Vermont Employment Termination Law – Updated
VERMONT EMPLOYMENT TERMINATION LAW –
Roger E. Kohn, Esq.
The author reviewed the status of Vermont employment law, as of 1993, in two articles appearing in the February and April, 1993, issues of The Vermont Bar Association Journal & Law Digest. The purpose of the present article is to put into context the more recent Vermont court decisions. The author has concluded that this article will be most useful if it provides a general overview of Vermont employment law, rather than limiting itself only to the more recent decisions.
I. THE EMPLOYMENT-AT-WILL DOCTRINE AND ITS
Clients are greatly surprised to learn that, in the absence of a special exception, they can be fired at any time, for any reason or no reason. This is the doctrine of “employment-at-will”, which has long been the common law of Vermont.1 The development of Vermont employment law has largely been the development of exceptions to the employment-at-will doctrine.
A. Does The Doctrine Apply?
The employment-at-will doctrine applies only in cases where there is no oral or written contract for an ascertainable or definite term of employment; i.e., the doctrine applies only when the length of employment is not specified by contract. Accordingly, an oral agreement to employ someone for a year has never been within the doctrine. The law will, however, imply various reasons for terminating such a contract, such as excessive absenteeism, theft, or other “just cause” reasons for dismissal.
B. Written Contracts
Written employment agreements are obviously enforceable in accordance with their terms. Specific performance may not be available, however, in light of the constitutional prohibition against involuntary servitude.
C. Union Contracts
If the employer is unionized, the union contract will provide a potential remedy. However, practitioners need to beware of malpractice in situations involving unionized employers. Union contracts commonly require that procedural steps be followed, and often require the employee to take action within short time frames, such as five, ten, or thirty days.
D. Governmental Employees
An employee of a governmental entity or an entity the actions of which constitute “state action” has the right to due process of law before being fired. The provisions of the federal civil rights statutes, and in particular 42 U.S.C. § 1983, provide remedies in this context. Attorney’s fees may be available under 42 U.S.C. § 1988. Claims under the federal
civil rights statutes can be asserted either in state or federal court. In addition, other specific statutory remedies may be available to state or federal employees.
For termination to be actionable under § 1983, the plaintiff must have been deprived of a “property right.”2 This is a term of art, and is rather broadly defined under federal law (see the numerous cases cited in the annotations in United States Code Annotated). The “property right” hurdle is usually not a problem in the employment termination
context, except as to probationary employees.3
As the Supreme Court held in Gallipo v. City of Rutland, 163 Vt. 83, 656 A.2d 635 (1994), whether an employment decision other than termination requires due process depends upon the nature of the employee’s right. To constitute a property interest, there must be a “legitimate claim of entitlement” on the part of the employee, rather than a unilateral expectation on the employee’s part. In Gallipo, the Court found that there was insufficient evidence that
plaintiff was entitled to be promoted because of his seniority, and accordingly held that he did not have a “property right” to promotion under the facts in the record.
E. Anti-Discrimination Statutes
It is illegal under either state or federal law, or both, to terminate an employee on the basis of sex, age, religion, race, color, national origin, ancestry, place of birth, or sexual orientation.4 These statutes are particularly useful because they provide for attorney’s fees to a prevailing plaintiff. Employment discrimination law has a number of complexities which are beyond the scope of this article. These complexities need not be too daunting to the practitioner; in particular, although the federal statutes require certain procedural steps be taken before filing federal court claims, a discrimination case can be filed in Vermont courts without the necessity of any previous administrative proceedings.
In Gallipo v. City of Rutland, 163 Vt. 83, 89, 656 A.2d 635, 640 (1994), the Vermont Supreme Court held that if a plaintiff presents evidence that an impermissible factor played a motivating part in an employer’s decision, the burden shifts to, and remains with, the employer to show that it would have made the same decision even if it had not considered the impermissible factor. Gallipo’s analysis on this issue was referred to in Murray v. St. Michael’s College, a case involving retaliation for filing a worker’s compensation claim, discussed later in this article. Gallipo also held
that evidence that the plaintiff was denied promotion in part because he was watching religious television shows was sufficient to overcome a motion for summary judgment in his claim of religious discrimination.
