Kimberly S. Jasper Vs. H. Nizam, Inc. D/b/a Kid University And Mohsin Hussain, Individually And In His Corporate Capacity ( 2009 )

IN THE SUPREME COURT OF IOWA
No. 05–1994
Filed January 23, 2009
KIMBERLY S. JASPER,
Appellant,
vs.
H. NIZAM, INC. d/b/a KID UNIVERSITY and MOHSIN HUSSAIN,
Individually and in his Corporate Capacity,
Appellees.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Donna L.
Paulsen, Judge.
Employer seeks further review in wrongful-discharge action.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND CASE
REMANDED.
Mark D. Sherinian and Andrew L. LeGrant, West Des Moines, for
appellant.
Gordon R. Fischer of Bradshaw, Fowler, Proctor & Fairgrave, P.C.,
Des Moines, for appellees.
2
CADY, Justice.
In this appeal, we face several issues of first impression in the
continuing development of our tort of wrongful discharge in violation of
public policy. Primarily, we must decide whether an administrative
regulation may be a source of public policy to restrict the rights of an
employer in this state to discharge an at-will employee. We also consider
whether a corporate officer may be individually responsible for the tort
and address a number of issues relating to damages, including the
excessiveness of an award of emotional-distress damages.
We conclude administrative regulations can serve as a source of
public policy to give rise to a claim of wrongful discharge from
employment. We also conclude an individual corporate officer can be
liable for the tort. We further conclude the award of emotional-distress
damages in this case was excessive, and punitive damages were not
recoverable. We vacate the decision of the court of appeals and affirm
the decision of the district court in part, reverse in part, and remand for
further proceedings.
I. Background Facts and Proceedings.
This case arose when Kimberly Jasper was terminated from her
employment as the director of a day-care facility in Johnston, Iowa,
called Kid University. The center was owned by H. Nizam, Inc. Mohsin
Hussain was the president of the corporation. Zakia Hussain was the
vice president. The Hussains were married. Mohsin Hussain was a
special education teacher for the Des Moines School District and was not
involved in the day-to-day operation of the center. 1
1Mohsin Hussain will be referred to as Hussain throughout the remainder of this
opinion, while Zakia will be identified by her full name. Kid University will be used in
this opinion to designate both the corporate entity and its president, Mohsin Hussain.
3
Jasper began her employment as director of the center in late
August 2003. She was paid an hourly wage. There was no specific term
of employment. A few weeks after Jasper started her employment, she
and her husband agreed to rent a home owned by the Hussains. The
Jaspers had moved to Des Moines from Arizona and were looking for
housing at the time. Jasper learned the Hussain house was available to
rent when she and Hussain went to the house to retrieve some
equipment to use at the day-care center that was stored in the house.
The house had four bedrooms and two bathrooms, but had sustained
substantial water damage and was in a general state of disrepair. The
agreed monthly rent was $10, plus utilities, and the Jaspers were
required to make all repairs to the house at their own expense.
Within a short time after Jasper started her employment, Hussain
told her the center was not making enough money to justify the size of
the staff. He also encouraged Jasper to attract more children to the
center. Jasper responded by telling Hussain that any staff cuts would
place the center in jeopardy of violating state regulations governing the
minimum ratios between staff and children. See Iowa Admin. Code r.
441—109.8 (2003). Hussain was generally aware of the staffing
requirements imposed by state regulations through his contact with a
consultant and compliance official from the Iowa Department of Human
Services. The consultant dealt with licensing and regulatory compliance
of day-care facilities. She would periodically stop by the center to
determine if the facility was being operated in compliance with all
regulations. Hussain had also hired a private consultant prior to
employing Jasper. The private consultant also informed Hussain of the
necessity to comply with the state ratio requirements. Within a month
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after Jasper started her employment, Hussain was again told of the
staffing ratios at a meeting with both consultants and Jasper.
The staff-to-child ratio became a frequent subject of conversation,
and friction, between Hussain and Jasper. Hussain was persistent in his
desire to reduce staff to decrease expenses, and Jasper was adamant
that the current staff was necessary to meet the minimum staffing ratios
under the state regulations. During one meeting with the Hussains and
Jasper in early November, staff reductions were again discussed. Jasper
claimed Zakia Hussain said, “What [the department of human services
consultant] doesn’t know won’t hurt her.” Hussain made no response to
the statement. In fact, Hussain never specifically told Jasper to violate
or ignore the staffing regulations.
At a meeting between Hussain and Jasper later in November,
Hussain proposed that Jasper and her assistant director begin to work
as staff in the classrooms occupied by the children as a means to cut
staff and reduce expenses. Jasper objected to the plan as unreasonable.
She believed it would prevent her from performing her duties as director
of the center and risk placing the center in violation of the ratio
regulations.
On December 1, 2003, Hussain terminated Jasper from her
employment with Kid University shortly after she arrived for work at the
center in the morning. She was handed a written letter listing the
reasons for the termination and was escorted outside the building. A
confrontation followed after she was told she could not return to the
building to remove her children from the day-care center, and police were
called.
Hussain also brought a forcible entry and detainer action against
the Jaspers for failing to pay the December rent. Jasper and her family
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subsequently moved from the house, and she obtained new employment
with another day-care facility in April 2004.
Jasper brought a wrongful-discharge action against the
corporation and Hussain individually. She claimed Hussain terminated
her employment because she refused to violate the staff-to-child ratios,
in violation of public policy of this state. She sought damages for lost
earnings, emotional pain and suffering, and punitive damages. She also
sought damages relating to the termination of the rental agreement and
for unreimbursed expenses relating to improvements made to the center.
At trial, Jasper presented testimony that the center violated the staff-to-
child ratios shortly after she was terminated. This violation occurred
when one staff member was left in a classroom to supervise five or more
children between the ages of one and two years old. The regulations
promulgated by the department of human services required one staff
member for every four children under the age of two. However, the
district court refused to permit Jasper to present evidence that a second
day-care facility owned by Hussain had been cited by the state for
violating the staff-to-child ratios.
Jasper presented evidence of her damages, including lost wages,
pain and suffering, expenses relating to the house, and unreimbursed
services and expenses relating to the day-care facility. Her damages for
emotional distress suffered as a result of the termination from
employment were supported by her testimony concerning her emotional
state following the termination, as well as the testimony of her husband
and sister.
In particular, Jasper testified she “was a wreck” during the days
immediately following the termination, and “cried a lot.” During the
weeks following the termination, she “didn’t sleep a lot” and “worried
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about money.” The holiday season following the termination was
particularly hard on her, largely due to the financial strain from being
unemployed and having to rely upon her husband’s income. At times,
she “didn’t want to get out of bed,” and began to experience “anxiety
attacks.” On one occasion in February 2004, she testified she went to a
hospital emergency room because she believed she was experiencing a
“heart attack.” A doctor prescribed antidepressant and antianxiety
medication. Jasper did not testify about her emotional state beyond a
couple of months after the termination and certainly nothing after the
time she became reemployed. Jasper was hired as the director of
another day-care facility in the Des Moines area in April 2004. She
worked part-time on occasion at a day-care facility prior to that
employment.
Jasper’s husband testified his wife was “crying and sobbing” on the
day of the termination and that she later became somewhat “distant.”
She was also “short” with the children and was generally depressed. He
also testified she started to gain weight she had lost prior to the
termination. Jasper’s sister testified Jasper was “withdrawn” after the
termination and lacked the “confidence” she had prior to the termination.
The jury returned a verdict for Jasper against the corporation and
Hussain individually, based solely on the tort of wrongful discharge in
violation of public policy. The jury awarded Jasper lost wages of $26,915
and past emotional distress of $100,000. It awarded her $39,507.25 for
expenses relating to the house and additional services and expenses.
The district court refused to submit the punitive-damage claim to the
jury.
