Texas is an at-will employment state where employees and employers are free to end the employment relationship at any time and almost for any reason.  The Texas Supreme Court has created a single public policy exception to the at-will employment rule –the Sabine Pilot wrongful discharge claim.  Under that judicially created claim, an employee has a cause of action against an employer if the employee is terminated solely for refusing to perform an illegal act. 

In a recent Texas Supreme Court opinion, the Court considered whether punitive damages were available in a public policy termination case, and if so, what was the proper standard for such an award.  The case arose after a former employee, Martinez, sued his employer after he was terminated for allegedly refusing to drive a company truck that was not in compliance with all Department of Transportation regulations.  After a jury trial, he was awarded $250,000 in punitive damages (as well as other modest damages) against his former employer –Safeshred.

On appeal, Safeshred argued that punitive damages were not recoverable in a Sabine Pilot claim.  Safeshred’s theory was that the judicially created cause of action sounded more in contract law than tort law and therefore punitive damages should not be recoverable.  Safeshred also argued that even if punitive damages were recoverable, Martinez’s facts were insufficient to establish the requisite culpability for the recovery of such damages.

The Supreme Court of Texas concluded that a Sabine Pilot claims is more akin to a tort claim than a contract claim and therefore punitive damages were recoverable.  In evaluating the standard necessary to recover punitive damages, the Court announced that a Sabine Pilot plaintiff may recover punitive damages where there is evidence that the employer: 1) circulates false or malicious rumors about the employee before or after the discharge; 2) actively interferes with the employee’s ability to find other employment; 3) harasses the employee in connection with a wrongful firing; or 4) knows the retaliatory firing is unlawful and does it anyway.  The illegal directive alone, however, is insufficient to warrant a punitive damage award.  Similarly, negative remarks about the employee in internal personnel records of the defendant employer are insufficient without a showing that such information was publicly communicated to other companies in the industry.

In evaluating Martinez’s evidence against this new standard, the Court held that there was insufficient evidence to support the punitive damage award and reversed that portion of the award.

You can download a complete copy of Safeshred, Inc. v. Martinez here.