Sarah Borse v. Piece Goods Shop, Inc

Plaintiff Sarah Borse brought suit against her former employer, Piece Goods Shop, Inc. ("the Shop"), in the district court for the Eastern District of Pennsylvania. She claimed that, by dismissing her when she refused to submit to urinalysis screening and personal property searches (conducted by her employer at the workplace pursuant to its drug and alcohol policy), the Shop violated a public policy that precludes employers from engaging in activities that violate their employees' rights to privacy and to freedom from unreasonable searches. Pursuant to Federal Rule of Civil Procedure 12(b)(6), the district court dismissed her complaint for failure to state a claim on which relief could be granted. This appeal requires us to decide whether an at-will employee who is discharged for refusing to consent to urinalysis screening for drug use and to searches of her personal property states a claim for wrongful discharge under Pennsylvania law.

Because we predict that, under certain circumstances, discharging a private-sector, at-will employee for refusal to consent to drug testing and to personal property searches may violate the public policy embodied in the Pennsylvania cases recognizing a cause of action for tortious invasion of privacy, and because the allegations of Borse's complaint are not sufficient for us to determine whether the facts of this case support such a claim, we will vacate the district court's order and remand with directions to grant leave to amend.

Because of the procedural posture of this case, we begin with a summary of the allegations of the complaint. Borse was employed as a sales clerk by the Piece Goods Shop for almost fifteen years. In January 1990, the Shop adopted a drug and alcohol policy which required its employees to sign a form giving their consent to urinalysis screening for drug use and to searches of their personal property located on the Shop's premises.

Borse refused to sign the consent form. On more than one occasion, she asserted that the drug and alcohol policy violated her right to privacy and her right to be free from unreasonable searches and seizures as guaranteed by the United States Constitution. The Shop continued to insist that she sign the form and threatened to discharge her unless she did. On February 9, 1990, the Shop terminated Borse's employment.

The complaint alleges that Borse was discharged in retaliation for her refusal to sign the consent form and for protesting the Shop's drug and alcohol policy. It asserts that her discharge violated a public policy, embodied in the First and Fourth Amendments to the United States Constitution, which precludes employers from engaging in activities that violate their employees' rights to privacy and to freedom from unreasonable searches of their persons and property. Plaintiff seeks compensatory damages for emotional distress, injury to reputation, loss of earnings, and diminished earning capacity. She also alleges that the discharge was willful and malicious and, accordingly, seeks punitive damages.

II. OVERVIEW OF THE PUBLIC POLICY EXCEPTION TO THE

The district court's subject-matter jurisdiction was based on diversity of citizenship pursuant to 28 U.S.C. § 1332. The jurisdiction of this court is founded upon 28 U.S.C. § 1291.

Federal courts sitting in diversity must apply the substantive law of the state whose laws govern the action. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938). Our review of the district court's prediction and application of Pennsylvania law is plenary. Smith v. Calgon Carbon Corp., 917 F.2d 1338, 1345 (3d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1597, 113 L.Ed.2d 660 (1991). Because the Pennsylvania Supreme Court has not addressed the question whether discharging an at-will employee who refuses to consent to urinalysis and to searches of his or her personal property located on the employer's premises violates public policy, we must predict how that court would resolve the issue should it be called upon to do so. Smith, 917 F.2d at 1341; Robertson v. Allied Signal, Inc., 914 F.2d 360, 364 (3d Cir.1990). Although decisions by Pennsylvania's intermediate appellate courts are not conclusive in predicting how the state's highest court would decide an issue, they suggest how that court might decide and may constitute presumptive evidence of state law in appropriate circumstances. McGowan v. University of Scranton, 759 F.2d 287, 291 (3d Cir.1985).

B. Recognition of the Exception by the Pennsylvania Supreme Court

Ordinarily, Pennsylvania law does not provide a common-law cause of action for the wrongful discharge of an at-will employee. Rather, an employer "may discharge an employee with or without cause, at pleasure, unless restrained by some contract." Henry v. Pittsburgh & Lake Erie Railroad Co., 139 Pa. 289, 21 A. 157, 157 (1891) (quoted in Smith, 917 F.2d at 1341).

In Geary v. United States Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974), however, the Pennsylvania Supreme Court recognized the possibility that an action for wrongful discharge might lie when the firing of an at-will employee violates public policy. Geary, a salesperson, complained to his immediate superiors about the safety of his employer's product. After being told to "follow directions," Geary took his complaints to the vice-president in charge of the product. As a result, the company withdrew the product from the market, but discharged Geary.

