Luedtke v. Nabors Alaska Drilling, Inc.

Citations: 768 P.2d 1123; 4 I.E.R. Cas. (BNA) 129; 79 A.L.R. 4th 75; 1989 Alas. LEXIS 12; 1989 WL 11811Docket: S-2074, S-2127

Court: Alaska Supreme Court; February 17, 1989; Alaska; State Supreme Court

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Clarence and Paul Luedtke, employees of Nabors Alaska Drilling, Inc., were terminated after refusing to undergo required drug testing. They challenged their dismissals on several grounds, including violations of their constitutional right to privacy under the Alaska Constitution, breaches of the covenant of good faith and fair dealing in employment contracts, wrongful discharge due to infringement on personal privacy, and common law invasion of privacy. Nabors contended that the Luedtkes were "at will" employees, allowing termination for any reason, or alternatively that they had just cause for termination due to the Luedtkes' refusal to comply with established drug testing policies aimed at ensuring employee safety.

The case involved significant legal questions for Alaska, such as the applicability of constitutional privacy rights to private employers, the parameters defining wrongful discharge, and the judicial control over employee drug testing practices. Paul Luedtke's specific case highlighted his employment history with Nabors, including prior violations of the company's drug and alcohol policies, and an incident involving potential marijuana possession. His lack of a written employment contract at the time of his termination was also noted, alongside the context of his union membership being disregarded when Nabors allegedly broke the union. The cases were consolidated for appeal due to their overlapping legal issues.

Paul underwent a physical examination required by Nabors to qualify for work on offshore rigs, but was unaware it would include a urinalysis for drug testing, which he assumed was solely for health-related issues. Nabors announced its drug testing policy after Paul's exam. Following his inquiry about returning to work, Paul was suspended on November 5 for alleged substance use, later receiving notification on November 16 that he tested positive for cannabinoids. He was instructed to complete two additional urinalysis tests but did not take the first one. As a result, Nabors discharged him for refusing the test. Paul applied for unemployment benefits, which were initially denied due to his refusal being classified as misconduct. However, a hearing officer later deemed the testing requirement unreasonable and ruled his dismissal was not for misconduct. Paul subsequently filed a civil lawsuit alleging wrongful dismissal, breach of contract, invasion of privacy, and defamation. Nabors successfully obtained summary judgment on the invasion of privacy claim, and Paul voluntarily dismissed the defamation claim before trial. The trial court ruled in favor of Nabors regarding wrongful dismissal and breach of contract, leading to Paul's appeal. 

Clarence, another employee, also faced a drug testing requirement from Nabors. He refused to submit to testing during his scheduled period, opting to forgo the test on principle despite being offered time to prepare. Nabors terminated Clarence for his refusal to test. Both employees sought unemployment benefits, facing objections from Nabors citing misconduct.

The Commissioner of Labor concluded after a factual hearing and two appeals that Nabors did not demonstrate a link between off-the-job drug use and on-the-job performance, which negated any justification for their drug test policy related to job misconduct. The Commissioner found no evidence from Nabors connecting off-duty drug use to workplace accidents and noted that Nabors did not allege any drug use by Clarence. Clarence's complaint, filed in November 1984, included claims of invasion of privacy under common law and the Alaska Constitution, wrongful termination, breach of contract, and violation of the implied covenant of good faith and fair dealing. The trial court granted summary judgment in favor of Nabors without issuing an opinion, findings of fact, or conclusions of law. Clarence appealed the summary judgment on all claims.

The right to privacy, as articulated by Brandeis and Warren in a 1890 law review article, emerged in response to technological advancements that diminished personal privacy. They introduced the idea of "inviolate personality" and highlighted the need for legal protection against intrusion into private life. Although initially weak in legal grounding, the concept gained traction, leading to recognition in tort law and inclusion in various state constitutions. Professor Prosser later identified four manifestations of privacy rights: intrusion upon seclusion, public disclosure of embarrassing facts, false light publicity, and appropriation of name or likeness for profit, which became the basis for the expanded tort of invasion of privacy in legal frameworks.