During the trial, the district court reserved ruling on a motion for
directed verdict made by Kid University. After the jury verdict was
7
returned, the district court granted the motion. It determined Jasper
failed to establish the existence of a well-recognized and clearly defined
public policy to support her cause of action and that she failed to present
substantial evidence to show she was terminated for refusing to violate
the state staffing regulations. The district court then proceeded to
determine additional claims Kid University raised in a motion for new
trial. The court determined the damages for emotional distress of
$100,000 were excessive and reduced the award to $20,000. It
determined damages relating to the rental house and unreimbursed
expenses were independent of the wrongful-termination-of-employment
action and could not be recovered under the claim.
Jasper appealed, and we transferred the case to the court of
appeals. The court of appeals determined a clear public policy existed in
Iowa that day-care centers be adequately staffed. It also found Jasper
presented substantial evidence to support a finding that she refused to
reduce staff below the minimum ratios and that this conduct was the
cause of her termination. The court of appeals then determined the
district court did not err in finding the $100,000 award for emotional
distress was excessive and in setting aside the award of $39,507.25 for
additional services and housing expenses. However, the court of appeals
treated the reduction of the award for emotional distress as a remittitur
and remanded the case to the district court to give Jasper the
opportunity to accept the remittitur or a new trial. In the event of a new
trial, the court of appeals determined the district court erred in failing to
permit the jury to consider the punitive-damage claim and further found
the district court erred in failing to admit the excluded evidence. Finally,
it found Hussain failed to preserve his claim that he could not be
8
personally liable for the tort because the district court failed to rule on
the issue after granting the directed verdict.
Kid University and Hussain sought, and we granted, further
review. They argue no clearly defined and well-recognized staff-to-child
ratio for day-care centers exists to support a cause of action for wrongful
discharge. They also argue there was insufficient evidence Jasper was
terminated for engaging in any protected activity. Additionally, Hussain
claims the issue of individual liability was properly preserved and only
the corporation as the employer can be liable for claims of wrongful
discharge. Finally, Kid University and Hussain seek review of other
issues decided by the court of appeals that will be relevant in the event of
a new trial.
II. Standard of Review.
We review rulings by the district court on a motion for judgment
notwithstanding the verdict for errors at law. See Summy v. City of
Des Moines, 708 N.W.2d 333, 343–44 (Iowa 2006) (reviewing a directed
verdict for errors at law); Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388,
391 (Iowa 2001) (reviewing judgment notwithstanding the verdict for
errors at law). We also review the issue of personal liability of a
corporate officer or employee for errors at law. Iowa R. App. P. 6.4. Our
review of a motion for a new trial based on discretionary grounds is for
abuse of discretion. Olson v. Sumpter, 728 N.W.2d 844, 848 (Iowa 2007).
III. Public-Policy Exception to Employment-at-Will Doctrine.
A. Overview. We adhere to the common-law employment-at-will
doctrine in Iowa. Fitzgerald v. Salsbury Chem., Inc., 613 N.W.2d 275,
280 (Iowa 2000). However, we joined the parade of other states twenty
years ago in adopting the public-policy exception to the employment-at-
9
will doctrine. Id. at 281. In doing so, we recognized a cause of action in
Iowa for wrongful discharge from employment when the reasons for the
discharge contravene public policy. Id. Since the adoption of this
exception, we have identified and explained the elements of the cause of
action. Lloyd v. Drake Univ., 686 N.W.2d 225, 228 (Iowa 2004). These
elements are: (1) existence of a clearly defined public policy that protects
employee activity; (2) the public policy would be jeopardized by the
discharge from employment; (3) the employee engaged in the protected
activity, and this conduct was the reason for the employee’s discharge;
and (4) there was no overriding business justification for the termination.
Id.; accord Fitzgerald, 613 N.W.2d at 282 n.2.
This case primarily focuses on the public-policy element of the tort
and ultimately requires us to decide if the source of public policy can be
derived from administrative regulations. Yet, the case also requires us to
consider the parameters of the public-policy element and to dig into the
element to unearth and identify the often difficult distinction between a
claim based on public policy and a claim based on a private dispute
between an employer and employee. In this way, we must also consider
the element of the tort that requires the employee to establish that the
discharge was caused by the employee’s participation in an activity
protected by public policy.
B. Sources of Public Policy. The concept of public policy
generally captures the communal conscience and common sense of our
state in matters of public health, safety, morals, and general welfare.
Truax v. Ellett, 234 Iowa 1217, 1230, 15 N.W.2d 361, 367 (1944).
Although public policy can be an elusive concept, once recognized, it
becomes a benchmark in the application of our legal principles. See In re
Marriage of Witten, 672 N.W.2d 768, 779 (Iowa 2003) (recognizing the
10
definition of public policy is largely elusive). We have used public policy
to constrain legal principles in many areas of the law, especially
contracts. While we continue to adhere to the doctrine of employment at
will, we have always recognized that parties may not incorporate matters
into contracts that are contrary to our public policy. Walker v. Gribble,
689 N.W.2d 104, 110–11 (Iowa 2004). This fundamental principle
actually dates back to one of our first cases as a territorial court in 1839,
when we refused to enforce a contract for slavery. See In re Ralph, 1
Morris 1 (Iowa 1839). Thus, the public-policy exception to the
employment-at-will doctrine carries forward a hallmark concept of this
state; that the rights of each individual in a civilized society are
ultimately “limited by the rights of others and of the public at large” and
that the delicate balance between these rights is what helps hold us
together as a society. Gantt v. Sentry Ins., 824 P.2d 680, 686–87 (Cal.
1992), overruled on other grounds by Green v. Ralee Eng’g Co., 960 P.2d
1046 (Cal. 1998); see also Rocky Mountain Hosp. & Med. Serv. v. Mariani,
916 P.2d 519, 523 (Colo. 1996) (“The rationale underlying the [discharge-
in-violation-of-public-policy] exception was the long-standing rule that a
contract violative of public policy is unenforceable.”). When a contract
violates public policy, including a contract of employment, the entire
community is damaged.
In each case we have decided since adopting the public-policy
exception to the employment-at-will doctrine, we have relied on a statute
as a source of public policy to support the tort. See, e.g., Lara v.
Thomas, 512 N.W.2d 777, 782 (Iowa 1994); Springer v. Weeks & Leo Co.,
429 N.W.2d 558, 560 (Iowa 1988). At the same time, we have
consistently rejected claims of wrongful discharge based on public policy
when the public policy asserted by an employee was not derived from a
11
statute. For example, we have declined to find public policy to support a
wrongful-discharge tort based on generalized concepts of socially
desirable conduct. See Lloyd, 686 N.W.2d at 229–30 (rejecting a claim
for wrongful discharge by a private security guard for attempting to
uphold criminal laws by arresting a perceived lawbreaker when no
statute was identified protecting or promoting the employee activity
sought to be protected). We have also held that public policy cannot be
derived from internal employment policies or agreements. See Davis v.
Horton, 661 N.W.2d 533, 536 (Iowa 2003) (holding no cause of action for
public-policy discharge of employee for seeking to mediate an
employment dispute pursuant to an employee handbook when no statute
could be identified that protected the rights of employees to mediate
disputes). In fact, consistent with other states, our wrongful-discharge
cases that have found a violation of public policy can generally be aligned
into four categories of statutorily protected activities: (1) exercising a
statutory right or privilege, Springer, 429 N.W.2d at 559 (right to file
workers’ compensation claim); Lara, 512 N.W.2d at 782 (right to pursue
unemployment benefits); Teachout v. Forest City Cmty. Sch. Dist., 584
N.W.2d 296, 300 (Iowa 1998) (intending to report child abuse); (2)
refusing to commit an unlawful act, Fitzgerald, 613 N.W.2d at 286
(refusal to commit perjury); Borschel v. City of Perry, 512 N.W.2d 565,
567 (Iowa 1994) (referring to refusal “to commit an unlawful act” as one
basis for wrongful-discharge claim); (3) performing a statutory obligation,
Fitzgerald, 613 N.W.2d at 286 (testifying truthfully); and (4) reporting a
statutory violation, see Harvey v. Care Initiatives, Inc., 634 N.W.2d 681,
685–86 (Iowa 2001) (recognizing employee, but not independent
contractor, right to file complaint against employer). See generally Gantt,
824 P.2d at 684; Vanessa F. Kuhlmann-Macro, Blowing the Whistle on
12
the Employment At-Will Doctrine, 41 Drake L. Rev. 339, 341–42 (1992)
(citing three categories of protected whistle-blowing activity).