Geary argued that an exception to the at-will doctrine was warranted in his case because his dismissal was contrary to public policy. The Pennsylvania Supreme Court disagreed, relying upon two factors to decide that Geary's case did not merit an exception. First, the court observed that Geary was not responsible for monitoring product safety and that he did not possess expertise in that area. 319 A.2d at 178-79. Second, the court noted that Geary had violated the internal chain of command by pressing his concerns before the vice-president. Id. at 179-80.

Summarizing its decision, the court stated:

It may be granted that there are areas of an employee's life in which his employer has no legitimate interest. An intrusion into one of these areas by virtue of the employer's power of discharge might plausibly give rise to a cause of action, particularly where some recognized facet of public policy is threatened.... [However, w]e hold only that where the complaint itself discloses a plausible and legitimate reason for terminating an at-will employment relationship and no clear mandate of public policy is violated thereby, an employee at will has no right of action against his employer for wrongful discharge.

Id. at 180. Courts construing Pennsylvania law have interpreted this language as implicitly recognizing that a cause of action for wrongful discharge exists in appropriate circumstances, even though the court refused to uphold such an action on the facts in Geary. See, for example, Woodson v. AMF Leisureland Centers, Inc., 842 F.2d 699 (3d Cir.1988) (upholding cause of action). See also Field v. Philadelphia Electric Co., 388 Pa.Super. 400, 565 A.2d 1170 (1989) (same); Hunter v. Port Authority of Allegheny County, 277 Pa.Super. 4, 419 A.2d 631 (1980) (same); Reuther v. Fowler & Williams, Inc., 255 Pa.Super. 28, 386 A.2d 119 (1978) (same).

The Pennsylvania Supreme Court did not revisit the validity of the public policy exception to the employment-at-will doctrine until fifteen years after Geary. In Clay v. Advanced Computer Applications, Inc., 522 Pa. 86, 559 A.2d 917 (1989), a married couple employed by the same company alleged that they were fired because the wife rejected the sexual advances of a company manager. The court held that their claims were barred because they had failed to seek recourse under the Pennsylvania Human Relations Act, which provides a statutory remedy for wrongful discharges based upon sexual harassment. The court did not deny that it had recognized a public policy exception to the employment-at-will doctrine in Geary, but it did stress the narrowness of that exception. The court stated:

[A]s a general rule, there is no common law cause of action against an employer for termination of an at-will employment relationship.... Exceptions to this rule have been recognized only in the most limited of circumstances, where discharges of at-will employees would threaten clear mandates of public policy.... Nevertheless, inasmuch as appellees failed to pursue their exclusive statutory remedy for sexual harassment and discrimination in the workplace, they are precluded from relief.

One year later, the Pennsylvania Supreme Court returned to the issue again. In Paul v. Lankenau Hospital, 524 Pa. 90, 569 A.2d 346 (1990), a doctor alleged that a hospital had forced him to resign because he removed five refrigerators, which he claimed that he was authorized to take. He argued that because he had permission to remove the refrigerators, the hospital was estopped from discharging him for taking them. The court held that the doctrine of equitable estoppel is not an exception to the employment-at-will doctrine. Id. 569 A.2d at 348. The court also appeared to question the validity of the public policy exception, but it did not expressly inter it. Regarding Geary, the court stated:

The majority in a 4-3 decision held that while some exceptions to the at-will employment doctrine might exist, especially in public policy areas, "this case does not require us to define in comprehensive fashion the perimeters of this privilege, and we decline to do so." ... The Court specifically answered in the negative to the central question of "whether the time has come to impose judicial restraints on an employer's power of discharge."

Id. at 348 (citations and footnote omitted). The Pennsylvania Supreme Court has not addressed the public policy exception since Paul.

