The relationship between employer and employee is based on a free and voluntary exchange, which helps maintain the competitiveness of the economy. While the relationship can be terminated by either party, with or without cause with penalty, there are legal exceptions.

1. 1
Global Competitive Report
(2008-2009)
Rank Country
1 United States
2 Switzerland
3 Denmark
4 Sweden
5 Germany
6 Finland
7 Singapore
8 Japan
9 United Kingdom
10 Netherlands

2. 2
Key Competitive Advantages of U.S.
Innovation
Access to Capital
Flexible Labor Markets
Government Stability
Free Trade
Intellectual Property Protection

3. 3
U.S. firms are the best managed
and most productive in the world
Study conducted by
Stanford University
London School of Economics
McKinsey & Co.
(2008)

4. 4
“U.S. firms scored highest on
‘managing people’. This reflects the
relative ease with which workers can
be hired and fired in the U.S.,
compared with countries such as
France and Italy.”

5. 5
The Reality of At Will Employment
“Employee can be fired at any time, for
any reason, with or without cause.”
“the relative ease with which workers
can be hired or fired.”

6. 6
At-Will Employment is Rooted in
Several Notions:
Inasmuch as it was the employer’s
business, the employer should have the
right to run it as the employer sees fit.
Further, the at-will employee was free to
leave at any time, so it was only fair that
the employer was free to terminate
employment at any time.

7. 7
“The first purpose of government is to protect rights
to property, which includes everything to which a
man may attach value and have a right, including
the labor that acquires daily subsistence.”
James Madison

8. 8
Slavery and Indentured Servitude are preserved
in the U.S. Constitution
Article IV, Section 2
All persons held to service or labor in one state,
under the laws thereof, escaping into another,
shall be delivered up on a claim of the party to
whom such service or labor is due.

9. 9
Fifth Amendment
“No person shall be….deprived of
life, liberty or property, without due
process of law…”

10. 10
Dred Scott v. Sanford
U.S. Supreme Court (1857)
Holds that Congress cannot prohibit
slavery in the territories since slavery is
property and it cannot be taken by
government without due process.

11. 11
13th Amendment abolishes slavery and
involuntary servitude.
14th Amendment guarantees full rights of
citizenship regardless of race and equal
protection under the law. All persons born
in the U.S. are citizens.

12. 12
14TH Amendment
“No state shall make or enforce any law
which shall deprive any person of life,
liberty or property, without due process of
law, nor deny to any person the equal
protection of the laws.”

13. 13
Adair v. United States
U.S. Supreme Court (1908)
Congress passed law making it illegal to fire
employees for participating in a labor union.
Holding: Fifth Amendment prevents Congress
from depriving a person from liberty or property
without due process of law.

14. 14
Lochner v. New York
U.S. Supreme Court (1905)
New York enacted statute prohibiting
bakers from working more than 60
hours a week or 10 hours per day.
Holding: Violated “liberty” protected
by 14th Amendment. Employers and
employees are free to bargain to their
best advantage.

15. 15
Coppage v. Kansas
U.S. Supreme Court (1915)
Kansas enacted law banning the practice
of requiring employees to sign “yellow dog
contracts.”
(An agreement not to join a labor union)
Holding: Violates “freedom of contract”
protected by the Due Process Clause of the 14th
Amendment.

16. 16
Morehead v. New York
Supreme Court (1936)
New York enacts minimum wage law.
Holding: Violates the “liberty” protected
by the Due Process Clause of the 14th
Amendment.

17. 17
At-Will Employment
An employer can discharge an at-will
employee with or without cause, with or
without notice, for any or no reason.

18. 18
Can you identify any problems
with at-will employment?

19. 19
West Coast Hotel Co. v. Parrish
U.S. Supreme Court (1937)
California enacts minimum wage law for women
in the hotel industry. Parrish sues alleging she
is paid a substandard wage.
Holding: State minimum wage law does not
violate “liberty of contract” under the 14th
Amendment.
Court finds that employer and employee are not
equally free in negotiating contracts.

20. 20
West Coast Hotel Co. V. Parrish
(continued)
Court takes judicial notice of economic
depression and the “alarming degree
of economic insecurity.”
“The community is not bound to
provide what is in effect a subsidy for
unconscionable employers.”

21. 21
NLRB v. Jones & Laughlin Steel Corp.
U.S. Supreme Court (1937)
National Labor Relations Act, which
guarantees the right to organize labor
unions, does not violate Commerce
Clause.
Ensuring “labor peace” has a direct impact
on interstate commerce.

