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Maryland Courts Continue to Dilute Meaning of “Just Cause” Employment

By Christopher R. Ryon, Principal, Kahn, Smith & Collins, P.A.

By David Maher, Associate, Kahn, Smith & Collins, P.A.

A hallmark of workplace protections is the employee’s ability to challenge disciplinary action under a “just cause” standard. In the unionized private sector context, this has given rise to the seven tests of just cause. The seven tests of just cause have been developed and applied through decades of arbitral law, and are generally applied by labor arbitrators widely across different collective bargaining agreements and workplaces.

In Maryland, many classes of employees outside of unionized private-sector workplace are not “at will” employees and can challenge disciplinary actions under a just cause standard. These rights arise under individual employment contracts, public sector collective bargaining agreements, and state or local laws, and contain different rights of review. Maryland courts have created a multiplicity of approaches to the just cause framework, and afford factfinders lesser deference than is found in the traditional just cause case. Maryland courts have crafted no less than three different standards and rights to review, depending on the source of an employee’s rights. What constitutes just cause is not consistent in Maryland law, nor are arbitrators or other factfinders similarly empowered to craft a remedy as a private sector labor arbitrator.

I. Unionized private sector arbitration – the seven tests of just cause

The inclusion of a “just cause” provision is standard in collective bargaining agreements. Discipline cases under private sector collective bargaining agreements and submitted to arbitration typically apply the seven tests of just cause.[1] This approach allows an arbitrator a wide degree of latitude in assessing two principal questions: whether just cause exists for the employee’s discipline, and if not, what shall be the remedy.

Arbitrators may consider a wide variety of factors in assessing just cause, going beyond the factual basis of whether an employee committed a disciplinable act and whether the employer’s motivation in disciplining the employee was objectively reasonable.[2] An arbitrator will consider the employer’s investigation, past practices regarding similar behavior, and the fairness of the employer’s conduct and the imposed discipline. Arbitrators are typically not constrained by an employer’s specific rules of conduct if an arbitrator finds that just cause does not exist when following those rules.[3] Further, arbitrators are empowered and given broad discretion to impose alternate disciplinary actions, or to modify or entirely rescind the discipline and order back pay.[4]

Further, arbitral awards are afforded great finality. As made clear in the Steelworkers Trilogy handed down by the Supreme Court in 1960, arbitration awards are difficult to overturn, and great deference is given to an arbitrator’s interpretation of the facts and interpretation of the contract.[5] Generally, an arbitrator’s decision can only be overturned if it exceeded the arbitrator’s authority. However, the arbitrator receives a great deal of deference in defining the scope and authority the arbitrator has under the contract. This means that efforts to overturn or vacate arbitral awards face a very steep battle.[6]

II. Private litigation of an individual’s contract – the Conte decision and objective reasonableness

Under Maryland law, an employment contract may convert employment at-will to just-cause if the contract either specifies a length of term for the contract, or the contract specifies that employment may be terminated only for cause.[7] An employee who is terminated under such a contract, if the contract itself does not contain an arbitration clause, may challenge the termination as a breach of contract action in circuit court.

A split has developed between different states regarding how a just cause termination case is assessed by the trial court. In several states, which follow the Toussaint[8] rule, the finder of fact is charged with determining whether just cause exists for the employer to terminate the employee.[9] In such a case, “whether “cause” for termination actually existed was for the fact-finder to decide.”[10] This standard places the jury in the same role as a labor arbitrator in unionized context applying just cause: the jury determines whether just cause exists.

The Maryland Court of Appeals took the alternative route in the leading case on the issue, Towson University v. Conte.[11] In Conte, a just cause employee in a non-unionized context, Conte, working for Towson University, was terminated for cause. Conte challenged the decision in the Circuit Court for Baltimore County. At trial, the jury was instructed to find for Conte if it found that “one or more of the [causes in Dr. Conte’s] contract existed for the plaintiff’s termination.”[12] The jury found for Conte, and Towson University appealed.