Our adherence in our prior cases to identifying statutes as a
source of public policy is consistent with our earlier pronouncement that
the tort of wrongful discharge should exist in Iowa only as a narrow
exception to the employment-at-will doctrine. See Springer, 429 N.W.2d
at 560 (adopting narrow public-policy exception). The legislature is the
branch of government responsible for advancing public policy, and
courts can be assured that the tort is advancing “a legislatively declared
goal” when public policy is derived from a statute. See id. at 561. In
turn, we can be assured that the public-policy exception to the
employment-at-will doctrine is a product of the balancing by our
legislature of the competing interests of the employer, employee, and
society. See Fitzgerald, 613 N.W.2d at 283. This balance means the
discretion employers have to discharge at-will employees without cause
will be limited only under narrow circumstances, and the law will
continue to give law-abiding employers the freedom to make managerial
decisions in the operation of their businesses. See Green, 960 P.2d at
1054; Palmateer v. Int’l Harvester Co., 421 N.E.2d 876, 880 (Ill. 1981)
(observing employer business decisions, no matter how sound, cannot
override a decision by the legislature). The use of statutes as a source of
public policy also helps provide the essential notice to employers and
employees of conduct that can lead to dismissal, as well as conduct that
can lead to tort liability. Fitzgerald, 613 N.W.2d at 282. The public-
policy exception was adopted merely to place a limitation on an
employer’s discretion to discharge an employee when the public policy is
so clear and well-defined that it should be understood and accepted in
our society as a benchmark. See Martin Marietta Corp. v. Lorenz, 823
13
P.2d 100, 109 (Colo. 1992) (action directed by employer violates a specific
statute relating to public health, safety, or welfare or undermines a
clearly expressed public policy relating to the employee’s basic
responsibility as a citizen with the employee’s right or privilege as a
worker). Our reliance on statutes as a source of this limitation has been
a way to ensure that the tort continues to serve its objectives.
While we have justifiably relied on statutes, we have not closed the
door to using other sources as a means to derive public policy to support
the tort. We have repeatedly observed that our constitution is a proper
source of public policy. See id. at 283 (citing Borschel, 512 N.W.2d at
567). Moreover, we have recognized that other jurisdictions have used
administrative regulations as a source of public policy, yet we have not
had the occasion to decide the issue until today. See id.; see also Tullis
v. Merrill, 584 N.W.2d 236, 239–40 (Iowa 1998) (relying on an
administrative regulation to find public policy from a statute).
Kid University generally asserts that administrative regulations are
an unreliable source of public policy because they are too numerous to
serve as a recognized guide for employers and do not actually express the
voice of our legislature. It argues that even a regulation pertaining to
safety is merely another administrative rule “in a veritable ocean of safety
regulations” in this state.
In deciding whether administrative regulations may be used as an
additional source of public policy to support the tort of wrongful
discharge, we generally observe a strong fundamental congruence
between statutes and administrative regulations. Administrative
agencies have become an important component of our modern world of
governance as a means for our legislature to better deal with the array of
complex and technical problems it faces. See Mistretta v. United States,
14
488 U.S. 361, 372, 109 S. Ct. 647, 654–55, 102 L. Ed. 2d 714, 731
(1989) (discussing the development of congressional delegation of
authority). Thus, our legislature often delegates its rule-making
authority to administrative agencies as a means to better accomplish its
objectives in dealing with these problems. See Auen v. Iowa Dep’t of
Commerce, 679 N.W.2d 586, 590 (Iowa 2004) (addressing legislature’s
delegation of authority to adopt rules necessary to carry out Iowa Code
chapter 123). The administrative regulations ultimately adopted are
necessarily tied to the broad directives of the legislature and effectuate
the intent of the enabling legislation. See Lenning v. Iowa Dep’t of
Transp., 368 N.W.2d 98, 103 (Iowa 1985) (analyzing the validity of an
administrative rule based on whether the rule conflicts with the intent of
the enabling legislation). Administrative regulations have the force and
effect of a statute. Stone Container Corp. v. Castle, 657 N.W.2d 485, 489
(Iowa 2003). Moreover, the regulations are required to be consistent with
the underlying broader statutory enactment. Iowa Dep’t of Revenue v.
Iowa Merit Employment Comm’n, 243 N.W.2d 610, 615–16 (Iowa 1976).
These observations reveal that administrative regulations can be
an important part of a broader statutory scheme to advance legislative
goals. They can reflect the objectives and goals of the legislature in the
same way as a statute. Consequently, the justification for relying on
statutes as a source of public policy can equally apply to administrative
regulations. Administrative regulations have the potential to reflect
legislative intent, satisfy our concern that public policy be derived from
statutory sources, and can provide the same notice to employees and
employers as a statute. The argument that most administrative
regulations are too detailed and numerous to serve as a source of public
policy is itself too generalized to eliminate all administrative regulations
15
as a source of public policy. Consequently, we are satisfied that
administrative regulations can be used as a source of public policy to
support the tort of wrongful discharge when adopted pursuant to a
delegation of authority in a statute that seeks to further a public policy.
We also recognize this position is consistent with most jurisdictions that
have considered the question. See Green, 960 P.2d at 1054; Conoshenti
v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 149 (3d Cir. 2004)
(New Jersey law); Schatzman v. Martin Newark Dealership, Inc., 158
F. Supp. 2d 392, 398–99 (D. Del. 2001) (Delaware law); Bonidy v. Vail
Valley Ctr. for Aesthetic Dentistry, P.C., 186 P.3d 80, 83 (Colo. Ct. App.
2008); Sears, Roebuck & Co. v. Wholey, 779 A.2d 408, 413 (Md. Ct. Spec.
App. 2001); Kittelson v. Archie Cochrane Motors, Inc., 813 P.2d 424, 426–
27 (Mont. 1991); Leininger v. Pioneer Nat’l Latex, 875 N.E.2d 36, 39 (Ohio
2007); Weaver v. Harpster, 885 A.2d 1073, 1077 (Pa. Super. Ct. 2005);
Feliciano v. 7-Eleven, Inc., 559 S.E.2d 713, 723 (W. Va. 2001); Bammert v.
Don’s Super Valu, Inc., 646 N.W.2d 365, 369 (Wis. 2002). But see
Rackley v. Fairview Care Ctrs., Inc., 23 P.3d 1022, 1030 (Utah 2001).
Nevertheless, a declaration that an administrative regulation can
be a source of public policy to support the tort of wrongful discharge
does not answer the question whether a particular administrative
regulation is a source of public policy to support the tort. To support the
tort, an administrative regulation must state a clear and well-defined
public policy that protects an activity in the same way as a statute must
state a clear and well-defined public policy to support the tort. See
Lloyd, 686 N.W.2d at 228 (requiring “the existence of a clearly defined
public policy that protects an activity”). Thus, the administrative
regulation must not only relate to public health, safety, or welfare, but
the regulation must also express a substantial public policy in a way that
16
furthers a specific legislative expression of the policy. Accordingly, we
turn to the particular administrative regulation governing day-care
facilities at issue in this case to determine if it actually expresses a clear
and well-defined public policy that can support a wrongful-discharge
claim. While courts do not declare public policy, courts must necessarily
determine if public policy has been expressed in a statute or an
administrative regulation.