In Lavalley v. E.B. & A.C. Whiting Company, 692 A.2d 367 (Vt. 1997), the Supreme Court held that pregnancy discrimination can be sex discrimination for the purposes of the Vermont Fair Employment Practices Act. However, the Court found that the disability scheme adopted by the employer was facially neutral with respect to pregnancy, and that no disparate impact claim had been made by the plaintiff. Accordingly, summary judgment was upheld.
In re Grievance of Deborah Butler, 8 Vt.L.W. 143 (May 23, 1997), was an appeal from a decision of the Vermont Labor Relations Board requiring reinstatement of a female Vermont State Police Officer. The Court upheld the finding of a hostile work environment, pointing out that hostile environment cases seldom involve “outright and blatant discrimination based on gender.” The Court found a hostile environment based “upon the accretion of seemingly small incidents.” The Court further pointed out that the disparate treatment analysis by which the grievant compared her treatment with the treatment of other employees did not require a “precise equivalence in culpabability between employees.” The Supreme Court held that the test is “whether a prudent person, looking objectively at the incidents, would think them roughly equivalent and the protagonists similarly situated.”
A recent sex discrimination case has implications as to other areas of employment law. In Ballard v. University of Vermont, 693 A.2d 55 (Vt. 1997), a man was hired rather than plaintiff. The Supreme Court held that it was error to admit evidence of the quality of the man’s performance after he was hired, because that could not have influenced UVM’s hiring decision. The Court cited a number of cases holding that an employer may not prevail by offering legitimate reasons for a decision, if that reason did not motivate it at the time of the decision. Accordingly, the common defense tactic of attempting to obtain evidence of wrongful conduct which was unknown to the employer at the time of the termination (often referred to as “after-acquired evidence”) would appear to be foreclosed by Ballard.
F. Statutes Protecting the Handicapped
One anti-discrimination statute is of particular importance. It is illegal under both federal and state law to terminate or refuse to hire a person because the person is a “qualified handicapped individual.”5 Federal and state law require that employers make reasonable accommodations for disabled employees. The inter-relationship between the Americans With Disabilities Act and its state counterpart, and the worker’s compensation statutes, is an area which often requires exploration: an individual injured on the job may become a handicapped worker who is protected by these statutes. It is also important to note that an individual may be considered disabled not only for physical reasons, but also for mental reasons. Accordingly, questions can arise as to whether employees who have difficulty dealing with co-workers or managers require reasonable accommodation for a mental illness.
An employee raising a disability claim must show that he or she “has a physical or mental impairment which substantially limits one or more major life activities.”6 The employee must show that he is “capable of performing the essential functions of the job or jobs for which he is being considered with reasonable accommodations to his handicap.”7 In Gallipo v. City of Rutland, 163 Vt. 83, 89-93, 656 A.2d 635, 640-642 (1994), the Supreme Court held that evidence that plaintiff was not promoted in part because he was dyslexic and had difficulty reading was sufficient to support a prima facie case and avoid dismissal on summary judgment. Moreover, the Court found that the plaintiff had presented sufficient evidence that he had been retaliated against for filing a discrimination complaint, and that he could bring such a claim even if he did not succeed on the merits of his discrimination claim; summary judgment was accordingly also not appropriate on this issue.
In State v. G.S. Blodgett Company, 163 Vt. 175, 656 A.2d 984 (1995), the Supreme Court discussed various issues concerning the handicapped provisions of the Vermont Fair Employment Practices Act. In that case, the Supreme Court held that a woman suffering from multiple sclerosis had failed to establish that she could perform the essential functions of her job or that there were reasonable accommodations which would permit her to do so. Accordingly, she was not a “qualified” handicapped individual.
Although there are some decisions from federal courts around the country defining a “handicapped individual” narrowly, the Vermont Supreme Court does not seem so inclined. In Potvin v. Champlain Cable Corp., 687 A.2d 95 (Vt. 1996), the Supreme Court noted that temporary injuries, such as broken limbs that heal properly within a few weeks, are not considered to substantially limit major life activities. Because plaintiff’s impairment had lasted for at least five months, and was the result of a long-term illness, the Court held that it could not say, as a matter of law, that plaintiff was not a “handicapped individual.” The Court went on to hold that even if plaintiff could work full-time and perform all the tasks of her job, a handicap which prevented her from working second shift could constitute a substantial impairment. Finally, Potvin held that Vermont statute was not pre-empted by federal labor laws in the circumstances of that case, and that the plaintiff could pursue her discrimination claim without first following the
collective bargaining agreement grievance procedure.
