Labor & Employment Law Blog

A recent decision by California’s Fourth District Court of Appeal demonstrates some of the unfortunate pitfalls an employer can encounter when taking disciplinary action against employees related to conduct occurring outside the workplace – even unlawful conduct.  Additionally, California employers should keep in mind several Labor Code provisions that protect employees from discrimination based upon their political beliefs and activities.  Tilkey v. Allstate Ins. Co. (2020) 56 Cal. App. 5th 521.

In November 2020, the Court of Appeal issued its opinion in Tilkey v. Allstate Ins. Co.  The case arose out of the termination of an Allstate employee from California who was arrested during a visit to Arizona. 

Tilkey, who had worked for Allstate for 30 years, was charged with criminal damage, possession or use of drug paraphernalia, and disorderly conduct disruptive behavior.  Domestic violence charges were attached to both the criminal damage and disorderly conduct charges.  Tilkey pled guilty to disorderly conduct.  The other two charges were dropped, and the disorderly conduct charge was to be dismissed upon completion of a domestic nonviolence diversion program.  Allstate terminated Tilkey before the final charge was dismissed, citing as its reason Tilkey’s “threatening behavior and/or acts of physical harm or violence to another person.”  This reason was also included on Form U5, a form Allstate was required to file with the Financial Industry Regulatory Authority (FINRA) whenever a registered representative leaves a covered company such as Allstate.  Forms U5 are accessible to any firm that hires licensed brokers like Tilkey. 

Tilkey sued Allstate asserting claims for wrongful termination in violation of Labor Code section 432.7 (which prohibits employment decisions based upon “any record of arrest ... that did not result in a conviction”), and “compelled self-published defamation.” The latter claim was based upon the Form U5 FINRA filing being necessarily accessed by prospective employers when Tilkey sought subsequent employment.  At trial, the jury returned a verdict for Tilkey, awarding $2,663,137 in compensatory damages, with $960,222 for wrongful termination and $1,702,915 for defamation, as well as $15,978,822 in punitive damages.

Allstate appealed.  The Court of Appeal reversed the trial court judgment as to the wrongful termination cause of action on the grounds that Tilkey’s guilty plea constituted a conviction for purposes of Labor Code section 432.7 and thus did not fall within the prohibitive protections of the Code.  The Court also found the punitive damages award excessive.  However, the Court of Appeal supported the lower court’s recognition of a cause of action for compelled self-publication defamation – a novel combination of the doctrines of defamation per se and self-defamation – and affirmed Tilkey’s recovery on that ground.  In essence, compelled self-published defamation occurs when a person has to explain a matter that unfairly (and unlawfully) reflects negatively on the individual because someone else has put the matter out into the world.

Ultimately, even though Allstate terminated Tilkey based upon his illegal conduct – for which he was convicted – and complied with FINRA requirements in filing the Form U5, Allstate was forced to defend the action and was held liable for defamation.  In December 2020, Allstate filed a petition for review with the California Supreme Court.  This case demonstrates that even a seemingly unquestionable termination can lead to litigation and a money judgment if not handled carefully, particularly with regard to post-termination communications.

California Protections For Political Activity

California employers are familiar with the concept that “at-will” employment still has limitations.  Employers may not terminate an employee for unlawful or discriminatory reasons, including reasons based upon employees’ political beliefs or activities.

Many employees have traditionally been willing to separate their professional lives and their personal political activities.  However, social media and remote workplaces prevalent during the pandemic, combined with the recent polarized political environment, have blurred this boundary in ways that raise concerns for employers.  Contrary to popular belief, the political expressions and activities of employees of private companies are not protected by the First Amendment.  However, California’s Labor Code does provide employees significant protection in this regard.

Specifically, Labor Code section 1101 prohibits employers from having “any rule, regulation, or policy”: (1) forbidding or preventing employees from engaging or participating in politics or running for office; or (2) “controlling or directing, or tending to control or direct the political activities or affiliations of employees.” Section 1101 prohibits employers from taking action against employees for their political activities that do not directly affect their job performance.

Additionally, Labor Code section 1102 provides, "[n]o employer shall coerce or influence or attempt to coerce or influence his employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity."  California employers are thus not allowed to discriminate based on political activities or affiliations, unless employees’ political expressions or activities affect their job performance or that of co-workers.   Public/government employees – and some unionized workers – have additional legal protections associated with political expression.

Employers Must Remain Diligent

While terminating an employee for off-duty conduct can sometimes fit within the at-will doctrine, the Tilkey case is a cautionary reminder that an employer must consider whether there are any statutory or other exceptions under California law that may weigh against a termination decision before taking action.  In most instances in California, terminating an employee for lawful off-duty conduct, including political activity, is a violation of California law. Where an employee engages in unlawful conduct off-duty, the employer should investigate to determine if the conduct impacts the employee's ability to perform the employee’s job.  Further, employers should be careful not to base an employment decision upon an arrest unless that arrest results in a conviction that can legally serve as the basis for an adverse employment decision. 

The current political climate is polarized and complicated.  Compounded by the difficulties presented by the pandemic, people are reaching for new and different ways to communicate and demonstrate their opinions, sometimes lawfully and sometimes not.  The realm of employee relations can often seem just as complicated and polarized as the political climate, particularly when an employee’s personal or political conduct raises concerns in the workplace.  Employers should consult their legal counsel as needed to ensure they remain compliant with applicable law in addressing these concerns. 

This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

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