C. Application of the Exception by the Pennsylvania Superior Court

The Pennsylvania Superior Court first upheld a wrongful discharge cause of action based on the public policy exception in Reuther v. Fowler & Williams, Inc., 255 Pa.Super. 28, 386 A.2d 119 (1978). Reuther alleged that he was discharged for missing work for a week in order to serve jury duty. The court first observed that "[t]he jury system and jury service are of the highest importance to our legal process." 386 A.2d at 120. As evidence of the strong public policy encouraging jury service, the court then cited the Pennsylvania constitution's guarantee of the right to trial by jury, a Pennsylvania statute providing that summonses for jury service shall be deemed summonses of the court, another Pennsylvania statute providing that persons who fail to appear for jury duty when summoned may be fined, and the United States Supreme Court's identification of trial by jury as "fundamental to the American scheme of justice." Duncan v. Louisiana, 391 U.S. 145, 149, 88 S.Ct. 1444, 1447, 20 L.Ed.2d 491 (1968). The court thus concluded that "the necessity of having citizens freely available for jury service is just the sort of 'recognized facet of public policy' alluded to by our Supreme Court in Geary. " 386 A.2d at 121. Accordingly, the court held that Reuther had stated a cause of action.

The Superior Court also upheld a cause of action for wrongful discharge in Hunter v. Port Authority of Allegheny County, 277 Pa.Super. 4, 419 A.2d 631 (1980). Hunter alleged that the Port Authority had denied his application for employment as a bus driver because of a thirteen-year old assault conviction for which he had since been pardoned. The court noted that the federal courts had held that banning a person convicted of past misconduct from public employment violates federal law unless the ban is rationally related to a legitimate governmental objective. The court also observed that the Pennsylvania legislature had recently enacted a statute limiting an employer's reliance upon criminal records when making employment decisions. The court then turned to Pennsylvania Supreme Court decisions interpreting Article I, section 1 of the Pennsylvania constitution2 as prohibiting the government from interfering with the "right to engage in any of the common occupations of life" without a reasonable relationship to a legitimate governmental objective. 419 A.2d at 635. In reliance upon those decisions and " 'the deeply ingrained public policy of this State ... to avoid unwarranted stigmatization of and unreasonable restrictions upon former offenders,' " id. at 636 n. 5 (quoting Secretary of Revenue v. John's Vending Corp., 453 Pa. 488, 309 A.2d 358, 362 (1973)), the court held that Hunter had stated a cause of action under Article I, section 1 of the Pennsylvania Constitution.

Field v. Philadelphia Electric Co., 388 Pa.Super. 400, 565 A.2d 1170 (1989), is the most recent Superior Court decision upholding a wrongful discharge cause of action based on the public policy violation. Plaintiffs, a married couple employed by companies that provided services to the Philadelphia Electric Company ("PECO"), alleged that they were discharged because the husband had notified the Nuclear Regulatory Commission that PECO had violated the Commission's regulations. The court held that the alleged discharge contravened public policy because federal law required Field to report the violations, nothing in the complaint indicated that he had bypassed the internal chain of command, Field was an expert in the area, and the public potentially was endangered by the violations. Specifically, the court reasoned:

Since a statutory duty to act is present, since discharge was based on performance of that statutory duty, and since performance of that duty directly and clearly protects public safety, we believe a cause of action for wrongful discharge exists in this case.

565 A.2d at 1180.

The Superior Court's first statement of general principles for determining whether a cause of action for wrongful discharge exists (in contrast to the case-by-case application of Geary ) came in a decision in which it rejected the plaintiff's claim. In Yaindl v. Ingersoll-Rand Co., 281 Pa.Super. 560, 422 A.2d 611 (1980), the court explained that the employer's interest in running its business as it sees fit must sometimes yield to the employee's interest in making a living and to the public's interest in ensuring that the employer does not act abusively. 422 A.2d at 617. The court then analogized the wrongful discharge action to an action for intentional interference with the performance of a contract and reasoned that in determining whether a discharge is wrongful, it should consider the same factors that courts consider in assessing whether an intentional interference with the performance of a contract is improper. Id. at 618.3 Specifically, the court stated that the "employer's interest in running its business, its motive in discharging [the employee] and its manner of effecting the discharge, and any social interests or public policies that may be implicated in the discharge" must be "balanc[ed] against [the employee's] interest in making a living." Id. at 620.

Yaindl appeared to expand the public policy exception dramatically. When an employer arbitrarily discharges an employee, the employee's interest in earning a living will usually outweigh the employer's interest. Therefore, because Yaindl requires the court to balance the employee's interest in earning a living against the employee's interest, it could be read as establishing a just cause requirement for discharging an at-will employee. See Comment, The Role of Federal Courts in Changing State Law: The Employment at Will Doctrine in Pennsylvania, 133 U Pa L Rev 227, 251 (1984) (reading Yaindl in this manner).

