Hold the Whistle: The Status of the Contract Employee Without a Contract

Posted on 05-12-2014 by
Tags: Trending News & Topics , Wage & Hour , Employment Law , trending news

Recently, the Michigan Supreme Court reversed the court of appeals, holding that the failure to renew the contract for a fixed term employee satisfies the Michigan's Whistleblowers' Protection Act requirement of an adverse employment action. The case involved an employee who had an employment contract for a fixed term with the water district. The Court noted that although there had been a total breakdown in the working relationship, the district allowed the employee to finish out the contract. It was undisputed that the employee did not suffer any adverse consequences during his employment. The breakdown of the relationship leading to the non-renewal was highlighted in the court of appeal's decision. 

According to the article Hold the Whistle: The Status of the Contract Employee Without a Contract via the LexisNexis® Legal Newsroom | Labor & Employment Law Blog, the Court held that the statute by its express terms is limited to current employees. There is no language in the statute that affords protection to prospective employees. Likewise, there is no protection for a contract employee who an employer refuses to hire for a new term. The Court noted that in this case, the employee only alleged that the district declined to renew his contract and did not allege that any adverse employment action was taken against him during the term of the contract.

The Court noted that the language of the statute differs from the state and federal civil rights act which covers a failure to recruit or to hire. As a result, case law applying the anti-discrimination statutes to a contract renewal offers no insight as to how it would be viewed under the whistleblowers' act. The Court stressed that it was necessary to state what its holding did not say. The statute protects employees working under fixed-term contracts from prohibited employer action taken with respect to service under the contract. The opinion has no impact on at-will employees. While an at-will employee has no expectation of continued employment, the employment continues indefinitely unless action is taken by the employer, and thus an employee need not re-apply for a job. A current at-will employee "stands squarely within the WPA's protection."  The Court added that the decision is not based on whether a person can maintain an expectation of future employment but merely on whether a person falls with the statute's protection. While at-will employees do, contract employees seeking a new term of employment do not.

The lesson for employers seems pretty clear. When confronted with a whistleblowing employee whose employment is covered by a fixed term contract, an employer should not take any action or say anything that would support a claim of retaliatory motive prohibited by the statute. A failure to renew without action taken during the contract term cannot be the basis of a claim under the statute. The holding provides a new twist to the saying that revenge is a dish best served cold.

For more information about Wage & Hour regulations and compliance, and how to avoid the crush of class actions and investigations, register now for a complimentary webinar scheduled Wednesday, May 21, at 2 p.m. This webinar is sponsored by LexisNexis and is a CLE-accredited webinar, with 1.5 CLE credits are available.

This article is courtesy of the LexisNexis® Legal Newsroom | Labor and Employment Law Blog.

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