In the landmark case Griswold v. Connecticut (1965), the U.S. Supreme Court struck down a Connecticut law prohibiting the use of birth control by married couples, asserting that such a ban infringed upon the privacy inherent in the marital relationship. The Court articulated that certain rights in the Bill of Rights create "zones of privacy" through their "penumbras." Justice Goldberg’s concurrence emphasized that marital privacy is a fundamental aspect of liberty. Following Griswold, the right to privacy has been recognized in various contexts, including maternity leave regulations (Cleveland Bd. of Educ. v. La Fleur), a woman's right to terminate her pregnancy (Roe v. Wade), and the invalidation of laws that made contraceptives less accessible to unmarried individuals (Eisenstadt v. Baird). However, the Court's decision in Bowers v. Hardwick limited this right by ruling that the due process clause does not grant homosexuals a fundamental right to engage in consensual sodomy. The concept of privacy, while influential in legal discourse, lacks a precise definition, leading to challenges in its application. The expansive nature of privacy raises concerns about its utility in specific legal contexts, as it risks becoming overly broad without clear boundaries. Legal scholar Gerety proposes a definition of privacy centered on personal autonomy, but this view is critiqued for overlooking the outward expressions of identity. The plaintiffs in this case aim to frame their arguments within established legal frameworks of privacy, including constitutional, contract, tort law, and public policy exceptions related to employment law.

The Alaska Constitution’s Right to Privacy, established in 1972, asserts that the right to privacy shall not be infringed but lacks specific application guidelines. The legislature has not enacted any statutes to implement this provision. The Luedtkes contend that the court should clarify whether this right governs only state action or extends to private actions. Prior case law, particularly Allred v. State, indicates that the constitutional right to privacy primarily serves to limit governmental power, as the court found no state action that would invoke constitutional protections in that case. The court emphasized that constitutional provisions aim to protect personal privacy and dignity against state intrusions. Further precedent, such as United States Jaycees v. Richardet, reinforces that certain sections of the Alaska Constitution apply only to state actions, although some constitutional clauses, like the Thirteenth Amendment, do address private actions. Comparatively, privacy rights under the California Constitution have been interpreted to extend to private actions, as evidenced by relevant case law.

In Kinsey v. Macur, the court recognized that letters concerning a defendant's behavior could indicate a cause of action for tortious invasion of privacy, but clarified that California's privacy amendment applies to both private and governmental actions. The court noted that no evidence was presented to suggest Alaska's constitutional right to privacy was meant to restrict private actions, such as Nabors’ drug testing program; thus, the constitutional right to privacy was not extended to private parties' actions.

Regarding wrongful termination, the court cited Mitford v. de LaSala, establishing that at-will employment in Alaska includes an implied covenant of good faith and fair dealing. The court acknowledged that breaching public policy could constitute a violation of this covenant, supporting the notion that employee privacy is protected by public policy. However, due to the competing concern for employee safety, Nabors’ actions did not breach this implied covenant.

The Luedtkes argued against their status as at-will employees, claiming they could only be terminated for good cause. The court clarified that at-will employees can be fired for any reason that does not violate the implied covenant of good faith. The Luedtkes lacked formal agreements for specific employment duration, unlike in Eales v. Tanana Valley Medical-Surgical Group, where a contract for a definite term was implied. The court found no indication of a definite duration in the Luedtkes’ employment with Nabors, dismissing their claims regarding a guaranteed term.

Finally, the court affirmed the existence of a public policy in Alaska that supports an employee's right to withhold private information from their employer, as reflected in common law, state statutes, and the constitution.

The Illinois Supreme Court's ruling in *Palmateer v. International Harvester* is significant for establishing public policy regarding employee rights in relation to crime reporting. The court found that an employee's termination for reporting a co-worker's illegal activities violated public policy, which supports civic engagement in crime prevention. This public policy is not explicitly defined by statute but is derived from citizen rights and responsibilities recognized in state law and judicial decisions. The court emphasized that matters affecting a citizen's social duties warrant protection against retaliatory discharge, even in the absence of a specific legal obligation to report crimes.

In Alaska, the law demonstrates strong support for employee privacy, as reflected in various statutes. For instance, AS 23.10.037 prohibits employers from requiring polygraph tests, highlighting areas of an employee's life that are shielded from employer scrutiny. Additionally, AS 18.80.200(a) addresses discrimination based on various personal characteristics, asserting that such discrimination is a public concern threatening the rights and welfare of state inhabitants. AS 18.80.220 further prohibits employers from inquiring about these personal matters during hiring processes, indicating a legislative intent to robustly protect employee rights, even more so than federal anti-discrimination laws.

Moreover, the Alaska Constitution's right to privacy clause, while not directly applicable to the current action, contributes to a broader public policy favoring privacy rights. Overall, both statutory protections and constitutional provisions collectively underscore a public policy in Alaska that affirms employee privacy and the right to engage in civic duties without fear of retaliation.

