The <i>Horn</i> Decision: Significant Victory for Employers

Disciplinary Committee as required under DR 1-103 (A) of New York's Code of Professional Responsibility. The plaintiff filed a lawsuit alleging retaliatory discharge and breach of implied contract. The Court of Appeals held that the plaintiff stated a viable claim for breach of implied contract. The court noted that, unlike prior plaintiff accountants in cases resulting in Court of Appeals decisions upholding the 'at-will' employment doctrine whose professional accounting services were performed in furtherance of their corporate responsibilities, as an attorney, the professional services that the plaintiff provided to his firm's clients as a member of the Bar 'w[ere] at the very core and, indeed, the only purpose of his association with [the law firm].' The court also found that the particular ethical rule at issue, DR 1-103 (A) was indispensable 'to the unique function of attorney self-regulation, a judgment that [the Court is] best situated to make since the regulation of lawyers in New York has been delegated by the Legislature to the Judiciary.' Finally, the court noted that, because the plaintiff attorney and his employer firm were both involved in a' common professional enterprise,' the practice of law, and that they were thus mutually bound by the implied covenant to abide by the common rules of the legal profession, including the particular ethical rule that the plaintiff alleged was implied in his employment contract with his firm.

Factual Background of the Horn Decision

The plaintiff in Horn was a physician employed by The New York Times (the Times) as Associate Medical Director of its Medical Department. Her primary function was to provide medical treatment to Times employees. Her responsibilities also included determining whether injuries sustained by Times employees were work-related for purposes of determining coverage under the New York State Workers' Compensation statute. The plaintiff had complained to the Times and subsequently had consulted the New York State Department of Health concerning the Times' repeated demands that she provide various departments at the company with confidential medical records of employees without their knowledge or consent. The Department of Health advised her that releasing confidential patient information without obtaining the appropriate employee consents could place her in violation of New York State law, the Code of Ethical Conduct of the American College of Occupational and Environmental Medicine, the Americans with Disabilities Act and various federal regulations. Following this advice, the plaintiff disobeyed the Times' requests to provide employee records to other Times departments in the absence of the relevant employees' consent. In 1999, the Times terminated the plaintiff in connection with a restructuring of its Medical Department.

The plaintiff filed a lawsuit against the Times for breach of contract, contending that her employment relationship implied a fundamental understanding that her duties as a physician would be performed in accordance with ethical standards of the profession. The Supreme Court denied the Times' motion to dismiss on grounds that the exception to the employment-at-will doctrine enunciated in Wieder applied to a physician in this context. The Appellate Division affirmed and subsequently certified the issue to the Court of Appeals.

The Court's Decision in Horn

In Horn, the Court of Appeals declined to extend the Wieder doctrine to physicians employed by non-medical employers. The court distinguished the employment relationship in Wieder from others on several grounds. First, the court noted that, unlike the attorney in Wieder, whose professional legal services to his firm's clients 'w[ere] at the very core and, indeed, the only purpose of his association' with his firm, Horn did not use her professional expertise solely for the benefit of the Times employees she examined. Rather, because she used her professional expertise to determine whether employee injuries were compensable under the Workers' Compensation Law, she also applied her professional expertise in furtherance of her responsibilities to her employer as part of corporate management. Second, unlike the ethical standard at issue in Wieder set forth in DR 1-103 (A), which applied to both the employee and the employer under a common and 'self-policing rule critical to professional self-regulation,' the ethical standards that the Times allegedly ordered the plaintiff to violate, to wit, CPLR ' 4505 (the evidentiary rule protecting the physician-patent privilege) and provisions in New York State's Education Law and the Rules of the Board of Regents, did not apply to the Times and were not central to the conduct of the plaintiff's practice on the Times' behalf.

The court also telegraphed its policy-related concern: it did not wish to 'create a broad-new exception to the presumption of at-will employment, [which would be] applicable to hosts of professional employees.' The court underscored its consistent position that it will not create a common law tort of wrongful or abusive discharge or recognize a covenant of good faith and fair dealing to imply contractual terms grounded in public policy into employment contracts.

Conclusion

The Court of Appeal's decision in represents a significant victory for employers. Employees alleging wrongful discharge or breach of an implied contract are left with little recourse in the absence of a specific statutory, constitutional, or contractual limitation of the employers' right to terminate their employment. However, it is not clear that the court's decision in Horn precludes extension of the Wieder holding to professionals in different circumstances, including, for example, those in which a physician is employed by a hospital rather than a non-medical employer, and where his or her core duties are to provide professional medical services to the public at large. Under the holding in Wieder, if that hospital is subject to the same ethical or regulatory standards as the physician, the court's holdings in Wieder and Horn do not necessarily preclude the possibility that the Wieder exception can be applied to physicians or other professionals.

Robert P. Lewis is a partner, and J. Carlos Real is an associate, in the New York office of Baker & McKenzie.

New York's Court of Appeals recently issued an important decision in which it declined to expand the narrow exception to the 'at-will' employment doctrine enunciated in Wieder v. Skala for attorneys to physicians employed by non-medical employers. The court's decision in Horn, however, arguably is limited to that particular class of physicians whose duties are not limited to providing medical treatment, but include non-medical-related management responsibilities as well. Consequently, the court will likely be faced with future attempts by professionals, including physicians employed by medical employers, to expand the Wieder doctrine to them.

