05 May 2006

Yesterday's Colorado Court of Appeals Action

The Colorado Court of Appeals made a decisions with a few interesting nuances yesterday.

Governmental Immunity Not Expanded To Independent Contractors For Government.

One was a suit against the Lottery Commission and Texaco (a lottery ticket seller) alleging that selling scratch games when the prizes had already been awarded gave rise to legal liability (many such suits have been filed nationwide).

The Court of Appeals affirmed that the lottery commission was free from liability, noting that the action was a "tort action" rather than a contract action, because the representations concerning the odds of winning which were the basis of the suit were made before the scratch games were purchased, and because the lottery commission as a governmental entity, was protected from tort suits by governmental immunity. This was a relatively straight forward application of existing law.

More notable was that the Court of Appeals rejected the argument that Texaco could benefit from governmental immunity, even though it was a licensed seller of a government authorized product. The Court of Appeals ruled that governmental immunity depends upon the possibility that taxpayers will end up paying for any ultimate judgment, and that independent contractors for the government aren't in that position. Thus, Texaco will have to find a different argument if it wants to avoid liability for selling worthless scratch games, even though those scratch games were specifically authorized by a governmental agency (I would suggest that they strongly consider a lack of duty argument along those lines).

This follows a similar case in Colorado in the area of private prisons, in which the Courts have held that private prison operators are also not entitled to the governmental immunity that applies to governments and government employees in public prisons.

Apparent Authority And The Statute Of Frauds.

In another case, the Court of Appeals upheld the firing of a medical employee who was an employee at will at a hospital. It held that only firings that are for adherence to ethical standards which can result in legally enforceable discipline, rather than mere private professionalism standard come into a public policy exception for wrongful termination of employment has some relevance. It also noted, with somewhat tortured logic, that the state's quality management statute protects only those who insist on keeping confidential records confidential; it does not protect the whistle blowers who actually provide the confidential information to a quality management committee when the employer knows that a report to the committee was made, but doesn't know precisely the content of that confidential report. (The case probably would have been a loser anyway, as one of the grounds for discharge was the presumably good cause of a serious delay in giving patient medication.)

The more interesting part of this case was some very clever language in an employee policy manual which the employee sought without success to enforce as a contract. The language was contained in a disclaim at the front of the policy book that notes that everyone is an employee at will. This statement alone is pedestrian. Every employee policy handbook says that. More interesting was an additional part of the disclaimer, whose importance I will explain before I quote it.

Colorado law strongly disfavors written contract provisions that state that the contract can only be modified in writing. In fact, provisions that say so are void as a matter of law in Colorado, even though they are routinely found in contract boilerplate. Companies want those provisions very badly, however, and routinely put them in despite the fact that the law clearly holds that they are invalid.

Why do companies want these terms so badly? Part of it is an issue of proof. A contract case with only written documents and testimony about the alleged breach of contract itself are very inexpensive to bring a lawsuit over. The contract terms are established conclusively and quickly. A case with extensive oral testimony is very expensive to bring or defend. Every conservation during the history of the relationship is potentially relevant as a source of oral contractual terms.

Also, big organizations don't want low level sales people and managers making decisions on the boilerplate terms of its agreements with customers or other people with whom it routinely enters into contracts. It wants those decisions made at the top, by the legal department and senior managment. But, normally, those efforts are to no avail. The "apparent authority" doctrine of agency law hold that a business is responsible for the acts and statments of anyone who appears to have authority to act as an agent of the business. Most managers, even at the lowest level, seem to have broad responsibility in personnel matters, including the power to hire and fire. So, generally, the statements of even the lowliest manager about an employee's employment relationship with the business are normally binding on the business as an oral contract with an agent of the business who has apparent authority to enter into that kind of contract. This is so even if they would never presume subjectively that they could write up a written emplyment agreement with that same employee without approval from management. What matters is the power the manager appears to have, not the power the manager subjectively believes that he or she has inside.

