by Wilton H. Strickland

Montana law strikes me as rather friendly to plaintiffs, certainly friendlier than Florida law. For example, Montana plaintiffs generally have 3 years to serve a complaint on a defendant after filing the complaint in court (Florida plaintiffs have only 4 months). Montana plaintiffs can sue a landowner for negligence even if the plaintiffs were trespassing when they suffered injury (in Florida a trespasser must show intentional or malicious harm). Montana plaintiffs can demand advance payment of medical expenses and lost wages from a liability insurer — even before a judgment against the insured — if the liability for those damages is “reasonably clear.” And Montana plaintiffs can sue a former employer for wrongful discharge even without proving discrimination or harassment.

On this last score Montana differs from perhaps all other jurisdictions in the Union, where employment is regarded as a voluntary (or “at will”) relationship that may be terminated for virtually any reason. In 1987 Montana staked out its unique position by adopting the Wrongful Discharge From Employment Act, Mont. Code §§ 39-2-901 et seq. The Act requires a showing of “good cause” to justify terminating an employee in most circumstances, and while this seems quite generous, the Act has some caveats and curveballs that a former employee should take into account before pursuing a claim.

Certain Claims And Employees Are Exempt From The Act

The Act does not apply to claims that are governed by more specific procedures under state or federal law. The most common example is a claim for unlawful discrimination (e.g., based on race, national origin, sex, age, disability, creed, religion, political belief, color, marital status, etc.). Mont. Code § 39-2-912(1)(a).

The Act also does not apply to “an employee covered by a written collective bargaining agreement or a written contract of employment for a specific term.” Mont. Code § 39-2-912(1)(b).

The Employee Must Have Completed His Or Her Probationary Period

A new hire who is still in the probationary period and has not become a full-fledged employee cannot bring a claim under the Act, given that “the employment may be terminated at the will of either the employer or the employee on notice to the other for any reason or for no reason.” Mont. Code § 39-2-904(1)(b), (2). This language is sweeping and allows termination for any motive, no matter how sinister, even if the employee was discharged for refusing to violate public policy. See Blehm v. St. John’s Lutheran Hosp., 2010 MT 258, ¶¶ 15-21, 358 Mont. 300, 246 P.3d 1024; see also Ritchie v. Town Of Ennis, No. DV 29-01-60, 2003 Mont. Dist. LEXIS 2102 (5th Dist. Ct. Jan. 7, 2003).

Note that the length of a probationary period is subject to change. Years ago I got into an argument with a plaintiff’s attorney who insisted that my client (the employer) improperly had extended the period from 3 months to 6 months without obtaining new contractual consideration, thereby making the plaintiff’s termination after 3 months trigger a claim under the Act. I responded that the Act does not prohibit a unilateral extension; that the new period of 6 months matched the default period under the Act (at that time); and that a Montana trial court already had agreed with my view in Int’l Ass’n Of Firefighters Local No. 8 v. City Of Great Falls, No. ADV-97-349(b), 2000 Mont. Dist. LEXIS 1598 (8th Dist. Ct. Dec. 30, 2000). Needless to say, the attorney refused to let go of his damages demand, causing many more weeks of haggling. In 2021 the Montana Legislature amended the Act to set a new default probationary period of 12 months and to allow the period to be extended while still in effect, up to a maximum of 18 months. Mont. Code § 39-2-910(1), (2). I sure could have used that amendment sooner.

The Employee Must Exhaust Any Internal Appeals Before Filing A Lawsuit

The Act is quite clear on this point and speaks for itself: “If an employer maintains written internal procedures . . . under which an employee may appeal a discharge within the organizational structure of the employer, the employee shall first exhaust those procedures prior to filing an action under this part. The employee’s failure to initiate or exhaust available internal procedures is a defense to an action brought under this part.” Mont. Code § 39-2-911(2).

As a practical matter, the employee should make sure to get written and documented proof that the internal appeal indeed has run its course, to avoid any potential dispute down the line. The rule of thumb still holds that if it’s not in writing, it didn’t happen.

