Bank Officer Not Entitled to Invoke Narrow Exception to “At Will” Employment Rule

In Cruz v. HSBC Bank USA, N.A., the Second Circuit recently affirmed the dismissal of a bank officer’s claim of breach of the covenant of good faith and fair dealing.

The court cited the rule of “at will employment” in New York and its narrow exception, based on the New York Court of Appeals’ decision in Wieder v. Skala.

New York law provides:

[W]here an employment is for an indefinite term it is presumed to be a hiring at will which may be freely terminated by either party at any time for any reason or even for no reason. Murphy v. Am. Home Prods. Corp., 58 N.Y.2d 293, 300 (1983). New York courts have consistently rejected causes of action arising from the allegedly wrongful discharge of an at-will employee absent violation of a constitutional requirement, statute or contract. Sullivan v. Harnisch, 19 N.Y.3d 259, 262-63 (2012). The New York Court of Appeals, however, has articulated a narrow exception to the long standing at-will doctrine unique to certain employment relationships.

 

In Wieder v. Skala, 80 N.Y.2d 628 (1992), the Court of Appeals sustained a wrongful discharge claim brought by an attorney who was allegedly discharged for his insistence that a fellow attorney’s unethical conduct be reported as required by the Code of Professional Responsibility. Wieder explained that because an attorney’s core purpose of employment as an associate of a law firm and responsibilities as a member of the bar are “so closely linked as to be incapable of separation,” adhering to the profession’s ethical standards is an implied term of an attorney’s employment agreement and one that courts are well-placed to monitor. 

The so-called Wieder exception is a narrow one, however, and cases applying it “have focused on the purpose of the employment and whether reporting misconduct is ‘central’ to an employee’s role on behalf of its employer”, such that “where an employee is merely peripherally responsible for informing his or her employer … of violations of certain obligations, that person is unlikely to be covered by the Wieder exception.”

The court held that the plaintiff in this case, Cruz, did not fall within the exception:

We conclude that Cruz’s employment with HSBC, as alleged in the first amended complaint, does not fall within the Wieder exception. Cruz was hired by HSBC as a Vice President and Senior Business Relationships Manager, and his core role at HSBC was to manage accounts and supervise clients. Although Cruz was required to report fraudulent or criminal activity pursuant to the terms of his employment and federal law[], this obligation does not implicate the Wieder exception. Indeed, the New York Court of Appeals has affirmed the dismissal of a compliance officer’s claim that he was wrongfully discharged for reporting trading practices that violated his hedge fund’s code of ethics and securities laws because regulatory compliance was not the core purpose of his employment. Sullivan, 19 N.Y.3d at 264. Cruz’s duty to report misconduct is even further attenuated from a compliance officer’s duty. Because Cruz does not fall within the Wieder exception, his claim for breach of an implied covenant of good faith and fair dealing was properly dismissed.