In a case of first impression in Colorado, on May 23, 2024, the Court of Appeals has established a test for evaluating claims of actual discharge under state law. The case, Potts v. Gaia Children LLC, No. 23CA1008 (May 23, 2024), centers on a plaintiff who appealed the district court's dismissal of her wrongful discharge claim. The Colorado appellate court concluded the allegations could substantiate a finding of actual discharge and adopted a definition of "actual discharge" in line with federal court holdings.
Facts of the Case
Plaintiff Debbi Potts was employed by Defendant Gaia Children, LLC d/b/a The Learning Experience (Gaia), a childcare facility. Potts was a mandatory reporter in her position and cited concerns about "unsafe practices with the children." After Potts saw no change, she reported her concerns to the Colorado Department of Licensing and Larimer County Child Protective Services and an investigation/site visit was conducted. Potts refused to reveal the content of her conversation with the investigators to her employer and she was instructed to go home immediately, even though her shift had not ended. Potts assumed she was fired and picked up her last paycheck. She also returned all work-related items, and no one questioned the return. Potts took this as further evidence that she was fired.
In addition, an email went out to the entire staff indicating that Potts was no longer employed and no one should speak with her. Potts brought a lawsuit against Gaia for wrongful discharge, claiming that her firing was against public policy. Gaia filed a motion to dismiss claiming that Potts had not sufficiently alleged that she was terminated and that she had voluntarily resigned. Because Potts failed to formally confirm her dismissal, the district court granted Gaia's motion to dismiss and Potts appealed.
Wrongful Discharge and Public Policy
Colorado is an at-will employment state. The general rule is that an employer or employee may terminate and employment relationship at any time, for any reason. Rocky Mountain Hosp. & Med. Serv. vs. Mariani, 916 P.2d 519, 523 (Colo. 1996). The general rule has several exceptions including:
- "The employer directed an employee to perform an illegal act as part of the employee's work-related duties or prohibited the employee from performing a public duty or exercising an important job-related right or privilege.
- The action directed by the employer would violate a specific statute related to public health, safety, or welfare, or would undermine a clearly expressed policy relating to the employee's basic responsibility as a citizen or the employee's right or privilege as a worker.
- The employee was terminated as the result of refusing to perform the act directed by the employer; and
- The employer was aware that the employee's refusal to perform the act was based in the employee's reasonable belief that the directed act was unlawful." Bonidy v. Vail Valley Ctr. For Aesthetic Dentistry, P.C., 232 P.3d 277, 281 (Colo. App. 2010).
In the case at hand, the district court only examined the third exception identified in the Bonidy case and concluded that she failed to allege sufficient facts to support her contention that she was actually or constructively discharged.
Actual Discharge
Looking at the circumstances between Potts and Gaia, on appeal, the court found that the facts were sufficient to show an actual discharge occurred. As Colorado did not have a published case for determining whether an employee was actually discharged, the court looked to how federal courts have addressed this issue. In Chertkova v. Conn. Gen. Life Ins. Co., 92 F.3d 81, 88 (2d Cir. 1996), the court articulated the test for actual discharge as "An actual discharge occurs when the employer uses language or engages in conduct that would logically lead a prudent person to believe her tenure has been terminated." The “inquiry focuses on the reasonable perceptions of the employee, not on whether formal words of firing were in fact spoken.” Id. at 88. The test is therefore objective rather than subjective and requires consideration of whether the circumstances would lead a reasonable employee to understand that she has been discharged from employment.
In this instance, the court centered in on three main facts in concluding there had been actual discharge. First, that Potts was sent home after she refused to divulge what was discussed with the state investigators. This was also followed by a text message that stated she did not need to report back to work for the remainder of the week.
In addition, the fact that Gaia sent their compliance specialist (Potts) home during a major investigation is not in line with the idea that they wanted to continue her employment. To the contrary, reason would suggest that the compliance officer would the among the most important staff to have on site during such an investigation. "The test of whether an employee has been discharged depends on the reasonable inferences that the employee could draw from the statements or conduct of the employer." Pennypower Shopping News, Inc. v. NLRB, 726 F.2d 626, 629 (10th Cir. 1984).
Finally, the fact that when Potts went to go pick up her paycheck and returned all work-related equipment there were no questions asked by Gaia. This would also lead a reasonable person to believe that her employment was terminated. Potts also never told anyone that she wanted to resign. Even if there was ambiguity in the interpretation of these facts, the district court should have examined them in the light most favorable to Potts, which it did not do.
Therefore, the court concluded that the facts alleged in Potts complaint were sufficient to support the finding that Gaia terminated her employment by telling her not to return that week and accepting the return of her work equipment and that actual discharge had occurred.
Conclusion
The Colorado Court of Appeals has broken new ground by adopting a test for actual discharge claims, aligning state law with established federal standards. The court's decision underscores the importance of the reasonable perceptions of the employee in determining whether an actual discharge occurred. The court found sufficient grounds to remand the case for further examination of her actual discharge allegations. This ruling not only impacts the immediate parties but also sets a significant precedent for future wrongful discharge claims in Colorado, providing clearer guidelines for employees and employers.