Frederick Olson joined Microsoft in 2021 as an at-will employee. Microsoft contracted to provide IT services to Freddie Mac, and in December 2023 Olson was assigned to the Freddie Mac Azure OpenAI Accelerator project. He alleges that Microsoft employees asked him to leak sensitive information from Freddie Mac’s network and to lie and falsify a status report. Doing so, he believes, would violate Microsoft’s Trust Code. He refused to engage in any misconduct and reported the unethical conduct to his superiors. Microsoft then removed him from the Freddie Mac project, he alleges, in violation of oral assurances he was given that Microsoft would not retaliate against employees for reporting violations of the Trust Code.
Mr. Olson duly reported the misconduct to Microsoft’s compliance team, which he claims opened an investigation but never followed up. In 2024, he reported on his treatment to the office of the Inspector General at the Federal Trade Commission (FTC). Two weeks later, Microsoft terminated Mr. Olson, allegedly as part of a reorganization of his division. He brought suit in 2025, alleging wrongful discharge and promissory estoppel.
Microsoft moved to dismiss for lack of jurisdiction under F.R.C.P. 12(b)(1) and for failure to state a claim under 12(b)(6). Last September, in Olson v. Microsoft Corporation, the District Court for the Northern District of Texas found that it had jurisdiction but dismissed Mr. Olson’s claims without prejudice. We’ll skip the jurisdictional stuff, which does not relate to contracts law, except to note that it related to whether Mr. Olson had exhausted his administrative remedies before bringing suit.
The Court begins its analysis by observing that in Sabine Pilot Serv., Inc. v. Hauck, the Supreme Court of Texas recognized that an at-will employee “may recover for wrongful discharge when his refusal to perform an illegal act is the sole basis for his termination.” The crucial element here is that refusal to perform an illegal act must be the sole basis for discharge. Mr. Olson alleged that he was terminated because he refused to commit an illegal act and because he reported unlawful conduct to the FTC. Reporting the unlawful conduct to the FTC, the Court reasons, is not an illegal act, and so Mr. Olson has not alleged that he was terminated solely for his refusal to perform an unlawful act.
If that’s the law, the law is an ass. I get that Texas law may be wary of expanding exceptions to the rule that at-will employees are terminable at will, but the Sabine Pilot rule does not have to be construed this way. “Sole cause” could mean that Microsoft would be free to say (accepting arguendo the allegations as true), “Olson was a problematic employee because he refused to do the illegal things we asked him to do, but we were reorganizing his division anyway.” That’s different from saying “It wasn’t just the refusal to engage in illegal conduct, it was also the reporting of that illegal conduct to the FTC.” In the first version, one reason has nothing to do with illegality; in the second, everything flows from the illegality. The real question should be whether there is an independent ground for the termination. Was Mr. Olson’s refusal to act unlawfully and the conduct that flowed from that refusal the but-for cause of his termination? If so, he should survive the Sabine Pilot test, and this case illustrates why he should.
Mr. Olson alleges that he was fired for his refusal to engage in unlawful conduct and for seeking to have some adjudicatory or regulatory body confirm his allegations. The 12(b)(1) part of the opinion is all about exhausting administrative remedies before running to court, but now the Court is saying that if you are fired for exhausting your administrative remedies, you have no cause of action. If that is the law, claims will survive only if the at-will employee is terminated before they report the misconduct, but reporting the misconduct is often what triggers the termination. In any case, an at-will employee’s right to challenge an unlawful termination should not hinge on the timing of the wrongful termination, so long as the events that led to the termination all go back to a refusal to engage in unlawful conduct.
The Court quickly disposes of Mr. Olson’s promissory estoppel claim. Relying on a series of opinions from federal district courts in Texas, the Court finds that an employer’s assurances to an at-will employee do not provide a reasonable basis for reliance regarding future employment. It would have been nice if the Court had cited some state court as authority, but I will assume that the district courts cited were accurately representing Texas law on this point. But the Court also cites a case that state that oral representations do not “modify an employee’s at-will employment status unless [they] expressly and unequivocally evidence[] an intent to limit the conditions under which an employee may be terminated.” Don’t Microsoft’s alleged oral assurances that it would not retaliate against employees who report violations of the Trust Code evidence an intent to limit the conditions under which an employee can be terminated? That seems like a question the Court should allow the parties to address through discovery rather than answer based on the pleadings.
In addition, Mr. Olson’s employment agreement “contains a provision that disclaims reliance on any written or oral statement that would alter his at-will employment status.” The Court treats that provision as negating “any implication that the anti-retaliation promises modified the at-will relationship or could be relied on.” I also find this unconvincing. Mr. Olson is not trying to alter his at-will status. He is claiming that, even if he is at-will, he is still protected from retaliatory termination so long as it is the sole reason for his termination.
Finally, I’m not sure the Court has gotten the law of promissory estoppel right. Under the Restatement, the claim does not turn on reasonable reliance; it turns on whether the promise was the sort that the promisor would expect to induce reliance. The Texas Supreme Court adopted that approach to promissory estoppel in Wheeler v. White and that still seems to be the law in Texas today. The approach that focuses on the promisor’s expectation makes sense, because promissory estoppel is about protecting people who have relied to their detriments on other’s promises. So here the question is whether Microsoft’s promise induced Mr. Olson to refuse to violate the Trust Code and to report those who did. Courts have added a prong about the reasonableness of the reliance, and I don’t know where Texas law stands on this, but given that a person might quite reasonably think that even an at-will employee cannot be fired for an improper reason, I don’t think Mr. Olson’s reliance was unreasonable. In any case, the main inquiry should have been into whether Microsoft sought to induce reliance.
The docket indicates that Mr. Olson did amend his complaint in October, but in November, the Court granted Microsoft’s unopposed motion to dismiss. Perhaps a settlement was reached.
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