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Major changes in store for Tennessee wrongful discharge law

Last month, Tennessee Governor Bill Haslam signed into law legislation (Public Chapter 995) that will significantly amend the Tennessee Human Rights Act (“THRA”), the Tennessee Public Protection Act (“TPPA”), and the Tennessee Disability Act (“TDA”) in a manner favorable to employers.  This article provides an overview of the major changes in store for wrongful termination claims as a result of this new law.

Damages caps set

Previously, damages under the TPPA, THRA, and TDA (all of which create causes of action for wrongful discharge) weren’t capped.  But under the new legislation, a cap is imposed under all three statutes on compensatory damages that an aggrieved employee may recover for future pecuniary (monetary) losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses.  These caps, which are tiered based on the business’ number of employees, range from $25,000 (for employers with 8-15 employees) to $300,000 (for employers with more than 500 employees).  The caps don’t apply to backpay, interest on backpay, front pay or equitable relief.

Individual liability eliminated

Previously, individual supervisors could be held personally liable for violating the THRA (which is Tennessee’s version of Title VII of the Civil Rights Act of 1964).  However, under the new law, individual employees and other agents of businesses will be immune from liability under the THRA for unlawful discriminatory acts of an employer.  Therefore, a plaintiff who feels that she has been the victim of unlawful discrimination may only sue her employer and not her supervisor or other alleged perpetrator.  These changes bring Tennessee state law in line with  federal law on this issue, as supervisors may not be held individually liable under federal anti-discrimination laws.

Changes to whistleblower law

The bill makes two other major changes to the TPPA, also known as the “Whistleblower Statute.”  First and foremost, the bill eliminates the separate common law cause of action for retaliatory discharge, a cause of action that has been in existence for approximately thirty (30) years.  Although these two causes of action overlap in many respects, this development is significant because it is generally easier for a plaintiff to prevail in a common law retaliatory discharge action.  In particular, the TPPA requires an employee to prove that his or her protected activity served as the “sole reason” for termination; whereas, under the common law cause of action, an employee need only prove that the protected activity served as a “substantial factor” for the termination.  Through the years, employers have found it much easier to obtain a summary judgment dismissal of a TPPA claim because they must only show that some other reason played a role in the termination decision.

Therefore, a plaintiff will need to satisfy the following elements to prevail on a claim for retaliatory discharge (other than retaliation claims that are specifically actionable under other statutes, such as the THRA, the Americans with Disabilities Act, and other discrimination statutes):  1)  The plaintiff was an employee; 2) The plaintiff was terminated (demotions aren’t actionable); 3) the plaintiff either (a) blew the whistle on illegal activity in furtherance of a clear public policy; or (b) refused to participate in illegal activity; and 4) this action or inaction was the sole cause for the plaintiff’s termination.  A prevailing plaintiff may be entitled to reasonable attorney’s fees under the TPPA in addition to traditional damages.

One even more employer-friendly proposed change to the TPPA didn’t make it into law.  Prior versions of the bill stated that an employee must “blow the whistle” by reporting illegal activity to someone outside of or other than his employer in order to qualify for protection under the law.  This change would have overridden a line of court cases holding that an employee may pursue a whistleblower claim if he or she reported illegal conduct to someone within the company other than the perpetrator.  However, the provision requiring “external” whistle-blowing was eliminated as part of an amendment.

Interesting twist for small employers

Interestingly, the bill immunizes private employers with fewer than eight employees from liability under the TDA (the law was already the same under the THRA), but it doesn’t do the same for the TPPA.  Therefore, “mom and pop shops” and other private employers with fewer than eight employees continue to be liable under the TPPA.  However, there is a seemingly inadvertent anomaly created by the legislation.  The lowest damages cap ($25,000) applies to employers with 8-15 employees, but the bill contains no damages cap for employers with fewer than eight employees.  The General Assembly may have thought that unnecessary given that employers with fewer than eight employees are immune from liability under the THRA and the TDA.  But such employers aren’t immune from liability under the TPPA.  As a result, employers with fewer than eight employees sued under the TPPA can’t avail themselves of any damages cap—a consequence that seemingly wasn’t intended by the legislature.

Additional changes

The new law specifies that if an employee brings separate lawsuits in state and federal court in which an allegation is made of a violation of the THRA, the TPPA, or the TDA and the lawsuits are “based on a common nucleus of operative facts,” the state court lawsuit should be dismissed.  This is designed to prevent plaintiffs from pursuing parallel lawsuits in two forums—one alleging federal law claims and one alleging similar claims under state law.

Bottom line

This new legislation went into effect on July 1, 2014, and applies to all actions accruing on or after that day.  It is anticipated that this legislation will lead to fewer lawsuits, fewer large verdicts, and lower settlement values.

If you have any questions or concerns regarding these changes in Tennessee law, please contact the author of this article or any member of Butler Snow’s Labor and Employment group.