.

If your company is facing an unemployment insurance claim for benefits by a current or former employee, or you would like to learn more about how to avoid claims of wrongful discharge in violation of public policy, please contact any of the Trepanier MacGillis Battina P.A. employment law attorneys.
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About the Author:
Trepanier MacGillis Battina P.A. is a Minnesota employment law firm located in Minneapolis, Minnesota. Their employment law attorneys can be reached at 612.455.0500.