The Yaindl test proved short-lived, however; the court reformulated it only four years later in Cisco v. United Parcel Services, Inc., 328 Pa.Super. 300, 476 A.2d 1340 (1984). See Rinehimer v. Luzerne County Community College, 372 Pa.Super. 480, 539 A.2d 1298, 1301 (1988) (Cisco "redefined the Yaindl balancing test"). Rather than balance the individual employee's right to earn a living against the individual employer's interests, Cisco restored the focus on public policy. It stated:

First, we must discern whether any public policy is threatened [by the discharge of an at-will employee]; second, even when an important public policy is involved, an employer may discharge an employee if he has separate, plausible and legitimate reasons for doing so.

476 A.2d at 1343.

In addition to retaining the focus on public policy, subsequent decisions by the Superior Court have stressed that the public policy allegedly violated by the discharge must be clearly stated. For example, in Turner v. Letterkenny Federal Credit Union, 351 Pa.Super. 51, 505 A.2d 259 (1985), the court explained that Geary

held that where no clear mandate of public policy is violated by a termination, an employee has no right to action against his employer. The [Geary ] court made clear that an essential element in permitting a cause of action for wrongful discharge was a finding of a clearly defined mandate of public policy.

505 A.2d at 260 (emphasis added). The court further stated that Geary and subsequent cases

demonstrate a pattern of favoring the employer's interest in running its business.... [T]o overcome the employer's interest in running a business, the employee must show a violation of a clearly mandated public policy which "strikes at the heart of a citizen's social right, duties, and responsibilities."

Id. at 261 (emphasis added) (quoting Novosel v. Nationwide Ins. Co., 721 F.2d 894, 899 (3d Cir.1983)). See also Rinehimer, 539 A.2d at 1302 (Turner noted that employee had to show a violation of a clearly mandated public policy) (emphasis in original); id. at 1304 (specificity and clarity necessary to sustain wrongful discharge action); McGonagle v. Union Fidelity Corp., 383 Pa.Super. 223, 556 A.2d 878, 884 (1989), appeal denied, 525 Pa. 584, 575 A.2d 115 (1990) ("[W]here the public policy claimed to be violated is not 'clear,' a cause of action for wrongful discharge has not been recognized."); 556 A.2d at 885 ("[U]nless an employee identifies a 'specific' expression of public policy violated by his discharge, it will not be labelled as wrongful and within the sphere of public policy.").

In sum, the Superior Court continues to interpret Pennsylvania law as recognizing the public policy exception, but its most recent decisions emphasize that the exception is a narrow one. See Burkholder v. Hutchison, 403 Pa.Super. 498, 589 A.2d 721, 723 (1991) (characterizing exception as "extremely narrow"); Yetter v. Ward Trucking Corp., 401 Pa.Super. 467, 585 A.2d 1022, 1025 (1991) (exception recognized in "only the most limited of circumstances") (quoting Paul, 569 A.2d at 346). The public policy violated must be clear and specific before the court will uphold the cause of action.

D. Third Circuit Opinions Applying the Public Policy

In a series of cases decided after Geary, but before Clay and Paul, this court read Geary as recognizing a public policy exception to the employment-at-will doctrine. Woodson v. AMF Leisureland Centers, Inc., 842 F.2d 699 (3d Cir.1988); Novosel v. Nationwide Ins. Co., 721 F.2d 894 (3d Cir.1983); Bruffett v. Warner Communications, Inc., 692 F.2d 910 (3d Cir.1982); Perks v. Firestone Tire & Rubber Co., 611 F.2d 1363 (3d Cir.1979). In our most recent case on the issue, Smith v. Calgon Carbon Corp., 917 F.2d 1338 (3d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1597, 113 L.Ed.2d 660 (1991), we acknowledged that Clay and Paul cast some doubt on interpreting Geary as recognizing the public policy exception, but we concluded that

in the absence of a clear statement by the Pennsylvania Supreme Court to the contrary or other persuasive evidence of a change in Pennsylvania law, we are bound by the holdings of previous panels of this court.

Id. at 1343 (emphasis in original).