C. Public Policy Derived From Administrative Rules Governing
Staff Ratios of Day-Care Facilities. Our legislature has chosen to
regulate day-care facilities under chapter 237A of the Code. The
regulatory agency is the department of human services. Iowa Code
§ 237A.12. Specifically, this statute authorizes the department to “adopt
rules setting minimum standards to provide quality child care in the
operation and maintenance” of day-care facilities. Iowa Code
§ 237A.12(1). The legislature specifically authorized the department to
adopt rules regulating
[t]he number . . . of personnel necessary to assure the
health, safety, and welfare of children in the facilities.
Iowa Code § 237A.12(1)(a).
One rule adopted by the department in response to this legislative
directive establishes specific staff-to-child ratios. Iowa Admin. Code r.
441—109.8. The employee in this case relies upon this administrative
rule as a declaration of a public policy that prohibits an employer from
discharging an employee for refusing to violate the staff-to-child ratio
rule or for insistence on compliance with the rule.
Our prior cases have revealed that not all legislative enactments
support a wrongful-discharge tort. Instead, “many statutes simply
regulate conduct between private individuals, or impose requirements
17
whose fulfillment does not implicate fundamental public policy
concerns.” Foley v. Interactive Data Corp., 765 P.2d 373, 379 (Cal. 1988).
The difficult task for courts is to determine which claims involve public
policy and which claims involve private disputes between employers and
employees governed by the at-will employment doctrine. See Gantt, 824
P.2d at 684; see also Fitzgerald, 613 N.W.2d at 282 (holding court
determines issue as a matter of law). Our prior cases provide many
important guidelines.
From the beginning of our adoption of the public-policy exception,
we have emphasized that the public policy must be both well recognized
and clearly expressed. Springer, 429 N.W.2d at 560. These two concepts
partially express the important notion that the policy identified must deal
with a public interest so that the discharge from employment violates a
fundamental, well-recognized interest that serves to protect the public,
not individual interests. Of course, the public interest in a policy is most
easily observed in those instances when an enactment expressly protects
a specific employment activity from adverse employment consequences.
See Tullis, 584 N.W.2d at 239 (considering a statute that not only
permits employees to file claims for wages, but expressly prohibits an
employer from discharging employee for filing a claim for wages). Yet, in
our seminal case adopting the tort of wrongful discharge, we made it
clear that the public policy to support the tort can exist in a statute
without an express declaration that the specific activity is protected from
adverse employment consequences. See Springer, 429 N.W.2d at 560–
61. Instead, public policy to support the tort can be found if the statute
clearly implies the activity in question is protected in the workplace.
In Springer, we found an express declaration in the statute that an
employer could not be relieved of any duties imposed under the workers’
18
compensation statute to be a clear implication of a public policy to
protect an employee from adverse employment consequences for filing a
claim for benefits. Id. The unqualified statutory declaration impliedly
captured the specific protected activity to serve as the foundation for the
tort. This requirement of aligning public policy with specific statutory
language can be observed in our cases that followed Springer. See
Fitzgerald, 613 N.W.2d at 286 (statute that outlaws perjury clearly
implies a public policy to protect an employee who either refuses to
commit perjury or insists on providing truthful testimony); Teachout, 584
N.W.2d at 300–01 (statute that specifically promotes the reporting of
child abuse clearly implies a public policy to protect an employee who
files a child abuse report from adverse employment activity); Lara, 512
N.W.2d at 782 (statute that voids “any agreement” to limit or deprive an
employee of unemployment benefits clearly implies a public policy to
protect a worker who seeks partial unemployment benefits from adverse
employment activity). These cases reflect the principle that the public
policy to support the tort must be clear and well-defined so that a
legislative declaration of a protected activity will provide the required
notice to employers and employees.
On the other hand, legislative pronouncements that are limited in
scope may not support a public policy beyond the specific scope of the
statute. See Fitzgerald, 613 N.W.2d at 285 (statutes that protect against
specific discriminatory practices do not imply a public policy to protect
workers who engage in conduct not specifically covered from adverse
employment action); Harvey, 634 N.W.2d at 685–86 (statute that
authorizes persons to request state authorities to investigate a nursing
home, but only specifically provides whistle-blowing protection to
“employees” and “residents” does not imply a public policy to protect
19
whistle-blowers who are independent contractors). A court may not give
public-policy protection that the legislature has chosen not to provide
under a statutory scheme. Overall, these prior cases have made it clear
that a policy sought to be derived from an enactment must affect a public
interest so that the tort advances general social policies, not internal
employment policies or individual interests. Consequently, this same
approach is applicable to determine if an administrative regulation
advances a public policy to support the tort.
In this case, the legislature clearly delegated authority to the
department of human services to promulgate specific rules concerning
the proper staff-to-child ratios as a means “to assure the health, safety,
and welfare of children” in day-care facilities. Iowa Code § 237A.12(1)(a).
Without question, the protection of children is a matter of fundamental
public interest. Teachout, 584 N.W.2d at 300–01. See also Palmateer,
421 N.E.2d at 876 (observing there is no public policy more important or
fundamental than one favoring the effective protection of the lives of
citizens). These factors satisfy the goal that the regulation affect the
public interest.
Nevertheless, Kid University argues that the specific ratio
regulations, while important, are not important enough to limit the
discretion of employers to discharge employees. We agree with Kid
University that the public policy advanced by the wrongful-discharge tort
must be important and that many administrative regulations may not
support the tort. However, we have no hesitation in finding that the
staff-to-child ratios demonstrate an important public policy in Iowa. Our
legislature has specifically said the ratios are needed to protect children,
and we have consistently declared the safety of children to be one of our
highest priorities in this state. See In re B.B.M., 514 N.W.2d 425, 428
20
(Iowa 1994) (holding “the welfare of the child is the paramount
consideration” in cases dealing with children). We recognize the right of
employers to operate a business is also important, but certainly not more
important than the health, safety, and welfare of our children. We
disagree with the district court that the use of this administrative
regulation as a basis for the tort will undermine the at-will employment
doctrine. To the contrary, it expresses the type of policy the tort was
designed to embrace. Our legislature clearly wanted the ratios to be put
into place to protect children, and this important public objective would
be thwarted if an employer could discharge an employee for insisting the
ratios be followed.
Lastly, Kid University argues that this particular administrative
regulation is too detailed and confusing to qualify as a “clearly defined”
public policy. It asserts reasonable employers could not expect to know
they are violating the public policy behind the ratios by discharging an
employee when the ratios are not “clearly defined.”
While the particular administrative regulation at issue in this case
may be detailed, no reasonable employer with knowledge of the ratio
requirements would believe the ratios could be disregarded or that the
refusal by an employee to disregard the ratios could be used as a reason
to terminate the employee. Any confusion in the application of the ratios
would not undermine or diminish the important public policy that day-
care facilities in this state be operated with an adequate number of staff
as determined by the Iowa Department of Human Services.
We conclude the particular administrative rule at issue in this case
supports a clear and well-defined public policy that gives rise to the tort
of wrongful discharge. The ratios were implemented at the specific
direction of the legislature to protect the health, safety, and welfare of
21
those children in Iowa who attend day-care facilities. Additionally, the
legislature intended for the ratios to be an important component of the
larger public policy to protect children and, in turn, established a basic,
important component of the operation of a day-care center in Iowa.
These factors transform the ratios into a public policy and satisfy the
element of the tort that a clear and well-defined public policy that relates
to public health, safety, or welfare be identified.
D. Employee Participation in the Protected Activity as a
Cause of the Discharge. In addition to the existence of a public policy
to create a protected activity, the tort of wrongful discharge requires
proof that the discharge was a result of the employee’s participation in
the protected activity. This requirement is frequently identified as the
causation component of the tort and requires the employee to show the
protected activity engaged in by the employee was the “determinative
factor in the employer’s decision” to terminate the employee. Teachout,
584 N.W.2d at 301.
Kid University first argues Jasper failed to establish this element
because there was no evidence it actually violated the ratio requirements
during Jasper’s term of employment, and there was no evidence Jasper
even reported a suspected violation of the ratio requirements to the
department of human services during her employment. Thus, Kid
University asserts Jasper did not engage in a protected activity to
support liability. Instead, it claims Jasper was merely engaged in an
internal employment dispute with Kid University over a legitimate
employer concern that the center was overstaffed.
