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Legal Updates from KLO

Newsflash: Big Changes to the Wrongful Discharge From Employment Act

Posted on April 07, 2021

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By: Lily Crespo Esq.

Quick Takeaway: These changes affect any employer who has employees on contracts for a specified term. Namely, EVERYONE who isn’t covered by a collective bargaining agreement! Policies and procedures implicating this Act will need to be updated.

What happened: Last week, Governor Gianforte signed HB254 into law. The Legislature made its most significant changes to the Wrongful Discharge From Employment Act (WDEA) since its enactment in 1987. The new Act takes effect immediately. The Act provides clarity on how Montana law governs the relationship between employers and employees, and resolves uncertainties that arose under the original WDEA.

What changed: Pretty much everything! EXCEPT the 1 year tolling language of the statute–Meaning the case we covered on the WDEA previously stands in relation to tolling limitations. Read blog here.

In brief, the Act;

Establishes a default probationary period of 12 months from date of hire

The Act expands upon the WDEA’s existing probationary period provisions.  Moving forward, the default probationary period is “12 months commencing on the date the employee begins work.”  The Act also clarifies employers are permitted to: (i) set their own probationary periods; and (ii) extend a probationary period prior to its expiration, provided that the total probationary period does “not exceed 18 months.”

Expands the Definition of Good Cause and Clarifies What is a Wrongful Discharge.

(5) ‘Good cause’ means any reasonable job-related grounds for an employee’s dismissal based on: (a) the employee’s failure to satisfactorily perform job duties; (b) the employee’s disruption of the employer’s operation; (c) the employee’s material or repeated violation of an express provision of the employer’s written policies; or (d) other legitimate business reasons determined by the employer while exercising the employer’s reasonable business judgment.

This new definition is good for the employer as it provides employers with additional discretion to terminate employees.  It will also mean you need specific handbook and policy language!

Codifies employers’ broad discretion to discharge managerial employees

Remember this is for employees who are NOT on a term contract. § 39-2-904(3) was specifically amended to state: “The employer has the broadest discretion when making a decision to discharge any managerial or supervisory employee.”

Limits the monetary damages to which wrongfully discharged employees may be entitled;

Under the WDEA, wrongfully discharged employees may be awarded “lost wages and fringe benefits for a period not to exceed 4 years from the date of discharge.”  Mont. Code Ann. § 39-2-905(1) (2019).  Under the original WDEA, employees generally were required to mitigate their damages by pursuing alternate employment.  Id.  Any interim earnings the employee earned, or reasonably could have earned, “must be deducted from the amount awarded for lost wages.”  Id.

  1. The Act establishes the deduction for an employee’s “interim earnings” must include all earnings that were earned, or reasonably could have been earned, “from any new kind, nature, or type of work, hire, contractor status, or employment that did not exist at the time of discharge.”  In short, the Act identifies additional income sources separate and apart from the traditional employment relationship that must be deducted from a wrongful discharge award.
  2. The Act requires for the first time that certain benefits an employee receives as a result of the termination—including unemployment benefits—also must be deducted from a wrongful discharge award.  Specifically, a district court now is required to “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 must “deduct those payments, compensation, and benefits from the amount awarded for lost wages before entering judgment.”  Thus, the Act reduces the total damages to which wrongfully discharged employees may be entitled.

What this means in practice is that it will not be financially worth it for employees to bring these cases unless there are big dollars at stake as they will be responsible for their own attorney’s fees, which eats up any award after you deduct all the earnings, etc.

Establishes additional procedural requirements for discharged employees to pursue WDEA claims;

The Act provides employers with additional flexibility to notify employees of its internal grievance procedures.  Employers now are required to provide employees with its internal grievance procedures “within 14 days of the date of the discharge.”  Additionally, the Act clarifies the employer can provide the employee with those procedures “in writing or electronically,” including by constructively serving the employee by sending the procedures to the employee’s “last known postal mailing address or electronic mailing address.”

Although the Act does not change the WDEA’s 1 year statute of limitations, it does require employees to serve WDEA complaints “no later than 6 months after filing the compliant.”  However, if a plaintiff fails to do so, the Act requires the Court to dismiss the complaint without prejudice.  In such a situation, it is possible the plaintiff could re-file a WDEA complaint, provided the statute of limitations had not already run.

Identifies additional term contracts that are exempted from the WDEA.

The Act builds on the WDEA’s existing language to clarify that “a contract for a specific term may contain a probationary period . . . and may contain an automatic renewal clause that automatically renews the contract of employment for one or more successive terms.”  In this way, the Act provides employers with additional flexibility to draft term contracts that still are exempted from the WDEA.

You can read the entire text of the bill here.

As you consider these and other issues, we recommend you speak with your school lawyer or contact Bea, Kevin, Megan, Beth, and Lily by email or at 406-542-1300 to discuss these issues.

Kaleva Law

At Kaleva Law Office you receive the experienced, practical advice of a large firm with the responsive, efficient, top-notch support of a small firm. We take care of the legal questions so you can focus on education.

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