22. 22
United States v. Darby
U.S. Supreme Court (1941)
Fair Labor Standards Act upheld
–Minimum wage
–Overtime pay
–Child labor restrictions
Court defers to Congress in determining
what constitutes interstate commerce.

23. 23
While an employer can discharge an at-
will employee for any reason or no reason,
there are exceptions to this rule.
These exceptions make up the bulk of
wrongful termination litigation!

24. 24
Exception # 1
Terminations that violate a written contract
or collective bargaining agreement

25. 25
Each party to a contract owes a duty of
good faith and fair dealing.
A discharge must be made for a good
reason, fairly arrived at

26. 26
Silvestri v. Optus Software
(N.J. Supreme Court, 2003)
Optus software hires Silvestri as
director of support services. The
employment contract allows Optus to
terminate Silvestri for “failure or
refusal to perform faithfully, diligently
or completely his duties…to the
satisfaction” of the company.

27. 27
Employee has the burden of proof in a
wrongful termination suit. Employee
must present evidence:
1) That the employer was not dissatisfied
with him, or
2) That the employer, whether dissatisfied
or not, did not discharge him on account
of the dissatisfaction

28. 28
Court applies a subjective standard to
determine whether employer acted for a
good reason, fairly arrived at.
Employer must act “honestly.” There
must be “genuine dissatisfaction…honestly
held.”

29. 29
“Idiosyncratic judgments as to what
constitutes satisfactory performance are
expected and should be permitted. The
employer, not some hypothetical reasonable
person, is best suited to determine if the
employee’s performance is satisfactory.”

30. 30
Exception # 2
Terminations that breach
an implied contract

31. 31
Absent a “clear and prominent disclaimer”
an implied promise in an employment
manual that employees will be fired only
for cause is enforceable as a binding
contract.
Example: Progressive Discipline Policy

32. 32
Wolley v. Hoffman-LaRoche
N.J. Supreme Court (1985)
An employment manual containing terms
and conditions of employment for an
indefinite duration is an “offer”
“Acceptance” by the employee is made
when they take the job or continue to
work
“Unilateral Contract” is formed

33. 33
Hoffman-LaRoche’s policy established
steps that management should take
before making discharge decision. No
disclaimer was present.
“All that this opinion requires of an
employer is to be fair…what is sought
here is basic honesty.”

34. 34
Offer Letters
It is a common business practice to state
salary, bonus, vacation, sick days and other
benefits in annual terms
Such terms determine the method and
frequency of payment
Without more, such an offer letter does not
create an employment contract for one year.

35. 35
Performance Appraisals
Palmer v. Schlott Realtors
U.S. District Court (N.J.) 1989
Dolores Palmer was employed by Kings Real Estate as a
part-time secretary from 1974 to 1986. In 1986, King’s
was acquired by Schlott. She was terminated in 1987.
During her tenure at Schlott’s she received two
performance appraisals, both of which were very good.
The appraisal forms had 16 categories. Palmer argues
that the forms and the appraisal process constitute a
policy whereby employees are informed of their
deficiencies and afforded an opportunity to improve. “I
was certainly led to believe that my job would not be in
jeopardy as long as I continued to receive favorable
evaluations.”

36. 36
“The only reason given for my termination was
[my supervisor’s] statement to me that she
didn’t think I could handle the work that she
expected to come into the office. I was never
given any specific information of any deficiencies
in my performance.”
Court finds that performance appraisal process
can be inferred to create a policy of “for cause”
termination.

37. 37
Verbal Agreements
Shebar v. Sanyo Business Systems
(N.J. Supreme Court, 1988)
Shebar was hired as national sales manger. He
is given a standard offer letter. After several
strenuous years, Shebar accepted another job
with a different employer and tendered his
resignation but it was not accepted. According
to Shebar, Sanyo induced him to stay and
promised him that he would never get fired.
Shebar revoked the job offer from the other
employer. Four months later he was fired.

38. 38
Enforceable Contract or Friendly
Assurance of Employment
Court finds that a material issue of fact
exists whether Sanyo verbally promised
Shebar to discharge him only for cause.
In exchange for this promise, Shebar gave
up job at other employer

39. 39
Exception # 3
Terminations that violate public policy

40. 40
Pierce v. Ortho Pharmaceutical Corp.
(N.J. Supreme Court, 1980)
Dr. Pierce was hired to the research project team
to develop a drug treatment containing saccharin.
Although the concentration was the same as the
drug being marketed in Europe, the team agreed
that the amount of saccharin was unsuitable for
use in the U.S. While the alternative formula
containing less saccharin would take 3 months to
develop, the marketing division ordered that the
original formula be used and that a new drug
application be filed with the FDA. The drug would
be tested on patients only after FDA approval of
the new drug application.