G. Termination For Exercise of Rights Under
Workers’ Compensation Law
Vermont law prohibits termination of an individual for exercising his or her rights under the workers’ compensation
statute. 21 V.S.A. § 710. The Attorney General has enforcement powers. In Murray v. St. Michael’s College, 164 Vt. 205, 208-210, 667 A.2d 294, 298-299 (1995), the Supreme Court held that employees also have a private cause of action for monetary damages. Murray also held that a spouse has a derivative claim for lack of consortium in a case in which an employee has been discriminated against for filing a workers’ compensation claim, and the loss of consortium claim is not barred by the exclusivity provision of the workers’ compensation act. Murray held that a plaintiff claiming retaliatory discrimination must show: “(1) he was engaged in a protected activity, (2) his employer was aware of that activity, (3) he suffered adverse employment decisions, and (4) there was a causal connection between the protected activity and the adverse employment decision.” Once an employee establishes a prima facie case of retaliatory discrimination, the employer is required to articulate some legitimate, non-discriminatory reason for the challenged conduct; if the employer articulates such a reason, the employee is required to prove that the reason was mere pretext.
Murray held that an employee who could be disciplined for a reason unrelated to filing a workers’ compensation claim had a right to prove that the severity of the disciplinary action was a result of discrimination for filing such a claim. The fact that the employer took disciplinary action contemporaneously with plaintiff’s filing a workers’ compensation claim was a sufficient showing, for the purposes of surviving summary judgment, of a causal connection between the protected activity and the adverse employment decision.
An injured worker who recovers from the injury within two years has a right to be reinstated in the first available position suitable for the worker. 21 V.S.A. § 643b(b). The employee must inform the employer of his or her continuing
interest in reinstatement, as well as his or her recovery and any change in mailing address. 21 V.S.A. § 643b(d)(3). Note that the statute does not require the employer to hold a position open for the injured worker.8
H. Other Statutes
Employees cannot be fired for requesting leave under the federal Family and Medical Leave Act of 1993 or the Vermont Parental and Family Leave Act.9
There are other statutes providing remedies for fired workers. Federal “whistleblowers” are protected by federal statute. 10 Veterans returning from military services have certain re-employment rights under federal law.11 Federal law prohibits the discharge of an employee for filing a complaint under the Fair Labor Standards Act.12 Moreover, the possibility of remedies for violations of the Fair Labor Standards Act or the state minimum wage statutes should be considered. There are various other federal and state laws which may apply in specific instances.
I. The Public Policy Exception
The remedies for fired workers which are listed above are in some sense the “obvious” grounds for litigation. In many cases, however, these exceptions to the employment-at-will doctrine do not apply, and the practitioner is required to be more innovative in seeking a remedy for an injured employee. Some of the liability grounds listed hereafter in this
article are very well established, and some are emerging; they all require some degree of innovation and careful factual development to be useful.
One way that the courts have attempted to ameliorate the harsh and inflexible nature of the employment-at-will doctrine is to provide that it is unlawful to fire an individual in violation of a clear and compelling public policy. Although the plaintiff needs to identify a clear and compelling public policy, the policy does not need to be contained
in a statute.13
J. Tort Remedies
The tort of interference with contractual relations and the tort of defamation are often used in employment termination cases.14 Other torts may also provide a remedy.
Murray v. St. Michael’s College, 164 Vt. 205, 213, 667 A.2d 294 (1995), discusses the tort of interference with contract in the context of an employment case. Murray holds that the tort is applicable even to an employment-at-will situation. It can be used against other employees or officers of the employer if the defendants “were acting outside the scope of their employment to further their own interests.” In Murray, there was no allegation by the employee that his supervisor had acted outside the scope of his employment or in his own personal interest in dealing with plaintiff, and summary judgment was therefore granted in favor of the supervisor.