A matter qualifies as public policy if it significantly impacts a citizen's social rights, duties, and responsibilities, as established in the Palmateer case. The Alaska Constitution recognizes the right to privacy, reinforcing the idea that this right is central to social rights. Additionally, Alaska acknowledges a common law right to privacy, particularly regarding "intrusion upon seclusion," where intentional intrusions into an individual's solitude or private affairs can result in liability, provided such actions would be deemed highly offensive to a reasonable person. The legal framework in Alaska protects citizens from unwarranted intrusions by the government, employers, and other private individuals, establishing a public policy that safeguards certain employee conduct from employer intrusion.

The primary issue raised is whether employer monitoring of employee drug use outside the workplace constitutes an illegal intrusion. The public policy advocating for employee privacy must be weighed against the public policy promoting health and safety. Most litigation surrounding drug testing has involved government employees and has been scrutinized under federal search and seizure laws, which are not directly applicable to private sector cases. However, federal court reasoning on urine testing's intrusiveness provides relevant insights.

In Capua v. City of Plainfield, urine testing was characterized as a highly private act that traditionally occurs in private settings. The requirement for supervision during specimen collection and the potential for revealing unrelated health information raises significant privacy concerns. The implications of a positive test result could adversely affect employment status and lead to criminal charges. The case draws a parallel to invasive surveillance, likening it to a "Big Brother" scenario. While some judges express skepticism regarding the intrusiveness of such testing, others argue that the societal acceptance of various privacy intrusions renders urine testing justifiable.

The plaintiffs struggle to articulate a clear privacy interest concerning urine tests, which are inherently problematic due to the nature of urine as a waste product. Although the district court acknowledged a right to privacy, the plaintiffs primarily argue that the method of sample collection invades privacy, citing the requirement to remove outer garments and the presence of an observer of the same sex. However, this lack of privacy is common in public restrooms, suggesting that the issue may be more about perceived indignity rather than a concrete privacy right.

The testing program implies a generalized distrust of applicants, which reflects common practices in background and security checks for government positions. The court questions whether the privacy expectations of job applicants are objectively reasonable, particularly in the context of necessary inquiries related to employment. The referenced case, Ravin v. State, illustrates that while privacy is protected in the home, this protection has limits. Privacy rights do not extend to activities that may adversely impact the health, safety, or welfare of others. Thus, the right to privacy, especially when interacting with society outside the home, is not absolute and may be overridden by competing societal interests.

A private matter is defined by its lack of adverse effect on others, making it inherently private. When an issue impacts the public, it loses its private nature and may be regulated if a public need is shown. This principle parallels the public policy exception to the at-will employment doctrine, which balances individual privacy rights against public safety concerns. The Luedtkes argue that their marijuana use falls within their protected privacy sphere. However, it is noted that marijuana can impair functioning, and working on an oil rig poses significant dangers, necessitating drug-free operation for the safety of all personnel and the oil resource.

The trial court highlighted the critical importance of a drug-free environment for workers on oil rigs, prioritizing health and safety over privacy. Therefore, Nabors has a valid interest in assessing whether the Luedtkes are impaired due to off-duty drug use. Nevertheless, the employer's authority to test is limited: drug tests must occur close to work time to reflect potential impairment, rather than serve as a general drug enforcement measure. Nabors could have tested the Luedtkes around their work schedule on the North Slope.

Additionally, employees must be informed of any drug testing program to contest, negotiate, or prepare for it. Paul had notice and failed to take the scheduled test, justifying his discharge. Clarence also had notice and an opportunity to test but refused, warranting his discharge as well. Both terminations were found to not violate the implied covenant of good faith and fair dealing.

The determination of whether Paul's suspension violated the covenant of good faith and fair dealing is to be decided by the trier of fact, with the trial court permitted to gather additional evidence if needed. The common law right to privacy, which protects individuals from harassment and intrusion, is established in case law, specifically citing the Restatement (Second) of Torts § 652B. This section states that intentional intrusions into someone's solitude or private affairs can lead to liability if deemed highly offensive. Notably, the publication of acquired facts is not necessary for liability; the focus is on the nature of the intrusion itself. Courts have defined "offensive intrusion" as requiring either unreasonable methods or unwarranted purposes.

Paul's claims regarding the urine testing lack merit. He voluntarily provided the sample during a physical examination, which negates the argument of it being "highly offensive." Unlike cases where the subject was unaware of being recorded, Paul was aware that results would be reported to his employer, Nabors. His lack of knowledge about the specific tests conducted does not support a claim for invasion of privacy. Furthermore, for the urine tests that Paul and Clarence refused, no invasion of privacy occurs when the intrusion does not take place.

Regarding attorney's fees, the court addressed the Luedtkes' challenge to the fees awarded to Nabors, noting that Clarence's claim was waived due to lack of argument. Paul contended that the fees were excessive considering the brief, non-jury trial and the public nature of the case.