We have recognized the tort of wrongful discharge not only protects
the reporting of an activity violative of public policy, but also protects the
refusal by an employee to engage in activity that is violative of public
22
policy. See Fitzgerald, 613 N.W.2d at 286. Thus, Jasper was not
required to show that Kid University knowingly violated the ratio
requirements or that she reported a suspected violation to state officials.
Under the category of claim brought by Jasper, she was only required to
show Kid University wanted her to cut staff below the ratio requirements,
and she was discharged for refusing to do so. See Sears, Roebuck & Co.,
779 A.2d at 414–15 (“ ‘Limitation of the claim for [wrongful] discharge to
situations involving the actual refusal to engage in illegal activity, or the
intention to fulfill a statutorily prescribed duty, ties [wrongful] discharge
claims down to a manageable and clear standard.’ ” (quoting Adler v. Am.
Standard Corp., 830 F.2d 1303, 1307 (4th Cir. 1987)).
Kid University argues there was insufficient evidence to support a
finding by the jury that it requested Jasper to violate the ratio
requirement or that she refused to do so. Again, Kid University
characterizes the dispute as a legitimate employer concern to minimize
overhead and expenses in the operation of its business.
We readily recognize the tort of wrongful discharge is not intended
to interfere with legitimate business decisions of an employer. Yet,
staffing a day-care facility below the minimum requirements established
by an administrative rule is not a legitimate business concern.
In this case, there was sufficient circumstantial evidence that Kid
University wanted Jasper to reduce staff below the minimum state
requirements. Hussain repeatedly urged Jasper to cut staff after Jasper
had repeatedly told him the staff ratios were at the minimum levels. The
repeated nature of the discussions over the reduction of staff, under the
circumstances, was circumstantial evidence that Kid University wanted
Jasper to disregard the requirements. Similarly, Zakia Hussain’s
comment about failing to disclose staff levels to the department of
23
human services could be viewed as an implied demand to disregard the
minimum ratios. Likewise, the evidence that Jasper was discharged
within a short time after a discussion over staffing levels, as well as
evidence that the center violated the staffing level shortly after Jasper
was discharged, circumstantially shows Kid University wanted Jasper to
violate the state requirements.
This same evidence supports a finding by the jury that Jasper was
discharged because she refused to violate the state requirements. We
have said that the timing between the protected activity and the
discharge is insufficient, by itself, to support the causation element of
the tort. Hulme v. Barrett, 480 N.W.2d 40, 43 (Iowa 1992). However,
there was ample circumstantial evidence for the jury to conclude Jasper
was discharged for refusing to staff at a level below the minimum
requirements. Kid University contends it offered ample evidence to
justify the decision on grounds that did not violate public policy, but the
jury was free to conclude those reasons were merely pretextual. We
conclude there was sufficient evidence that Jasper’s refusal to violate the
administrative regulations was a cause of her discharge and that there
was no overriding justification for the termination.
IV. Compensatory Damages.
A. Posttrial Motions Relating to Damages. Following an
adverse verdict at trial, a defendant may file a motion for judgment
notwithstanding the verdict and motion for new trial. Iowa Rs. Civ. P.
1.1003, 1.1004. These rules authorize the district court to grant a
motion notwithstanding the verdict when the defendant requested a
directed verdict at trial at the close of the evidence, was entitled to the
directed verdict, and the jury failed to return the verdict. Iowa R. Civ. P.
1.1003. Under these circumstances, the district court may correct the
24
error by either entering the judgment as if it had directed a verdict at
trial or by granting a new trial. Id.
When a district court grants a motion for judgment
notwithstanding the verdict, it is also required “to rule on any motion for
new trial by determining whether it should be granted” in the event the
judgment is vacated or reversed on appeal. Iowa R. Civ. P. 1.1008(3). A
motion for judgment notwithstanding the verdict and motion for new trial
often address different issues, and this requirement promotes judicial
economy by allowing all issues to be preserved and decided on appeal.
In this case, Kid University moved for judgment notwithstanding
the verdict and, alternatively, for a new trial. The motion for judgment
notwithstanding the verdict set forth the claim that Kid University was
not liable as a matter of law for the tort of wrongful discharge and further
claimed Hussain could not be individually liable for the tort. The
alternative motion for new trial included issues relating to damages. Kid
University claimed the damages for emotional distress were excessive,
and the damages for expenses and services were not recoverable.
After the district court entered judgment notwithstanding the
verdict for Kid University and Hussain, it did not separately rule on the
claim that Hussain could not be individually liable. However, it
proceeded to consider the new-trial issues raised by Kid University in the
event the ruling on the motion for judgment notwithstanding the verdict
was reversed on appeal. In doing so, it found the award for emotional
distress was excessive and should be reduced to $20,000 and held the
property damages were not recoverable. 2 Thus, we proceed to determine
2The district court did not specifically rule that it was conditionally granting the
alternative motion for new trial, but merely ruled that the emotional-distress award
should be reduced to $20,000 and the award for property damage should be eliminated.
However, considering that rule 1.1008 requires a district court to determine if a motion
25
the issues decided by the district court in the motion for new trial,
having found that the district court erred in granting the judgment
notwithstanding the verdict.
B. Overview of Damages and Causation. Wrongful discharge of
employment in violation of public policy is an intentional tort in Iowa.
See Niblo v. Parr Mfg., Inc., 445 N.W.2d 351, 355 (Iowa 1989). The legal
remedy provided for victims of the tort covers the complete injury,
including economic loss such as wages and out-of-pocket expenses, as
well as emotional harm. Id. Emotional harm is a personal injury, and
economic loss constitutes property damage. Thus, both personal injury
and property damage are recoverable.
Even if an employer wrongfully discharges an employee in violation
of public policy and the employee suffers injuries, there can be no
liability for the wrongful discharge without a causal connection between
the discharge and the injury. The causal link essentially requires the
discharge to be an actual cause of the injury and further requires the
discharge to be a proximate cause of the injury. Generally, the wrongful
discharge is an actual cause of the injury if the employee would not have
suffered the same injury had the employer not discharged the employee.
See Faber v. Herman, 731 N.W.2d 1, 7 (Iowa 2007) (discussing causation
for new trial should be granted or denied, we consider the ruling made by the district
court to be a conditional grant of a motion for new trial. The ruling expressed grounds
that could only support a conditional grant of a new trial. We also observe that rule
1.1010 permits the district court to conditionally grant a new trial by giving a party a
choice between consenting to a reduced or modified judgment and proceeding to a new
trial. In this case, the district court reduced and modified the verdict, but did not
specifically give Jasper the option to avoid a new trial by consenting to the reduced and
modified judgment. Nevertheless, we consider the decision by the district court to
reduce and modify the verdict to be a conditional new trial under rule 1.1010. Because
the new trial was conditioned on appellate review of the district court ruling on the
judgment notwithstanding the verdict, there was no need for the district court to further
make the new trial conditional under rule 1.1010 until the judgment notwithstanding
the verdict was reversed on appeal and remanded for new trial.
26
generally). The wrongful discharge is a proximate cause of the injury if
the injury is not beyond the risks assumed by an employer, so it would
not be unjust to hold the employer responsible for injuries actually
caused by the wrongful discharge. See id.
C. Property Damage. The property damage by Jasper included a
claim for economic losses based on expenses incurred and work
performed in renovating the house rented from the Hussains, expenses
incurred in improving the day-care center, and the expenses of renting
another house following the discharge. Jasper claims these economic
losses arose from the employment agreement and were caused by the
wrongful termination. Kid University claims these damages may be
recoverable under other theories of liability, but not for the tort of
wrongful termination.