The tort of intentional infliction of emotional distress, sometimes known as the tort of outrage, is recognized in Vermont.15 However, the Vermont Supreme Court in Baldwin v. Upper Valley Services, Inc., 162 Vt. 51, 55-57, 644 A.2d 316 (1994) and Denton v. Chittenden Bank, 163 Vt. 62, 655 A.2d 703 (1994), made it very difficult to use this tort in the employment context. Denton, citing the Restatement (Second) of Torts, held that this tort requires conduct “so
outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and . . . be regarded as atrocious, and utterly intolerable in a civilized community.” The Court held: “Absent at least one incident of behavior that transcends the ignoble and vast realm of unpleasant and often stressful conduct in the workplace, incidents that are in themselves insignificant should not be consolidated to arrive at the conclusion that the overall conduct was outrageous.” An earlier case, Crump v. P&C Food Markets, Inc., 154 Vt. 284, 576 A.2d 441(1990), found the employer liable for this tort. Denton attempts to distinguish Crump, although one can wonder whether Crump would be decided the same way after Denton. In any event, in Baldwin, Denton, Gallipo v. City of Rutland, 163 Vt. 83, 94-95, 656 A.2d 635, 643 (1994), and Farnham v. Brattleboro Retreat, Inc., 164 Vt. 488, 497-99, 671 A.2d 1249 (1995), the Court found that the plaintiffs’ circumstances were not outrageous enough to be actionable under this tort.16
In Pearson v. Simmonds Precision Products, Inc., 160 Vt. 168, 624 A.2d 1134 (1993), specific representations were made to the plaintiff at the time of his hiring interview. He was assured that his employment was not specifically tied to a certain portion of the Boeing B-2 bomber project, and that military work comprised only forty percent of the company’s total work. The project plaintiff was working on subsequently lost its funding,
and plaintiff was laid off five months after he was hired. Plaintiff sued for negligent failure to disclose and negligent misrepresentation citing the Restatement (Second) of Torts §§ 551, 552. Plaintiff obtained a jury verdict of $163,200.00 for loss of income and $42,000.00 for emotional distress. After the employment interview at which the misrepresentations were made, the plaintiff signed an employment contract which provided for employment at will, and which the employer also claimed constituted a complete disclosure regarding job security. The Supreme Court upheld the verdict for loss of income, holding that neither the at-will provisions of the employment contract, nor the
contractual disclaimers, constituted a bar to the negligence claims. The Supreme Court did not, however, permit recovery for emotional distress, finding that the Restatement specifically allowed only pecuniary damages, and not damages for emotional distress, for these two torts.
K. Implied Contract
It should be remembered that the employment-at-will doctrine is “simply a rule of contract construction that can be overcome by evidence to the contrary,” such as evidence of an implied contract.17
Fired employees often claim that they have been terminated in breach of an implied contract. This area of the law has been subject to much litigation, and substantial case development. The general principles of implied contracts apply. The question of whether there is an express oral contract, or an implied contract (a contract implied from the facts and circumstances surrounding the transaction) are issues which often overlap.
In Ross v. Times Mirror, Inc., 164 Vt. 13, 18, 665 A.2d 580 (1995), the plaintiff argued that he had been hired pursuant to an oral contract for permanent employment, terminable only for just cause. The Supreme Court, referring to an earlier case, held that “the term ‘permanent,’ when used in an employment contract with reference to a term of employment, normally means nothing more than indefinite employment.” The Court held that “[a]n employer must do something more than promise continuous employment to take an employee out of an at-will status.”
Vermont law provides that there is an implied covenant of good faith and fair dealing in all contracts.18 Ross held that the covenant of good faith and fair dealing could not be used to imply a covenant as to tenure in an unmodified at-will contract, because this “irreconcilably conflicts with the employment-at-will doctrine.”19 The Court pointed out that it was not deciding whether it would recognize the covenant of good faith and fair dealing “in the context of non-tenure terms of at-will employment contracts, such as accrued benefits.” The Court cited with approval a Massachusetts case holding that the firing of a salesperson to prevent him from obtaining earned commissions constituted a breach of the implied covenant of good faith and fair dealing.