The Employee Must Show That His Or Her Termination Qualifies As Wrongful

According to the Act, a termination is wrongful (and thus actionable) in only three circumstances:

• it was in retaliation for a refusal to violate public policy or for reporting a violation of public policy;

• it was not for “good cause”; or

• the employer materially violated a provision of its own written personnel policy prior to the termination, and the violation deprived the employee of a fair and reasonable opportunity to remain in a position of employment.

Mont. Code § 39-2-904(1).

The ground that is cited most often (by employers and employees) is “good cause,” which means “reasonable job-related grounds for dismissal based on . . . the employee’s failure to satisfactorily perform job duties; . . . the employee’s disruption of the employer’s operation; . . . the employee’s material or repeated violation of an express provision of the employer’s written policies; or . . . other legitimate business reasons determined by the employer while exercising the employer’s reasonable business judgment.” Mont. Code § 39-2-903(5).

As one might imagine, a large amount of debate emerges over whether good cause exists, especially if it concerns “legitimate business reasons.” The Montana Supreme Court once described such a reason as one “that is ‘neither false, whimsical, arbitrary or capricious, and it must have some logical relationship to the needs of the business.’” Johnson v. Costco Wholesale, 2007 MT 43, ¶ 23, 336 Mont. 105, 152 P.3d 727 (citation omitted). For example, if an employer applies its policies in an unequal or disproportionate manner to terminate an employee, the employer’s conduct presents a valid claim for a jury to consider. See Johnson at ¶ 27; see also Williams v. Plum Creek Timber Co., 2011 MT 271, ¶¶ 18, 40-42, 362 Mont. 368, 264 P.3d 1090.

It comes as no surprise that Montana employers who have decided to terminate an employee often build up a file of incidents and disciplinary responses that can be tapped if the need ever arises to show “good cause.”

The Employer Cannot Change Its Stated Reasons For Terminating An Employee After The Fact

A few years ago I was helping represent an employee who challenged the employer’s stated reasons for terminating her, such reasons appearing in a formal discharge letter (also known as a “service letter”). I prepared a motion in limine arguing that the employer should not be allowed to offer new or different reasons for termination during trial, as already had become evident during discovery because the employer’s original grounds were highly questionable. The authority I cited was directly on point and unambiguous, holding that “in a wrongful discharge action the only reason for discharge the district court could consider was the reason set forth in the discharge letter.” Galbreath v. Golden Sunlight Mines, 270 Mont. 19, 890 P.2d 382, 385 (1995) (citing Swanson v. St. John’s Lutheran Hosp., 182 Mont. 414, 597 P.2d 702 (1979)).

Predictably, the employer opposed my motion, specifically by arguing that Galbreath is no longer controlling because it was superseded by a 1999 amendment to a different statute (Mont. Code § 39-2-801), which states that an employer is entitled to present “a full defense” after giving the reasons for discharge. According to the employer, this means that it is not bound by a discharge letter and may offer any new reasons ex post facto to justify the employee’s termination. I tore this argument to shreds in my reply, as follows:

Defendant’s interpretation runs smack into a large amount of case law that re-affirms Galbreath well after 1999 and repeats that novel grounds not appearing in the discharge letter are inadmissible to justify a termination after the fact; at most, an employer may cite new evidence to support the original grounds, but those grounds may not be expanded upon. See McConkey v. Flathead Elec. Coop., 2005 MT 334, ¶ 29, 330 Mont. 48, 125 P.3d 1121; Winslow v. Mont. Rail Link, No. CDV-1997-552, 2003 Mont. Dist. LEXIS 2082, at **1, **2 (1st Dist. Ct. May 14, 2003); Teichrow v. Pub. Employee Ret. Admin., No. BDV-2006-474, 2007 Mont. Dist. LEXIS 186, at *7-*9 (1st Dist. Ct. June 5, 2007); Schwartz v. Metro Aviation, Inc., No. CV 08-32-M-JCL, 2009 U.S. Dist. LEXIS 9448, at *13, *14 (D. Mont. Feb. 9, 2009); Barnett v. Holcim, Inc., No. CV 14-9-BU-DWM-JCL, 2015 U.S. Dist. LEXIS 118816, at *12 (D. Mont. Aug 19, 2015); King v. Rec. Equip., Inc., No. CV 16-27-M-DLC, 2016 U.S. Dist. LEXIS 170131, at *3, *4 (D. Mont. Dec. 8, 2016).