Lost future wages and benefits under an employment contract are
normally recoverable as compensatory damage in a wrongful-termination
action. See Smith v. Smithway Motor Xpress, Inc., 464 N.W.2d 682, 687
(Iowa 1990). Yet, there was insufficient evidence in this case to support
a finding that the rental house was a term or a benefit under the
employment agreement. The contract of employment was entered into
prior to the rental agreement, and the only connection between the two
contracts was the identity of the parties and the inconsequential
agreement between Hussain and Jasper that the monthly rent for the
house would be deducted from Jasper’s wages. Clearly, the employment
and rental agreements were separate contracts that were entered into as
a result of separate bargains. The termination of one of the agreements
did not affect the other agreement, and there was no evidence the rental
agreement terminated if the employment agreement was terminated. In
27
fact, Jasper claimed the term of the rental agreement was two years, but
acknowledged she was an employee at will.
Without a connection between the contract for employment and
the rental agreement, Jasper cannot establish that the expenses and
labor for improvements to the rental house prior to discharge would not
have been incurred if Kid University had not terminated her from her
employment. In fact, the expenses and labor sought by Jasper were
incurred prior to the discharge. Similarly, the unreimbursed expenses
associated with improvements made to the day-care center had no causal
connection to the discharge. Again, Jasper cannot establish those
expenses would have been reimbursed if Kid University would not have
terminated her employment. The discharge was not shown to be a
factual cause of either item of damage, and Jasper has not offered any
other theory of causation to establish an actual cause between the
claimed injuries and the discharge.
Finally, we consider if the evidence was sufficient to support a
finding that the expenses of maintaining a different house after Jasper’s
move from the house rented from the Hussains was causally connected
to the discharge. This item of damages is largely predicated on the
greater amount of rent incurred by Jasper for the new house over the
eighteen months that remained on the rental agreement for the Hussain
house. Thus, the claim necessarily considers that the Hussain home
had a rental value equal to the monthly cost of repairs plus $10. While
Jasper may not have incurred the increased amount of rent for a
different home if she had not been discharged, she has failed to explain
how it would be just to hold an employer responsible for the
consequences of her move to a new house with a greater rental value.
28
Even if actual causation was established, the discharge was not a
proximate cause of the expenses of renting a new home.
The district court did not err in granting a new trial. The property
damage award was not recoverable.
D. Personal Injury. A court may grant a new trial based on a
number of grounds, including when an excessive or inadequate award of
damages was made that was influenced by passion or prejudice or when
the verdict was not supported by sufficient evidence. Iowa R. Civ. P.
1.1004(4), (6). The district court in this case relied on both grounds in
granting the motion for new trial. It concluded the jury award of
$100,000 for emotional distress was excessive due to passion or
prejudice by the jury and the award was not supported by sufficient
evidence.
We begin our review of the decision by the district court to grant a
new trial by considering the excessiveness of the award for emotional
distress based on passion or prejudice. We recently discussed and
applied this standard in WSH Properties, L.L.C. v. Daniels, 761 N.W.2d 45(Iowa 2008). In Daniels we emphasized that a clearly excessive verdict
gives rise to a presumption that it was the product of passion or
prejudice. WSH Props., 761 N.W.2d at 50. Without such a presumption,
passion or prejudice must be found from evidence appearing in the
record. Id. In either event, the grant of a new trial under rule 1.1004(4)
is based on the presence of passion or prejudice in the award of
damages. This proposition is what distinguishes the grant of new trial
under rule 1.1004(4) from the grant of a new trial based on the
insufficiency of evidence under rule 1.1004(6). An excessive award of
damages that was influenced by passion or prejudice is necessarily
29
based on insufficient evidence, but a verdict based on excessive damages
can occur in the absence of passion or prejudice. See id.
In this case, the district court believed passion and prejudice was
afoot in the award of emotional-distress damages by the jury, but
additionally found there was insufficient evidence presented by Jasper at
trial to sustain an award for emotional-distress damages of $100,000.
Both claims must be addressed because an excessive award of damages
due to passion or prejudice may not be remitted on appeal as a condition
of avoiding a new trial. WSH Props., 761 N.W.2d at 49–50.
While the district court expressed a belief that the jury was
motivated by passion and prejudice in making its award of emotional-
distress damages, we require this ground for a new trial to be
affirmatively established. Id. The district court indicated prejudice was
established by the nature of the case and because Hussain was of Indian
descent, spoke in nonnative English, and was unsympathetic as a
witness. We find these reasons, without more, fail to affirmatively show
prejudice by the jury.
We have not previously considered the sufficiency of evidence to
support an award of damages for emotional distress in a wrongful-
termination-of-employment action. We have, however, said that the
amount of an award is primarily a jury question, and courts should not
interfere with an award when it is within a reasonable range of the
evidence. Kautman v. Mar-Mac Cmty. Sch. Dist., 255 N.W.2d 146, 147
(Iowa 1977).
At the outset, we recognize Kid University does not claim the
evidence in this case failed to support an award for emotional-distress
damages. Instead, it only claims the evidence did not support an award
of $100,000. Additionally, it is generally recognized that damages for
30
pain and suffering are by their nature “highly subjective” and are not
“easily calculated in economic terms.” Shepard v. Wapello County, 303
F. Supp. 2d 1004, 1021 (S.D. Iowa 2003). Nevertheless, an award for
emotional-distress damages is not without boundaries, but is limited to a
reasonable range derived from the evidence. Id. Accordingly, it is helpful
in considering a claim of excessive damages to consider the rough
parameters of a range from other like cases. Id. Of course, we have said
that precedent is of little value when determining the excessiveness of a
verdict. Northrup v. Miles Homes, Inc. of Iowa, 204 N.W.2d 850, 861
(Iowa 1973). Yet, this approach does not mean other cases should not be
used to establish broad ranges from which to examine particular awards
of emotional-distress damages.
In Shepard, the court reviewed a host of cases addressing claims of
excessiveness of emotional-distress damages in employment cases.
While emotional-distress damages tend to range higher in employment
cases involving sexual harassment and discrimination and other cases
involving egregious, sometimes prolonged, conduct, the awards are
noticeably less in cases involving a single incident of wrongful discharge
that gives rise to the common consequences of any involuntary loss of
employment, such as “anger, confusion, loss of esteem, financial worry,
and the effect on marital relationships.” Shepard, 303 F. Supp. 2d at
1022–23. In Kucia v. Southeast Arkansas Community Action Corp., 284
F.3d 944, 948 (8th Cir. 2002), the court said an emotional-distress
award in a wrongful-termination action of $50,000 presented a “close”
question of excessiveness. The plaintiff testified in the case that the
termination resulted in low self-esteem, general uneasiness, loss of sleep,
and marital problems. Kucia, 284 F.3d at 947. Some of these problems
still persisted at the time of trial. Id. In Frazier v. Iowa Beef Processors,
31
Inc., 200 F.3d 1192, 1194 (8th Cir. 2000), the court said an emotional-
distress award in a wrongful-termination case of $40,000 appeared
“generous,” but not “excessive.” The plaintiff in the case testified he lost
his dignity and self-esteem and felt lost and empty. Frazier, 200 F.3d at
1193. His wife testified he was a “broken man.” Id. In Foster v. Time
Warner Entertainment Co., L.P., 250 F.3d 1189, 1196 (8th Cir. 2000), the
court held an award of $75,000 was not excessive. In that case, the
termination left the plaintiff devastated, withdrawn, and plagued by back
pain, muscle stress, and stomach problems. Foster, 250 F.3d at 1196.
She had not yet fully recovered by the time of trial and feared she would
be unable to find another job. Id. Even more egregious circumstances,
however, can push the range of emotional-distress damages higher. In
Mathieu v. Gopher News Co., 273 F.3d 769, 783 (8th Cir. 2001), the court
upheld an emotional-distress award of $165,000. In that case, the
plaintiff had worked for the company for thirty-four years, the last
sixteen years as the manager, and was close to retirement. Mathieu, 273
F.3d at 773. The termination substantially altered his financial future.