Legal Background

In Wieder v. Skala, the Court of Appeals recognized a significant exception to the employment-at-will doctrine for attorneys. Wieder involved an attorney who was terminated by his law firm because of his insistence that the firm report another associate's misconduct to the to the Appellate Division

Disciplinary Committee as required under DR 1-103 (A) of New York's Code of Professional Responsibility. The plaintiff filed a lawsuit alleging retaliatory discharge and breach of implied contract. The Court of Appeals held that the plaintiff stated a viable claim for breach of implied contract. The court noted that, unlike prior plaintiff accountants in cases resulting in Court of Appeals decisions upholding the 'at-will' employment doctrine whose professional accounting services were performed in furtherance of their corporate responsibilities, as an attorney, the professional services that the plaintiff provided to his firm's clients as a member of the Bar 'w[ere] at the very core and, indeed, the only purpose of his association with [the law firm].' The court also found that the particular ethical rule at issue, DR 1-103 (A) was indispensable 'to the unique function of attorney self-regulation, a judgment that [the Court is] best situated to make since the regulation of lawyers in New York has been delegated by the Legislature to the Judiciary.' Finally, the court noted that, because the plaintiff attorney and his employer firm were both involved in a' common professional enterprise,' the practice of law, and that they were thus mutually bound by the implied covenant to abide by the common rules of the legal profession, including the particular ethical rule that the plaintiff alleged was implied in his employment contract with his firm.

Factual Background of the Horn Decision

The plaintiff in Horn was a physician employed by The New York Times (the Times) as Associate Medical Director of its Medical Department. Her primary function was to provide medical treatment to Times employees. Her responsibilities also included determining whether injuries sustained by Times employees were work-related for purposes of determining coverage under the New York State Workers' Compensation statute. The plaintiff had complained to the Times and subsequently had consulted the New York State Department of Health concerning the Times' repeated demands that she provide various departments at the company with confidential medical records of employees without their knowledge or consent. The Department of Health advised her that releasing confidential patient information without obtaining the appropriate employee consents could place her in violation of New York State law, the Code of Ethical Conduct of the American College of Occupational and Environmental Medicine, the Americans with Disabilities Act and various federal regulations. Following this advice, the plaintiff disobeyed the Times' requests to provide employee records to other Times departments in the absence of the relevant employees' consent. In 1999, the Times terminated the plaintiff in connection with a restructuring of its Medical Department.

The plaintiff filed a lawsuit against the Times for breach of contract, contending that her employment relationship implied a fundamental understanding that her duties as a physician would be performed in accordance with ethical standards of the profession. The Supreme Court denied the Times' motion to dismiss on grounds that the exception to the employment-at-will doctrine enunciated in Wieder applied to a physician in this context. The Appellate Division affirmed and subsequently certified the issue to the Court of Appeals.

The Court's Decision in Horn

In Horn, the Court of Appeals declined to extend the Wieder doctrine to physicians employed by non-medical employers. The court distinguished the employment relationship in Wieder from others on several grounds. First, the court noted that, unlike the attorney in Wieder, whose professional legal services to his firm's clients 'w[ere] at the very core and, indeed, the only purpose of his association' with his firm, Horn did not use her professional expertise solely for the benefit of the Times employees she examined. Rather, because she used her professional expertise to determine whether employee injuries were compensable under the Workers' Compensation Law, she also applied her professional expertise in furtherance of her responsibilities to her employer as part of corporate management. Second, unlike the ethical standard at issue in Wieder set forth in DR 1-103 (A), which applied to both the employee and the employer under a common and 'self-policing rule critical to professional self-regulation,' the ethical standards that the Times allegedly ordered the plaintiff to violate, to wit, CPLR ' 4505 (the evidentiary rule protecting the physician-patent privilege) and provisions in New York State's Education Law and the Rules of the Board of Regents, did not apply to the Times and were not central to the conduct of the plaintiff's practice on the Times' behalf.

The court also telegraphed its policy-related concern: it did not wish to 'create a broad-new exception to the presumption of at-will employment, [which would be] applicable to hosts of professional employees.' The court underscored its consistent position that it will not create a common law tort of wrongful or abusive discharge or recognize a covenant of good faith and fair dealing to imply contractual terms grounded in public policy into employment contracts.

Conclusion

The Court of Appeal's decision in represents a significant victory for employers. Employees alleging wrongful discharge or breach of an implied contract are left with little recourse in the absence of a specific statutory, constitutional, or contractual limitation of the employers' right to terminate their employment. However, it is not clear that the court's decision in Horn precludes extension of the Wieder holding to professionals in different circumstances, including, for example, those in which a physician is employed by a hospital rather than a non-medical employer, and where his or her core duties are to provide professional medical services to the public at large. Under the holding in Wieder, if that hospital is subject to the same ethical or regulatory standards as the physician, the court's holdings in Wieder and Horn do not necessarily preclude the possibility that the Wieder exception can be applied to physicians or other professionals.

Robert P. Lewis is a partner, and J. Carlos Real is an associate, in the New York office of Baker & McKenzie.