The only support that Defendant cites for its argument is an apparent trial court order in Stevenson v. Felco Indus., Inc., 2007 WL 5528566, denying a motion in limine similar to Plaintiff’s. Plaintiff has not been able to obtain a copy of this order. However, even giving Defendant the benefit of the doubt that the court in Stevenson allowed an employer to submit novel grounds for terminating an employee, such an order represents an outlier that cannot overcome the considerable case law in Plaintiff’s favor, including from the Montana Supreme Court.

Plaintiff’s (ample) case law is also more conducive to public policy, for if an employer could simply reinvent its reasons for terminating an employee it would be impossible for an employee ever to prove that the employer lacked “good cause.” Defendant certainly is entitled to mount a full defense of its decision to terminate Plaintiff’s employment. What Defendant may not do is reinvent the reasons for its decision, for the trial in this matter is meant to determine whether the reasons given and acted on at the time were arbitrary.

The case was resolved without a ruling on my motion, but I recently learned that some employers are still attempting to make the dubious argument that they can reinvent their stated reasons for terminating an employee. Just last month the Montana Supreme Court heard oral arguments in the matter of Smith v. Charter Communs., Inc., OP 22-0023, to answer a certified question from the Ninth Circuit Court of Appeals about whether Galbreath is still good law or has been nullified by the 1999 statutory amendment. I do hope the Court stands by Galbreath, for the sake of consistency and sound public policy.

An Employee Who Quits Might Still Be Able To Sue For “Constructive Discharge”

One might think that an employee who quits a job cannot sue for being wrongfully discharged from it, but the Act still supports a claim if the employee can prove what is called “constructive discharge.”

A constructive discharge is “the voluntary termination of employment by an employee because of a situation created by an act or omission of the employer which an objective, reasonable person would find so intolerable that voluntary termination is the only reasonable alternative.” Mont. Code § 39-2-903(1). This is a demanding test, so an employee’s personal feeling that working conditions are intolerable does not cut it. See Finstad v. Montana Power Co., 241 Mont. 10, 27, 28, 785 P.2d 1372, 1382 (1990) (citing Snell v. Montana-Dakota Util. Co., 198 Mont. 56, 65, 643 P.2d 841, 846 (1982)).

For example, an alleged victim of personal insults and verbal harassment who quit her job could not as a matter of law assert constructive discharge. Hanson v. Barthel, No. DV-06-003, 2007 Mont. Dist. LEXIS 462, at *10-*13 (12th Dist. Ct. Nov. 1, 2007). Even allegations of sexual harassment leave an open question of whether the victim’s resignation qualifies as constructive discharge. Davis Pipe & Mach. v. Vezane, No. DV-99-371(A), 2002 Mont. Dist. LEXIS 3414, at **15 (11th Dist. Ct. Jan. 20, 2002).

A stronger case for constructive discharge would be for health reasons, such as in one of my cases where the employee quit her job because she suffered from multiple sclerosis and was placed on a medical leave of absence from work despite persistently trying to get an accommodation from her employer. That type of situation makes quitting objectively reasonable and the only alternative.

The Act Provides The Only Remedy For A Wrongful Discharge From Employment

An employee cannot load up a wrongful-discharge complaint with other theories such as breach of contract, fraud, or infliction of emotional distress, since the Act “provides the exclusive remedy for a wrongful discharge from employment” and “no claim for discharge may arise from tort or express or implied contract.” Mont. Code §§ 39-2-902, -913. The only exceptions would be if the complaint falls into one of the exempt categories (Mont. Code § 39-2-912(1)) or if there are claims that arise from something other than the discharge (e.g., defamation, invasion of privacy, etc.).

Indeed, there is a school of thought that business owners lobbied for the creation of the Act as a way to narrow the possible rights of discharged employees, not to broaden those rights as is often believed upon hearing that a discharge cannot be “at will.” A review of the remedies provided under the Act seems to support this theory.