41. 41
Pierce knew that clinical testing could not begin without
FDA approval. Nevertheless she opposed the research
fearing saccharin would cause an undue risk to research
subjects. Ultimately she was fired after refusing to
continue the work of the team.
Court recognizes that an at-will employee can be fired
for any reason, even a bad reason. However, certain
discharges may be “incompatible with a clear mandate
of public policy,” i.e. discharge harms the public or
violates a public policy.

42. 42
Where does a court look to discover a “clear mandate of
public policy?”: legislation; agency rules, regulations or
decisions; judicial decisions; constitutional guarantees;
codes of conduct or ethical standards.
Here, Pierce had an ethical dispute with her employer.
She refused to conduct the research not because it was
dangerous but because it was controversial.
Employee should not have the right to prevent her
employer from pursuing its business because the
employee perceives that a business decision conflicts
with the employee’s personal morals; as opposed to
carrying out an unethical act or an act that violates “a
clear mandate of public policy,” i.e.: a professional code
of ethics, rules, regulations, court decisions.

43. 43
Maw v. Advanced Clinical Communications, Inc.
(Supreme Court, 2004)
Graphic Designer is fired for her refusal to sign a
noncompetition agreement restricting her ability to work
for a competitor for two years. She alleges that she
had no meaningful access to trade secrets other
confidential information and, therefore, employer had no
legitimate commercial interest to protect.
Appellate Court found that state’s antitrust law, together
with court decisions invalidating overly broad
competition agreements, create public policy favoring
fair and unrestricted competition, as well as unfettered
employment opportunities.

44. 44
Supreme Court reverses observing that
the employee’s refusal must have public
ramifications and that the dispute must be
more than a private disagreement.
Noncompetition agreements are not illegal
in New Jersey. Therefore, the refusal to
sign the agreement was a personal
decision that did not advance a public
policy.

45. 45
New Jersey Conscientious Employee
Protection Act (Whistleblowing Law)
In accordance with New Jersey State Law, an employee is protected
against retaliatory action because he or she:
1. Discloses or threatens to disclose to a supervisor or public body
an activity, policy or practice of his/her employer that he/she
reasonably believes is in violation of a law or regulation.
1. Provides information to or testifies before a public body
conducting an investigation or hearing concerning such a
violation.
1. Objects to or refuses to participate in an activity, policy or
practice if he/she reasonably believes that it is in violation of a
law or regulation or is fraudulent or that it is incompatible with a
clear mandate of public policy concerning the public health,
safety or welfare.

46. 46
Exception # 4
Terminations that violate a common law
duty to be forthright and honest and to be
fair and even handed

47. 47
McConkey v. Aon Corp.
(App. Div. 1999)
McConkey is vigorously recruited for a top
sales job. He has several conversations
with the president, who reassures him
several times that the firm is not a takeover
target. McConkey accepts job but
thereafter firm is taken over. McConkey is
fired. Discovery reveals that as President
was reassuring McConkey, he was
negotiating the terms of the takeover.

48. 48
Exception # 5
Termination that are made to retaliate against an
employee for exercising a right, privilege or entitlement
Family Medical Leave Act
Workers’ Compensation Insurance Act
Wage and Hour Laws
Title VII, Civil Rights Act

49. 49
Making Out The Retaliation Case
1. Employee takes FMLA leave
2. An adverse employment decision
3. The decision is “causally related” to
the leave.
Temporal proximity between return
from leave and termination is a link
sufficient to establish third prong.

50. 50
Employer must articulate legitimate
reason for taking adverse action.
Employee may present evidence that
employer’s reason is untrue.

51. 51
FMLA Retaliation
Tsakonas v. Nextel Communications
U.S. District Court for NJ (2006)
Sales person was not meeting quota for at least
two years. A Performance Improvement Plan
(PIP) is instituted.
During a 2-week medical leave of absence,
employer discovers that employee has fallen
short on every PIP target.
Upon return, employee is fired for poor
performance. He sues for retaliation.

52. 52
After initial case is alleged and proven,
burden shifts to employer to articulate a
non-retaliatory reason for discharge.
In this case, employer proves 2 ½ years
of not meeting sales quotas.
Employee has final opportunity to present
evidence and evidence undermining
employer’s reason.

53. 53
Employee provides evidence that other
employees are fired after medical leave.
One supervisor calls being out on medical
leave “the kiss of death.”

54. 54
Questions?