Back to Work: Montana Enacts Pro-Employer Changes to Wrongful Discharge Law While Becoming the First State to Protect Employees Based on Vaccination Status

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[co-author: Megan Uren]

In a flurry of activity this spring, the state of Montana implemented several changes to how employers may do business in Montana. To start, several amendments to Montana’s Wrongful Discharge from Employment Act (WDEA) provide increased flexibility to Montana employers. In addition, amendments to Montana’s Human Rights Act add new COVID-19-related protections for employees based on vaccination status.

On March 31, 2021, in particular, Montana’s governor signed HB 254, which, for the first time in over 30 years, revised the WDEA. Many changes beneficial to employers resulted from these amendments and, as further explained below, employers should review and revise internal policies, practices and protocols to take advantage of the changes. On May 7, 2021, moreover, Montana’s governor signed an important bill adding vaccination status as a protected category under Montana’s Human Rights Act. Montana is the first state to prohibit discrimination based on vaccination status and the amendments create numerous questions for employers operating in the state, including whether such protection will extend to other jurisdictions.

Amendments to the WDEA

As background, the WDEA provides an exception to the traditional at-will employment principle. Subject to certain exceptions, once an employee successfully completes a probationary period under Montana law, an employer must show “good cause” for termination of employment. For years, the ‘good cause’ standard and other requirements of the WDEA have resulted in litigation following an employee’s termination from employment. The recent amendments to the WDEA, however, provide employers with more flexibility in managing their workforce and may result in a reduction of WDEA claims.

Increased probationary period

Under the new law, the default probationary period, which is currently six months (unless otherwise set by an employer’s policy), is extended to 12 months. During the probationary period, an employee can be discharged without good cause, so the relationship is akin to an at-will employment relationship during this period. Employers have the option, however, to extend the probationary period to up to 18 months, but only if the extension occurs prior to the expiration of the original probationary period. Employers can still set their own probationary period in a written policy under the new law, but absent setting a different period per company policy, the probationary period will now default automatically to 12 months. This increase in default probationary periods will provide employers with a longer timeline to evaluate employees and, where necessary, separate employment without the fear of receiving a WDEA claim.

‘Good cause’ clarified

Under the act, as amended, good cause means “any reasonable job-related grounds for employee dismissal” based on:

  1. An employee’s failure to satisfactorily perform job duties.
  2. An employee’s disruption of the employer’s operation.
  3. An employee’s material or repeated violation of an express written employer policy.
  4. “Legitimate business reasons determined by employer” that are reasonable business judgments.

Importantly, the amendments added ground “c” to the list of justifications, which provides more flexibility for employers in managing their workforce, including by allowing employers to terminate employees for specific misconduct in violation of applicable policies. The amendments further recognize that employers have “the broadest discretion” in discharge decisions concerning managerial or supervisory employees.

Given this addition, employers should review and update, as necessary, their handbooks and policies, and policies or practices for holding employees accountable for violations under the same, to take advantage of this change.

Limitations on damages and lawsuits

The revisions to the WDEA also reduce what plaintiffs can recover as damages under a wrongful discharge claim and shorten the time period in which plaintiffs may serve a complaint filed pursuant to the act.

Ordinarily, a plaintiff who succeeds on his or her WDEA claim can recover up to four years of lost wages and fringe benefits as damages. As a result of the amendments, however, plaintiffs’ damages recovery is now subject to additional setoffs. For example, a court will now deduct unemployment benefits and early retirement pay and can widely consider any other monetary payment or benefits an employee receives after termination from employment. Collectively, these amendments reduce what employers may ultimately owe plaintiffs in damages, potentially increasing leverage for settlement and/or reducing incentive to bring a WDEA claim. Additionally, although the statute of limitations for when an employee must file a WDEA claim remains unchanged at one year, the deadline to serve the complaint has been reduced from three years to six months.

Internal grievance procedure

In addition to these changes, employers may now notify employees of any internal grievance procedure within 14 days of their discharge date by mail to the employee’s last known address or by email. This represents a departure from the prior version, which required employers wishing to rely on the administrative exhaustion defense to provide prompt notice of the procedure following discharge. Similar to the above, this is an important statutory change, as an employee’s failure to exhaust an employer’s internal grievance procedure can result in the dismissal of a WDEA claim.

Violation of employer policies and the WDEA

Finally, the amendments limit an employee’s ability to file a WDEA claim related to an employer’s violation of its own policies. Under the revised law, a discharge from employment related to a policy violation is wrongful only if the employer “materially violated” its written policy before the discharge and that violation “deprived the employee of a fair and reasonable opportunity” to remain employed. As a result of this amendment, employers may see a reduction in WDEA claims applicable to policy violations, as the liability standard has been heightened.

Montana Human Rights Act – New COVID-19 Vaccination Status Protections

Montana has also enacted changes to account for controversy surrounding vaccinations and immunity passports. As of May 7, 2021, vaccination status is now a protected category under the Montana Human Rights Act. Accordingly, employers may not refuse nor bar someone from employment based on the person’s vaccination status or possession of an immunity passport.

In addition, the amendments prohibit an employer from discriminating against an employee “in compensation or in a term, condition[] or privilege of employment based on the person’s vaccination status” or possession of an immunity passport. Given these changes, employers should be cautious in implementing policies that provide monetary incentives for vaccination status, disciplining employees who have not been vaccinated, or implementing policies, programs or practices that otherwise favor/disfavor Montana employees based on their vaccination status (even considering CDC guidelines). Note that employers can still recommend that Montana employees get vaccinated.

Finally, the amendments include exemptions for certain industries/employers, including, for example, licensed nursing homes, long-term care facilities and assisted living facilities where vaccinations are or may be required.

Montana’s new law is unique in that other states (e.g., Alabama, Florida, Georgia, Texas, etc.) that have proposed or passed legislation concerning vaccination status apply only to state and local governments. And one state – Washington – has gone the complete opposition direction, having passed a law requiring employers to verify the vaccination status of their employees if they wish to remove their masks in the workplace.

Next Steps for Employers

Overall, the WDEA amendments largely benefit employers, and the sooner employers review and update applicable policies, practices and agreements to take advantage of these changes, the better. In the least, employers should (1) update policies, offer letters or agreements to include the longer 12-month probationary period; (2) review and update employee handbooks and policies to account for new language and protections under the WDEA; and (3) update notice practices for internal grievance procedures to 14 days by mail to an employee’s last known address or by email.

With respect to the new prohibition against discrimination based on vaccination status, to mitigate risk, employers should aim to apply COVID-19 policies equally to all employees, regardless of vaccination status. For employers with employees outside Montana, employers should also ensure that any COVID-19-related programs and policies applicable to their workforce comply with the new Montana requirements. Given that Montana is the first state to pass antidiscrimination provisions based on vaccine status, employers with specific questions should consult with legal counsel to best understand potential options and the associated legal risks.

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