The Act Provides Limited Remedies Even Upon Proving Wrongful Discharge

A plaintiff who prevails on a wrongful-discharge claim may recover “lost wages and fringe benefits for a period not to exceed 4 years from the date of discharge, together with interest on the lost wages and fringe benefits.” Mont. Code § 39-2-905(1). Yet even this crimped recovery is subject to further limitations, as follows:

• “The employee’s interim earnings, derived from any new kind, nature, or type of work, hire, contractor status, or employment that did not exist at the time of discharge, including amounts the employee could have earned with reasonable diligence from the work, hire, contractor status, or employment, must be deducted from the amount awarded for lost wages.” Mont. Code § 39-2-905(1) (emphasis added). The good news is that “any reasonable amounts expended by the employee in searching for, obtaining, or relocating to new employment” are deducted from those interim earnings. Mont. Code § 39-2-905(1).

• “Following any verdict or award in favor of the discharged employee, the district court shall consider any monetary payments, compensation, or benefits the employee received arising from or related to the discharge, including unemployment compensation or benefits and early retirement pay, and shall deduct those payments, compensation, and benefits from the amount awarded for lost wages before entering judgment.” Mont. Code § 39-2-905(2).

• “The employee may recover punitive damages otherwise allowed by law if it is established by clear and convincing evidence that the employer engaged in actual fraud or actual malice in the discharge of the employee in violation of 39-2-904(1)(a).” This means that punitive damages are available only if a plaintiff proves (overwhelmingly) that there was a retaliation for refusing to violate public policy or for reporting a violation of public policy. This is a narrow right that carries a large burden.

The Statute Of Limitations For A Wrongful-Discharge Claim Is Brief

A wrongful-discharge claim must be filed within only 1 year of the discharge. Mont. Code § 39-2-911(1). This is rather brief in comparison to the limitation periods for other causes of action, though it can be extended for up to 120 days while the employee is pursuing any appeals within the company. Mont. Code § 39-2-911(2).

After filing the wrongful-discharge claim, the plaintiff must serve it on the former employer within only 6 months. Mont. Code § 39-2-911(4). Once again, this is much shorter than the service period for ordinary complaints, which is an entire 3 years per Mont. R. Civ. P. 4(t)(2).

Parties May Request Binding Arbitration, With Financial Incentives

Either the plaintiff or the defendant in a claim for wrongful discharge may request binding arbitration per Mont. Code § 39-2-914. The Act offers financial incentives for this as an alternative to litigation:

• For one, “[a] discharged employee who makes a valid offer to arbitrate that is accepted by the employer and who prevails in such arbitration is entitled to have the arbitrator’s fee and all costs of arbitration paid by the employer.” Mont. Code § 39-2-914(4).

• For another, “[a] party who makes a valid offer to arbitrate that is not accepted by the other party and who prevails in an action under this part is entitled as an element of costs to reasonable attorney fees incurred subsequent to the date of the offer.” Mont. Code § 39-2-915.

The downside to arbitration is that there is no plenary right to appeal, rather a narrow possible “review of the arbitrator’s decision under the provisions of the Uniform Arbitration Act.” Mont. Code § 39-2-914(5).

Conclusions

There is a popular perception that Montana has granted employees broader rights than their brethren enjoy in other jurisdictions, particularly by restricting the grounds for termination and punishing employers who stray beyond those grounds. However, this is a double-edged sword because Montana also restricts the relief that wrongfully-terminated employees can obtain even if they prevail. In this sense the Montana approach parallels worker’s compensation for employment-related injuries, an approach that lightens the burden on the front end but weighs it down on the back end.

I don’t know if Montana’s approach is good or bad, but I hope that my short article helps employers and employees navigate these murky waters a little better.

UPDATE

Wonders never cease. As I mentioned above, the Montana Supreme Court was analyzing a certified question from the Ninth Circuit Court of Appeals concerning whether an employer may alter or expand its reasons for discharging an employee after the fact. I am pleased to report that in May of 2023 the Court adopted the same position I had argued in a different case, namely that the employer cannot do this; at most, the employer may offer new evidence to support the original reasons given for discharge. See Smith v. Charter Communs., 2023 MT 92, 412 Mont. 292, 529 P.3d 871.