Id.
This sampling of cases provides a helpful context within which to
evaluate the excessiveness of an award of emotional-distress damages.
These cases reveal that the upper range of emotional-distress damages
increases as the nature of the wrongful conduct involved becomes more
egregious, and the emotional distress suffered becomes more severe and
persistent. Even the length of the employment, compatibility of the
worker in the employment, age and employment skills of the worker, and
the span of time necessary to become reemployed impact the amount of
emotional-distress damages.
32
While a broad range of emotional-distress damages in all
employment-termination cases may support awards of $200,000 and
beyond, termination cases involving a single incident of wrongful-
termination conduct producing the more common consequences of any
involuntary loss of employment support a much lower range of damages.
Jasper’s case should be evaluated from this lower range. A number of
reasons support this conclusion. First, Jasper only worked for the day-
care center for a few months prior to termination. Second, she was a
relatively young person at the time of her termination and was able to
become reemployed on a full-time basis as a director of another day-care
facility within five months after her termination. Third, the evidence of
emotional distress was not supported by medical testimony and was
largely nonspecific. Most of the evidence was confined to general
descriptive observations, restricted to the first days and months following
the termination. There was no evidence the emotional distress she
experienced after losing her job continued for a prolonged period of time.
We recognize Jasper was briefly denied access to her children at
the time she was terminated and was confronted by police before she left
the day-care center with her children. This evidence distinguishes this
case from others, but the distress it produced involved a short period of
time.
In the end, we are unable to conclude the district court abused its
discretion in finding the emotional-distress damages were excessive.
While courts must respect the jury process, we too must respect the
vantage point of the district court in assessing the evidence in ruling on a
motion for new trial. This is especially true of a trial court’s decision to
grant a new trial, as we are “slower to interfere with the grant of a new
trial than with its denial.” Iowa R. App. P. 6.14(6)(d). Clearly, an award
33
of $100,000 for emotional distress would not fall within the range of
cases supported by evidence of egregious conduct and special
circumstances. The district court did not abuse its discretion in
determining the case fell within the lower range of emotional-distress
damages and did not err in granting a new trial based on insufficient
evidence to support an award of emotional-distress damages of
$100,000.
V. Punitive Damages.
Generally, punitive damages may be awarded in an action for
wrongful discharge from employment in violation of public policy. See
Tullis, 584 N.W.2d at 241. Wrongful discharge in violation of public
policy involves intentional conduct and will give rise to a claim for
punitive damages when the discharge is committed with either actual or
legal malice. See Cawthorn v. Catholic Health Initiatives Iowa Corp., 743
N.W.2d 525, 529 (Iowa 2007) (holding punitive damages are recoverable
only when the defendant acts with actual or legal malice). Legal malice is
shown when the wrongful conduct is committed with a reckless or willful
disregard for the consequences of the conduct. Id.
We have refused to permit punitive damages in an action for
retaliatory discharge when the grounds for the discharge have been
recognized for the first time in the instant case to be in violation of public
policy. Lara, 512 N.W.2d at 782. The rationale behind this rule is an
employer cannot willfully and wantonly disregard rights of an employee
derived from some specific public policy when the public policy has not
first been declared by the legislature or our courts to limit the discretion
of the employer to discharge an employee at the time of the discharge.
See Smith, 464 N.W.2d at 687.
34
Although the tort of wrongful discharge in violation of public policy
has been recognized in Iowa for over twenty years, this case is the first
time we have specifically recognized a cause of action for wrongful
discharge arising from the refusal of the employee to violate
administrative rules. Additionally, there has otherwise been no
declaration that the subject matter of the administrative rules in dispute
in this case were of the type that would support a tort of wrongful
discharge. Consequently, we agree with the district court that punitive
damages were not recoverable in this case. The district court properly
refused to submit the punitive-damage claim to the jury.
VI. Personal Liability of Corporate Officer.
A. Preservation of Error. We first address the argument by
Jasper that Hussain failed to preserve his claim that he cannot be
individually liable for any wrongful termination by Kid University.
Hussain submitted the claim to the district court in a motion for
summary judgment prior to trial and again in a motion for judgment
notwithstanding the verdict after the trial. The district court granted the
motion for judgment notwithstanding the verdict, but only on the
alternative ground that there was no underlying tort for wrongful
discharge as a matter of law. Thus, Hussain was ultimately successful
in obtaining a dismissal of the case against him, but not on the specific
grounds that a corporate officer or employee of the corporation could not
be individually liable for the tort. Jasper then appealed, and Hussain
raised the issue of individual liability as an alternative ground for
affirming the district court ruling on appeal. Jasper now claims Hussain
failed to preserve error for appeal because he failed to raise the issue by
way of a cross-appeal and further failed to request a ruling by the district
35
court after the court dismissed the case on grounds that no cause of
action existed.
Hussain was not required to cross-appeal or to request the district
court to rule on the issue after the district court dismissed the case on
other grounds. As a successful party at trial, error was preserved by
asserting the claim before the district court. 3 An erroneous decision by
the district court can be affirmed on appeal based on a different ground
that was properly raised at trial. State ex rel. Miller v. Nat’l Farmers Org.,
278 N.W.2d 905, 906 (Iowa 1979).
B. Individual Liability of Corporate Officer and Employee. We
adopted the tort of wrongful discharge in violation of public policy within
the context of liability of an employer. In the subsequent development of
our law on the tort, we have not addressed the issue of individual liability
of corporate officers and other employees who participate in the
discharge. We have in existence, however, a rich body of law that
generally imposes individual liability on corporate officers for their own
torts, even when acting in their official corporate capacity. Haupt v.
Miller, 514 N.W.2d 905, 907–09 (Iowa 1994); Briggs Transp. Co. v. Starr
Sales Co., 262 N.W.2d 805, 809 (Iowa 1978); Grefe v. Ross, 231 N.W.2d
863, 868 (Iowa 1975); White v. Int’l Text-Book Co., 173 Iowa 192, 194,
3We recognize the familiar rule of appellate review that issues must ordinarily be
raised and decided by the district court before we will decide them on appeal. Meier v.
Senecaut, 641 N.W.2d 532, 537 (Iowa 2002). When the district court fails to rule on an
issue raised by a party, the party who raised the issue must file a motion requesting a
ruling to preserve error for appeal. Id. However, this rule does not apply to the party
who was successful before the district court. When the district court dismisses a case
based on one of several grounds asserted by a party, the successful party is not
required to request the district court to also rule on the other grounds in order to assert
those grounds in support of affirming the district court ruling on appeal. Moyer v. City
of Des Moines, 505 N.W.2d 191, 193 (Iowa 1993) (“A successful party, without
appealing, may attempt to save a judgment on appeal based on grounds urged in the
district court but not considered by that court.”).
36
155 N.W. 298, 299 (1915) (“The corporation and its servants, by whose
act the injury was done, may be joined in an action of tort in the nature
of trespass.” (quotations omitted)); Restatement (Third) Agency § 7.01, at
115 (2006) (“An agent is subject to liability to a third party harmed by
the agent’s tortious conduct. Unless an applicable statute provides
otherwise, an actor remains subject to liability although the actor acts as
an agent or an employee, with actual or apparent authority, or within the
scope of employment.”). In adopting this rule, we reasoned that the legal
status of a corporation as an independent entity was not created to
insulate officers from liability for their own tortious conduct, but was
only intended to generally insulate shareholders from individual liability
for corporate conduct and officers from liability for corporate contracts.
Haupt, 514 N.W.2d at 909. To impose individual liability, however, the
corporate officer must personally participate in the tortious conduct. Id.