The Court of Appeals ruled that the jury instruction was incorrect, and misapplied the factfinder’s role in assessing just cause in an employment contract. The Conte Court held that, in the context of employment contracts, courts could not serve as “super personnel officers” and second guess the reasoning of the employer.[13] Instead, the Court ruled, the role of the factfinder in this context was to determine “whether the employer acted in objective good faith and in accordance with a reasonable employer under similar circumstances when he decided there was just cause to terminate the employee,” and that the factfinder must focus on “whether an employer’s termination was based upon any arbitrary, capricious, or illegal reason, or on facts not reasonably believed to be true by the employer.”[14]

The Conte court made clear that despite the jury’s role, “the fact-finding prerogative remains with the employer.”[15] Maryland law treats the court, in this sense, as almost having an appellate role, extending deference to the employer’s decision similar to that given to factfinders on appellate review. Maryland specifically disclaims the role the arbitrator takes in the private sector unionized workplace as well as the role the trial court takes in states which follow the Toussaint rule.

III. Administrative Hearings – Limited remedial powers

Most employees of the executive branch of Maryland State government may challenge disciplinary actions taken against them using a three-step grievance process, which concludes with a hearing before the Maryland Office of Administrative Hearings (“OAH”).[16] Some, such as public school faculty and employees, are entitled to administrative hearings held by a hearing officer.[17] Such employees are, effectively, just cause employees, not at will employees.[18] However, this process also differs from the traditional private sector arbitration for a number of reasons.

Principally, an Administrative Law Judge of OAH is limited, in disciplinary cases, to either upholding discipline imposed for a certain offense or overturning that specific discipline.[19] The ALJ may modify the discipline in certain cases, such as where the ALJ found that the offense committed is lesser than the offense alleged, but generally must defer to the employer as to the correct discipline to impose.[20] An ALJ may also not consider serious procedural failings which prejudice the employee, in certain circumstances, because such regulations sometimes do not “bestow procedural benefits upon [employees] of questionable competency.”[21]

Administrative hearings have a further difference from traditional arbitration – the decision is an administrative decision, and therefore can be appealed to the circuit court, and later into the appellate courts.[22] Such cases are reviewed for errors of law de novo, and the hearing officer or ALJ only receives deference regarding their findings of fact.[23] Further, such decisions awarding reinstatement may be stayed during the pendency of the appeal.[24]

IV. Public sector union arbitration – the rise of the public policy exception

Some public sector employees in Maryland may challenge disciplinary action against them through arbitration. However, such arbitration differs from private-sector arbitration in that it lacks the finality and deference generally afforded to an arbitrator’s decision. In Maryland, an arbitrator’s decision may be set aside if the decision itself violates “public policy.” Maryland courts have interpreted public policy broadly in this context, limiting the power of the arbitrator and exercising significant appellate review over their decisions. The courts have done this by expanding the scope of public policy to consider the totality of Maryland statutes affecting public sector employees.

In two recent decisions regarding public sector arbitrations, the courts have set aside arbitration decisions ordering reinstatement of a terminated employee as exceeding the authority of the arbitrator.  In Prince George’s County Police Civ. Emps. Ass’n v. Prince George’s County,[25] an arbitrator ordered reinstatement of a terminated employee, largely based on the employer’s failure to advise the employee of his Weingarten rights. Weingarten rights, while normally based on a private sector employee’s rights under the National Labor Relations Act, were in this case granted in the collective bargaining agreement. In this case, the Court found that the Prince George’s County Council was not permitted to extend Weingarten rights under its charter and state law, and therefore the county had no authority to enter into a contract extending those rights. Thus, the Court reasoned, the arbitrator was exceeding his authority in basing the arbitral award on rights the County could not extend and the employee did not have. The Court therefore vacated the arbitral decision. Under this decision, parties could appeal, and courts can review, an arbitrator’s decision for whether it is legally correct – and that review is without deference to the arbitrator’s decision.

