House Bill 254, which was signed into law by Governor Gianforte, significantly revised Montana’s Wrongful Discharge from Employment Act (“WDEA”).

If you own or operate a business in Montana and employ workers, you need to be aware of the changes in the law and will likely need to update your employee handbook, policies, and employee contracts.

These updates are critical so that your employee handbook, policies, and contracts are not more restrictive than the law allows. For example, the default probationary period is now 12 months (increased from the previous presumptive period of 6 months), and the statute even permits employers to extend an employee’s probationary period up to 18 months in some cases. If your employee handbook or contracts still provide for a 6-month probationary period, however, you will not be able to take advantage of this long term.

Notably, the revisions exclude any leaves of absence (defined as an employee’s absence from work for a period of more than 5 consecutive working days for reasons other than holidays and vacations) from the probationary period unless the employer affirmatively decides to include them. Based on these changes and your unique business needs, you should review your handbook and policies to determine whether it’s appropriate to revamp your existing probationary period to reflect what is now permitted by law.

HB 254 included several other revisions that favor employers. For example, “good cause” grounds for dismissal under the WDEA now means “any” reasonable job-related grounds and clarifies that “legitimate business reasons” for termination are “determined by the employer while exercising its reasonable business judgment.” Equally important, the changes to employer justification for termination explicitly includes “the employee’s material or repeated violation of an express provision of the employer’s written policies.” HB 254 also incorporated the principal that has been established in Montana case law that employers have the “broadest discretion when making a decision to discharge a managerial or supervisory employee.”  

The changes also significantly limit an employee’s ability to claim wrongful discharge based on the employer’s violation of its own written personnel policy. For an employee to claim wrongful discharge on this basis, the employer’s violation of its own policies must be “material,” must have occurred “prior to the discharge,” and must have “deprived the employee of a fair and reasonable opportunity to remain in a position of employment with the employer.” While employers should still take care to follow their own policies, this revision provides employers some latitude.

Even with these pro-employer amendments, you should not view these changes as a reason to stop documenting personnel issues, disciplinary measures, written and verbal warnings, corrective counseling, etc. Documentation remains vital. Even during the probationary period, an employee may bring a discrimination claim. Keeping an employee file that documents your non-discriminatory reasons for the termination will help you defend against such a claim and show that your non-discriminatory reasons for the termination were not after-the-fact rationalizations.

Some employers may want to consider using employment contracts for a specific term for all skilled, managerial, and technical employees. Employment contracts for a specific term have always been excepted from the WDEA, but HB 254 clarified that such contracts may contain an automatic renewal clause that automatically renews a contract for one or more terms, clarifying dicta from Brown v. Yellowstone Club Operations, LLC, 361 Mont. 124 (2011). Contracts for a specific term may also now include a probationary period during which the contract can be terminated without cause, prior to the end of the specific term.

HB 254 included additional revisions that protect employers and are likely to lead to fewer WDEA claims. Employers now have 14 days (instead of 7) to notify the discharged employee of the internal grievance procedures and may do so electronically or in writing. Remember, if your former employee is notified of your internal grievance procedure and fails to use it to contest his or her termination, the right to file a WDEA claim is waived. Damages available under the WDEA have also been reduced. Following a wrongful discharge verdict, any unemployment compensation, benefits, or early retirement pay received by the employee in relation to the discharge will be deducted from the lost wages award.

If you need help protecting your interests while you incorporate the recent changes under the WDEA into your employment policies and contracts, contact our team of experienced employment attorneys.