Civil Rule 82 provides trial courts with discretion in awarding attorney's fees, which will only be reversed if deemed "manifestly unreasonable." In the case of Paul Luedtke, a $25,000 fee for a four-day trial was upheld, as it was not found to be manifestly unreasonable despite the uncertain legal theories involved. The public interest of the lawsuit did not outweigh Paul's private interest in employment. Although Paul argued the attorney's fees affidavit lacked an itemized statement of services, the appeal was denied since no such statement was requested in his motion for reconsideration. The trial court's decision was affirmed in part and reversed in part, with the case remanded to determine if Nabors breached the implied covenant of good faith and fair dealing regarding Paul's suspension. The Chief Justice concurred, emphasizing that a jury might find Nabors' failure to notify employees about marijuana use during leave could constitute a breach of good faith. However, he affirmed that employers may impose conditions on employment, such as prohibiting marijuana use at all times, provided there is a legitimate employer concern and appropriate notice.

Safety concerns regarding marijuana use are emphasized, indicating that off-duty use increases the likelihood of on-duty impairment. Factors such as lost productivity, absenteeism, and rising medical insurance costs support a total abstinence requirement from employers. The estimated economic impact of drug use, including alcohol, on employers ranges from $60 billion to $100 billion annually, suggesting that a private employer could legally require employees to abstain from marijuana usage at all times with appropriate notice.

The excerpt also addresses Clarence's argument regarding his dismissal from Nabors, referencing a decision by the Commissioner of Labor that he was not terminated for misconduct. However, the court disagrees, asserting that the commissioner’s ruling does not bind Nabors regarding the just cause for discharge, as the issues of misconduct and wrongful termination are distinct. The court cites precedents indicating that administrative decisions can be subject to res judicata only when relevant issues are adequately litigated, which was not the case here. Lastly, it touches on Clarence's testimony where he implied job security based on pension plans and references for loans, suggesting an understanding of permanent employment.

The witness suggests that factors like participation in a profit-sharing plan and a stock purchase program contribute to the belief of permanent employment. However, the witness cannot recall any specific statements made by others that would indicate permanence in employment, noting that any such thoughts would be interpretations based on general references or promotions. The witness expresses confusion over why someone would be promoted if they were to be terminated shortly thereafter, implying an understanding of ongoing employment. No specific time period for employment was mentioned during conversations, and the witness acknowledges that statements made were informal and ambiguous. Furthermore, the argument that the conclusion of a probationary period should imply a definite term of employment has been rejected by other courts, as illustrated by relevant case law. The excerpt also references a California case regarding drug testing, emphasizing the state's right to privacy and its limited applicability to the current case. Additionally, the text discusses various cases that analyze drug testing requirements in relation to the Fourth Amendment, noting that many courts require individualized suspicion before conducting urinalysis.

Individualized suspicion is not always required for searches of employees, particularly in certain job categories where privacy expectations are reduced, as illustrated by cases involving various types of public sector employees. For instance, courts have deemed searches reasonable for firefighters, customs service employees, and state corrections employees. In specific instances, such as after incidents drawing attention to employees (e.g., railroad workers post-accident), urinalysis tests have been supported. Conversely, some jurisdictions protect employee privacy more robustly; for example, the West Virginia Supreme Court ruled against mandatory polygraph tests as violating public policy related to privacy. Similarly, the Massachusetts Supreme Judicial Court determined that employers could be liable for wrongful discharge if they impose unreasonable privacy invasions through employment questionnaires. However, the court ultimately found that the questioned materials in Bristol-Myers' case were not overly intrusive.

A New Jersey court ruled that an employee terminated due to his marital status can pursue a claim against his employer for invasion of privacy, violating public policy. Paul and Clarence challenge the reliability of Nabors' "emit" drug test but do not contest the positive result from a test conducted without their knowledge, nor is there evidence that refusal for further testing was based on concerns about the accuracy of the testing procedure. Various Alaska cases illustrate injuries sustained by employees in workplace accidents, emphasizing the potential for substantial harm. In at-will employment scenarios, continued work post-modification of the employment agreement suffices as consideration, allowing for the possibility of drug testing modifications. The court must determine the reasonableness of these modifications. The Luedtkes assert a violation of the Intrusion upon Seclusion aspect of privacy law. The majority opinion indicates that while employers can test for impairment due to off-duty drug use, such testing must occur close to work hours to focus on performance-related drug use rather than general drug control. Testing could have been appropriately timed before or immediately after the Luedtkes' work on the North Slope.