            The Court of Special Appeals recently broadened this review power of public sector arbitration in Amalgamated Transit Union, Local 1300 v. Md. Transit Admin.[26]In this case, an arbitrator ordered the reinstatement of an MTA bus driver terminated for workplace violence, after getting into a fight with a retired bus driver. The arbitrator found that the violence had occurred, but that the employee’s action did not merit termination because of certain mitigating circumstances. The employer petitioned to vacate the arbitration, arguing that workplace violence was grounds for automatic termination under state law. The Court of Special Appeals agreed and vacated the arbitrator’s decision. The Court held that a state statute which made workplace violence potentially grounds for automatic termination made the arbitrator’s decision to reinstate an employee, who the arbitrator found to have committed workplace violence, a violation of public policy. The Court here goes beyond the principal, articulated in Prince George’s County, that a court can review an arbitral award de novo for legal error, and states that an arbitrator may have no discretion over the correct discipline. Similar to the OAH cases discussed previously, public sector arbitrators receive no deference regarding interpretations of the law or contract, and must defer to the disciplinary decisions of the employer.

Other state courts have invoked the public policy exception to vacate arbitral awards for public sector union employees.[27] Some state courts, however, are more hesitant to expand the public policy exception as a basis for vacating a public sector arbitral award.[28]

Under Maryland law, the rights of review and scope of the review for just cause employees differs dramatically based upon the employee’s employer, and the source of the employee’s just cause protections. “Just cause” does not mean the same thing across the State and across workplaces, and care must be taken to understand the scope of an employee’s due process rights given the disparate treatment afforded them.

[1] See Elkouri & Elkouri, How Arbitration Works at Ch. 15.3 (8th ed. 2016).

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] Id.

[7] Spacesaver Sys., Inc. v. Adam, 440 Md. 1, 13, 98 A.3d 264 (2013).

[8] Toussaint v. Blue Cross & Blue Shield of Mich., 292 N.W.2d 880, 895 (Mich. 1980).

[9] Kern v. Palmer College of Chiropractic, 757 N.W.2d 651 (Iowa 2008).

[10] Id. at 659 (citing Toussaint v. Blue Cross & Blue Shield of Mich., 292 N.W.2d 880, 895 (Mich. 1980)).

[11] 384 Md. 68, 862 A.2d 941 (2004)

[12] Id. at 75.

[13] Id. at 76 (quoting Elliott v. Board of Trustees, 104 Md. App. 93, 655 A.2d 46 (1995)).

[14] Id. at 85.

[15] Id.

[16] See Md. Code State Personnel and Pensions (“SPP”) § 11-110 (most executive branch employees); Transportation § 2-103.4 (Maryland Department of Transportation employees); Education § 13-201 (higher ed employees).

[17] ED § 6-202.

[18] SPP § 11-305.

[19] SPP § 11-110(d)(1).

[20] Id.; Dept. of Pub. Safety & Corr. Servs. v. Neal, 160 Md. App. 496, 517, 864 A.2d 287 (2004).

[21] See Bd. of Educ. of Anne Arundel County v. Barbano, 45 Md. App. 27, 40, 411 A.2d 124 (1980).

[22] Md. Code State Government (“SG”) § 10-222.

[23] Md. Bd. of Pub. Works v. K. Hovnanian’s Four Seasons at Kent Island, LLC, 425 Md. 482, 514 n.15, 42 A.3d 40 (2012).

[24] SG § 10-222(e).

[25] 447 Md. 180, 135 A.3d 347 (2016)

[26] 244 Md. App. 1, 222 A.3d 183 (2019)

[27] See, e.g., Town of Groton v. Un. Steelworkers of America, 757 A.2d 501 (Conn. 2000); Ill. State Police v. Fraternal Order of Police Troopers Lodge No. 41, 751 N.E.2d 1261 (Ill. App. Ct. 2001).

[28] See N.J. Turnpike Authority v. Local 196, I.F.P.T.E., 920 A.2d 88 (N.J. 2007).

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