How does Centura deal with this problem in its employee policy manual? After stating that everyone is an employee at will, it states:

Only the CEO, Executive Vice President and Senior Vice Presidents and Site Administrators have the authority to enter into an "Employment Agreement." Such an agreement is valid only if reduced to writing and signed by one of the above officers and the employee. No other representative has the authority to make representations, promises or agreements regarding term or conditions of employment.

Now, if in fact the Executive Vice President has spoken to the employee in question and made an oral promise concerning that employees employment, I very much doubt that the Colorado courts would uphold the writing requirement of that paragraph. But, that isn't the genius of the provision. The genius of its is attacking the problem by narrowing the scope of people who have apparent authority, rather than relying prinicipally on a writing requirement.

The reality is that low level employees in big businesses almost never have any conversations with senior management, and that senior employees are also far less likely to say something stupid about an employee's employment relationship than junior managers.

Unlike ordinary third party bystanders, it is quite hard for an employee who have been given a written employee policy handbook (who indeed, often has little choice but to try and rely upon it in bringing a wrongful termination suit) and who has signed a statement saying that they have read it which is in their personnel file, to claim that a low level manager has the authority within the business to make binding statements about employment relationships, when the employee has been told otherwise in a writing that they have agreed in writing to having read.

To really make the policy work, you would want to have every single hiring and every single firing signed off on as a formality on every single employee by the Site Administrator (otherwise one could argue that Employment Agreements of some type are routinely entered into and ended by lower level managers), but this is no big deal in practice. If the Site Administrator, in practice, follows lower management recommendations 99.9% of the time, and the business has even 3,000 employees at the Site and 20% turnover per year, the burden for the Site Administrator only a moment, a few times a day, to sign off which provides real protection in any future employement lawsuit, which is a major concern of most organizations with thousands of employees. If it becomes to much of a burden, the list of people with the authority to handle the chore can be slightly expanded to include the deputy site administrator, or the head of the HR Department at the site.

Thus, by limiting who can make a decision, rather than primarily relying on the formal manner in which a decision can be made, the big business gets the benefit of keeping out almost all oral evidence about employment terms, without going astray of Colorado law. This works less well when one deals with the outside world, but for employees it could be very effective at shutting down the whole class of implied employment agreement lawsuits.

Bad Law On Governmental Immunity For Automobile Accidents

The Colorado Court of Appeals has held, interpreting an inartfully drafted part of the Colorado Governmental Immunity Act, that if a governmental employee in the course of his governmental duties, while driving his own vehicle (for which the government is reimbursing him on a mileage basis) negligently injures you in an automobile accident, that the injured party has no right to sue either the government or the negligent employee who caused the accident.

There is an exception for governmental immunity for car accidents, but it applies only if the vehicle is owned or leased by the government. If the vehicle belongs to the employee, both the government and the driver are immune from liability.

The notion that a governmental employee is liable for negligent driving if he injures you while driving a government vehicle on governmental business, and while driving a private vehicle while on private business, but not while driving a private vehicle on governmental business, is absurd as well as harsh. But, if you want to base your law on the exact language of the statute drafted, considerations like this case, that rushed lawmakers never get around to resolving as they word their statute, fall through the tracks and seriously injured people get screwed. Unfortunately, the Court of Appeals, while knowning that this was the wrong outcome, and very likely was not what the legislature intended, was not clever enough to find a way out of the ill worded law. Perhaps this case will be appealed to a more clever Colorado Supreme Court, or perhaps the legislative body in question will recognize their moral obligation to compensate this individual and pass a special bill to compensate him even without legal liablity.

This is particularly a concern because the arrangement involved in not uncommon, and we really don't want anyone other than emergency vehicle operators with their signals on to know with confidence that even if they screw up that they can't be sued. If this case isn't overturned on certiorari, the General Assembly really should take up a bill amendment the Governmental Immunity Act to address this flaw and to instead allow suits in any case where a vehicle is operated in the course of governmental business, in the interest of public safety and fairness.

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