The Washington State Supreme Court recently issued a unanimous decision reversing the dismissal of a plaintiff’s gender discrimination claims and finding the employer’s progressive discipline policy altered the “at-will” employment relationship.

In Mikkelsen v. Public Utility District No. 1 of Kittitas County, et al, the plaintiff worked as an interim General Manager and Finance Manager for the Public Utility District No. 1 of Kittitas County (“PUD”). In 2009, the plaintiff was offered the permanent General Manager position but turned it down and continued to work as a Finance Manager. Charles Ward was hired as the General Manager. Over the course of several years, the relationship between Ward and the plaintiff deteriorated. The plaintiff claimed that Ward would routinely treat her differently than men in the office. Although the plaintiff complained about his behavior, and met with Ward personally to discuss his biased conduct, there was no discernible change.

Several months later, the plaintiff spoke with the president of the Board of Directors of the PUD about Ward’s alleged bias. The Board’s President asked the plaintiff to create an anonymous survey about the General Manager which was eventually emailed to the Board. When Ward found out about the survey, he fired the plaintiff, accusing her of “disrupting the workplace and undermining his authority.” Ward then replaced the plaintiff as Finance Manager with another woman.

The plaintiff thereafter filed a lawsuit against the PUD alleging a number of claims, including gender discrimination and wrongful termination in violation of the PUD’s progressive discipline policy. The trial court dismissed each of the plaintiff’s claims on summary judgment. The plaintiff then appealed the Court’s dismissal to the Washington State Supreme Court which overturned the dismissal for both claims.

On appeal, the Court addressed the gender discrimination claim and the elements to be established on summary judgment, as well as the potential violation of PUD’s discipline policy. First, the Court recognized current state law required a plaintiff to prove “that they were replaced by someone outside of their protected group – the replacement element.” Mikkelsen at p. 12. Having reviewed applicable authority from federal courts, the Court further recognized that “rigid application of the replacement element could result in dismissing meritorious claims.” Id. As such, the Court held that plaintiffs need not prove they were replaced by someone outside of the protected group - only that they were in a protected class, terminated from a job they were qualified for, and the employer continued to seek candidates. Id. at p. 17.

The impact of this holding does not make an employee’s replacement irrelevant; it remains strong evidence that no discrimination occurred when an individual is replaced by someone within the protected group. However, the replacement element alone will no longer allow an employer to avoid potential liability for discrimination.

The potentially more significant ruling came later in the opinion, when the Court considered whether the plaintiff presented sufficient evidence to support her claim that the PUD altered her “at-will” employment status through its corrective action policy. In doing so, the Court first recognized that although employment in Washington is generally “at-will," in certain circumstances employers may be required to follow the policies included in the employee handbook. Mikkelsen at p. 25. The Court then analyzed the text of PUD’s corrective action policy and found that, although the corrective action policy had provisions suggesting broad discretion in applying discipline, it also promised employees fair treatment and non-arbitrary corrective action. As a result, the Court held that “the policy could plausibly be read as requiring fair treatment during disciplinary proceedings and establishing a for-cause requirement for discharge.” Id. at p. 29.

While the PUD argued that its corrective action policy contained pointed language that made it clear that it was not altering the at-will nature of employment, the Court disagreed. In analyzing the language of the disclaimer which stated “the rules set out here are intended only as guidelines, and do not give any employee a right to continued employment or any particular level of corrective action” the Court found this was not sufficiently explicit. In furtherance of its opinion, the Court distinguished the PUD disclaimer from the valid disclaimer in Kuest v. Regent Assisted Living, Inc., 111 Wn. App. 36, 43 P.3d 23 (2002), which stated that the handbook or policies did “not constitute a contractual arrangement” and required its employees to acknowledge that their “employment is ‘at will’ and may be terminated, with or without cause.” The Court noted that this disclaimer was sufficiently clear because it stated that an employer “may, within its discretion, apply any corrective action in a given situation, up to and including discharge.” Mikkelsen at p. 28.

This Court’s ruling creates a risk for Washington employers that utilize a progressive discipline policy, or include any discussion of discipline in their respective handbooks. The Court has indicated that it will take a long look at these policies in order to determine the potential for employees to be led to believe that they will be treated fairly, or even non-arbitrarily, in the disciplinary process and therefore terminated only “for cause.”

As a result of this decision, we recommend that every employer carefully review their employee handbooks and progressive disciplinary policy (if any) in order to confirm that the language (including disclaimers) in the handbook and policy make it clear that the employee is still “at-will” and there is no promise of specific treatment in disciplinary or other matters.