As we have noted above, the Pennsylvania Supreme Court has not addressed the public policy exception since its decision in Paul. We are aware of no "persuasive evidence of a change in Pennsylvania law." As we have also explained, the Pennsylvania Superior Court continues to interpret Pennsylvania law as recognizing the public policy exception. Accordingly, we continue to interpret Geary as recognizing a cause of action for wrongful discharge when dismissal of an at-will employee violates a clear mandate of public policy.

In order to evaluate Borse's claim, we must attempt to "discern whether any public policy is threatened" by her discharge. Cisco, 476 A.2d at 1343.4 As evidence of a public policy that precludes employers from discharging employees who refuse to consent to the practices at issue, Borse primarily relies upon the First and Fourth Amendments to the United States Constitution and the right to privacy included in the Pennsylvania Constitution. As will be seen, we reject her reliance on these constitutional provisions, concluding instead that, to the extent that her discharge implicates public policy, the source of that policy lies in Pennsylvania common law.

Although the Supreme Court has made clear that the Constitution proscribes only the government from violating the individual's right to privacy, and to freedom from unreasonable searches, Skinner v. Railway Labor Executives Association, 489 U.S. 602, 614, 109 S.Ct. 1402, 1411, 103 L.Ed.2d 639 (1989) (Fourth Amendment does not apply to searches by private party), Borse argues that our decision in Novosel v. Nationwide Insurance Co., 721 F.2d 894 (3d Cir.1983), permits us to consider the public policies embodied in the First and Fourth Amendments despite the lack of state action. In Novosel, defendant Nationwide instructed its employees to participate in its effort to lobby the Pennsylvania House of Representatives, which was then considering an insurance reform act. Specifically, Nationwide directed its employees to clip, copy, and obtain signatures on coupons bearing the insignia of the Pennsylvania Committee for No-Fault Reform. Novosel alleged that he was discharged for refusing to participate in the lobbying effort and for privately stating opposition to his employer's political stand.

In response to Novosel's claim, Nationwide argued that a wrongful discharge action depends upon the violation of a statutorily recognized public policy. We disagreed. We observed that "both Reuther and Hunter allowed causes of action to be implied directly from the Pennsylvania Constitution." Id. at 898. We also pointed out that "Hunter further noted that Pennsylvania courts allow direct causes of action under the Constitution regardless of legislative action or inaction." Id. (citation omitted). After noting that the public policy exception applies only in the absence of statutory remedies, we reasoned:

Given that there are no statutory remedies available in the present case and taking into consideration the importance of the political and associational freedoms of the federal and state Constitutions, the absence of a statutory declaration of public policy would appear to be no bar to the existence of a cause of action. Accordingly, a cognizable expression of public policy may be derived in this case from either the First Amendment of the United States Constitution or Article I, Section 7 of the Pennsylvania Constitution.5

Id. at 899.

In deciding not to extend Novosel to Borse's claim, the district court remarked upon the Pennsylvania Superior Court's reluctance to rely upon constitutional provisions as sources of public policy. According to the district court, the Superior Court has never upheld such an action. The district court also noted that, although the Superior Court "has formulated a list of appropriate sources of public policy," its list does not include constitutional provisions. Moreover, the district court observed that in Booth v. McDonnell Douglas Truck Services, Inc., 401 Pa.Super. 234, 585 A.2d 24, appeal denied, 528 Pa. 620, 597 A.2d 1150 (1991), the Superior Court refused to uphold a wrongful discharge action that relied upon a constitutional provision as a source of public policy because, among other reasons, plaintiff made no allegation of state action. The district court reasoned that the Superior Court's requirement of state action in Booth "is no less applicable to [Borse's] cause of action under policies manifested in the First and Fourth Amendments of the United States Constitution." [Mem Op at 39]

To the extent that the district court's opinion suggests that a constitutional provision may never serve as a source of public policy in Pennsylvania wrongful discharge actions, we disagree. Although the Superior Court has never upheld a wrongful discharge cause of action that depended upon a public policy stated solely in a constitutional provision, two of its three cases upholding wrongful discharge causes of action relied upon constitutional provisions as evidence of public policy. See Hunter, 419 A.2d at 635 (relying upon Pennsylvania constitution); Reuther, 386 A.2d at 121 (looking to United States Constitution). Moreover, unlike the district court, we do not read an intent to proscribe reliance on constitutional provisions from the "list of appropriate sources of public policy" quoted in Cisco.6 As the district court observed, that list does not explicitly include constitutional provisions. Yet nothing in Cisco indicates that the Superior Court intended it to