While we have not previously considered the question of individual
liability for the tort of wrongful discharge, a few jurisdictions have
decided the issue with mixed results. Those states that impose liability
on an individual employee who participates in the tort of wrongful
discharge essentially view wrongful discharge as any other tort within the
existing rule that imposes individual liability on employees for their own
tortious conduct. See DeCarlo v. Bonus Stores, Inc., 512 F.3d 173, 177
(5th Cir. 2007); Higgins v. Assmann Elecs., Inc., 173 P.3d 453, 458 (Ariz.
Ct. App. 2007); Ballinger v. Del. River Port Auth., 800 A.2d 97, 110–11
(N.J. 2002); Harless v. First Nat’l Bank, 289 S.E.2d 692, 698–99 (W. Va.
1982). Those courts that refuse to impose personal liability do not
challenge the general rule of individual liability of corporate officers for
their own tortious conduct, but essentially conclude the tort can only be
committed by the person or legal entity that employs the terminated
37
employee. See Hooper v. North Carolina, 379 F. Supp. 2d 804, 814–15
(M.D.N.C. 2005) (North Carolina law); Miklosy v. Regents of the Univ. of
Cal., 188 P.3d 629, 644–45 (Cal. 2008); Buckner v. Atl. Plant Maint., Inc.,
694 N.E.2d 565, 569 (Ill. 1998); Rebarchek v. Farmers Coop. Elev., 35
P.3d 892, 903 (Kan. 2001); Bourgeous v. Horizon Healthcare Corp., 872
P.2d 852, 855–56 (N.M. 1994); see also Reno v. Baird, 957 P.2d 1333,
1347 (Cal. 1998). These courts reason that an individual officer or
employee of a corporation cannot commit the tort of wrongful discharge
because an individual officer or employee has no authority separate from
the authority exercised on behalf of the corporation to discharge an
employee of the corporation. In this way, these courts view the discharge
as an element of the tort, as well as the injurious act, which an officer or
employee commits only as an agent of the corporation. In other words,
wrongful discharge is a corporate tort within a corporate setting, not an
individual tort.
While all courts who have considered the question of individual
liability rely at least in part on the general legal principles governing
individual liability in a corporate setting, we think the more fundamental
question is whether the tort itself should apply to the conduct of
individuals who act in the name of the corporation. If the tort includes
individual liability independent of corporate liability, then the corporate
structure will not insulate individual officers and employees authorized
to make discharge decisions from liability for the underlying tortious
conduct in exercising that authority. See Haupt, 514 N.W.2d at 907
(legal fiction of the corporation as an independent entity serves in part to
insulate officers from liability for corporate contracts, not from liability
for their own torts).
38
We acknowledge that an officer or employee of a corporation who
discharges an employee in the name of the corporation has no
contractual liability in the event the discharge violates an obligation
under an employment contract. The limited-liability principles of
corporate law serve to insulate officers from liability for corporate
contracts and obligations. Tort law, however, concerns liability imposed
by society for acts by individuals deemed to be undesirable in society.
The tort seeks to encourage responsibility for individual behavior.
The tort of wrongful discharge is clearly influenced by contract law
because the tort involves the termination of an employment relationship
between an employee and employer. However, that influence does not
control the scope of liability under the tort. The tort of wrongful
discharge does not impose liability for the discharge from employment,
but the wrongful reasons motivating the discharge. In an at-will
employment arrangement, an employer can terminate an employee for
any reason that does not violate public policy. Thus, in the context of
tort law, the reason for the discharge is the undesirable, injurious act
prohibited by the tort. It is this act that gives rise to liability, not the
termination of the employment arrangement per se. Since the tort is
directed at the reasons behind the discharge, not the discharge itself, the
type of authority exercised by the person who carries out the discharge
for violations that violate public policy is largely irrelevant. Our tort laws
should be applied to encourage responsible behavior for all individuals,
not insulate unwanted conduct by individuals based on the legal fiction
of a corporation as an independent entity. See Haupt, 514 N.W.2d at
909. The purpose of the tort will clearly be better served if corporate
decision makers are held to the same standard of responsibility imposed
on corporate actors for other tortious conduct.
39
Some courts have expressed a concern that the imposition of
personal liability on supervisors and others for wrongful discharge would
adversely affect the management of personnel in the corporate world.
See Reno, 957 P.2d at 1341–42. Yet, the very purpose of the tort is
designed to alter the dynamics of the management of personnel by
encouraging management to make decisions consistent with
fundamental principles of public policy and by giving employees the
freedom to refuse to follow management decisions inconsistent with such
policy.
Moreover, we do not need to decide how deep the tort could reach
in the corporate chain of management in a particular situation. In this
case, Hussain was essentially Kid University. Hussain authorized and
directed the decision making, including the decision to terminate Jasper.
Thus, we only hold that liability for the tort can extend to individual
officers of a corporation who authorized or directed the discharge of an
employee for reasons that contravene public policy. Hussain may be
held individually responsible for wrongfully discharging Jasper. We
reinstate the verdict against Hussain.
C. Remittitur. Subject to the condition we impose later in this
opinion, Kid University is entitled to a new trial. However, we conclude
the new trial should be limited to damages for emotional distress. No
error affected the jury’s determination that Kid University was liable for
wrongful discharge and that Hussain was individually liable. The same
observation holds for the jury’s determination of damages for lost wages.
Additionally, the district court did not err in setting aside the award for
other economic damages and properly denied the claim for punitive
damages. A new trial is necessary only because the award of emotional-
distress damages was excessive and not supported by sufficient evidence.
40
When a damage verdict is excessive because it is not supported by
sufficient evidence, we may order a remittitur as a condition to avoiding a
new trial. WSH Props., 761 N.W.2d at 49–50; Iowa R. Civ. P. 1.1010.
This procedure seeks to provide fair compensation, yet avoid the time
and expense of a new trial. Thus, we may impose a condition on the
grant of a new trial in this case to allow Jasper an opportunity to accept
a reduced and modified judgment.
When a remittitur of damages is granted, only the excess of the
award is remitted. Id. at 50. Generally, this standard means the award
should be reduced “to the maximum amount proved” under the record.
In re Knickerbocker, 827 F.2d 281, 289 n.6 (8th Cir. 1987).
We have already determined that the absence of aggravating
circumstances places this case into the lower range of emotional-distress
damages for wrongful-termination cases. Under the record presented, we
conclude the maximum award is $50,000. We are primarily influenced
both by Jasper’s relatively brief period of employment and
unemployment. Her personal identity was not tied to this particular
employment, and she found new employment in the same field and in the
same position within a relatively short period of time. On the other
hand, the manner of her discharge was at best insensitive, principally
because she was not allowed to retrieve her children and the police were
called. In addition, she experienced emotional distress, particularly on
the day of her discharge and on other days for several months, but not
much more than the common manifestations of any job loss. Jasper
may accept this reduced amount of damages for emotional distress to
avoid a new trial. 4
4The district court properly granted a new trial in this case based on the
excessive damages for emotional distress and the improper award of property damages.
41
VII. Conclusion.
We affirm the district court in part and reverse in part. We remand
for a new trial in accordance with this opinion.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND
CASE REMANDED.
All justices concur except Streit and Baker, JJ., who take no part.
The remittitur of $20,000 imposed by the district court lost force and effect when
Jasper appealed, and therefore, the amount of the remittitur was not the specific
subject of our review. See Iowa R. Civ. P. 1.1010(3) (“In the event of an appeal any such
term or condition or judgment entered pursuant to district court order shall be deemed
of no force and effect and the original judgment entered pursuant to rule 1.955 shall be
deemed reinstated.”). However, upon finding the district court did not abuse its
discretion in granting a new trial in this case, we are authorized to impose a new
remittitur on remand as a condition of the new trial. See WSH Props. v. Daniels, 761
N.W.2d 45 (Iowa 2008). Thus, Kid University is entitled to a new trial, but the new trial
is conditioned upon the refusal of Jasper to accept the remittitur to $50,000 for
emotional-distress damages on remand.