Although Ross refused to imply an oral contract for permanent employment, the Court states that a procedure or practice used by an employer may be considered to be enforceable by employees (in the same manner as an employee handbook), if the procedure or practice is clearly established and uniformly and consistently applied throughout the company. Ross specifically held that an employer’s official statement does not have to be in writing to be enforceable; for example, an employee could enforce an employer’s unwritten disciplinary policy regarding sanctions for lateness. In Ross, the plaintiff offered only his own experience and hearsay statements regarding what “he had heard” about other employees, and the Court therefore granted summary judgment against him. The Court stated that while the plaintiff’s own experience was relevant, it did not, by itself, suggest a definitive company-wide practice. The Court cited with approval a case in which a plaintiff had established a prima facie breach of contract claim by submitting personnel records of employees who were subjected to an unwritten disciplinary policy and affidavits of managers who attested to using the policy. Similarly, in Madden v. Omega Optical, Inc., 683 A.2d 386 (Vt. 1996), the failure of plaintiffs to provide specific information as to who made alleged representations that their employment would be terminated only for unsatisfactory performance resulted in summary judgment being upheld against the employees.
L. Employee Handbooks
The area of employment law which has seen the greatest expansion in recent years has been the use of employee handbooks as evidence of an express or implied contract. In any employment case, it should be determined whether there is an employee handbook, policy manual, or internal documents of like effect, and these documents should be carefully reviewed in light of the case law.
The development of the law in this area has focused on several issues. Were the terms of the employee handbook bargained for by the employee? Did the employee rely on the employee handbook in taking the actions for which he or she was fired? Can an employee handbook unilaterally adopted by the employer also be unilaterally changed by the employer? What is the effect of disclaimers in an employee handbook? After a number of
years of gradual development,20 the answers to these questions have finally become relatively clear in Vermont.
In Taylor v. National Life Insurance Co., 161 Vt. 457, 652 A.2d 466 (1993), the Supreme Court held that a personnel manual may be used as evidence that the contract of employment requires good cause for termination, despite the fact that the personnel manual was not bargained for by the employee. Taylor was based upon the inherent unfairness in the employer setting forth a policy in an employee handbook, and then refusing to follow it. Accordingly, an employee handbook, even if not bargained for by the employee, and even if the employee has not relied to his detriment on it, is enforceable by the employee.21
Taylor holds that a plaintiff can challenge the procedure by which the employee was discharged, based upon an employee handbook, even though economic necessity represents good cause for termination; in Taylor, the Court found that the plaintiff had not presented sufficient evidence to go to a jury on that issue.
Ross v. Times Mirror, Inc., 164 Vt. 13, 18, 665 A.2d 580 (1995) specifically holds that disciplinary procedures set forth in an employee handbook must be followed by the employer, even if the employee is otherwise an at-will employee.22
The most ambiguous issue regarding employee handbooks is the extent to which a disclaimer is effective. The thrust of the recent decisions is that a handbook disclaimer will not be effective to modify specific language in the handbook. Ross holds that the effectiveness of a handbook disclaimer depends on the circumstances. The Court goes on to state that a written disciplinary procedure must be followed, even if the employer has expressly reserved the right to bypass the disciplinary process. Without such a principle, the Court points out, an employer could have it both ways — enjoying the morale-enhancing benefits of fair procedures most of the time, but relying on a handbook disclaimer whenever it chose to jettison its procedures in a particular case.
In Farnham v. Brattleboro Retreat, Inc., 164 Vt. 488, 671 A.2d 1249 (1995), the Supreme Court quoted
language from the defendant’s employee handbook regarding progressive discipline. The Court held that it was a jury question as to whether the handbook created an implied contract. The Court found that the provisions in the handbook sent mixed messages regarding whether employees can be discharged without cause. The disclaimer provision stated that all employment was at-will, whereas other provisions indicated that employees could be discharged only after a series of progressive warnings, except in cases involving serious misconduct or poor performance. The Court, citing Ross, stated: “The mere inclusion of boilerplate language providing that the employee relationship is at will cannot negate any implied contract and procedural protections created by the employee handbook.” Farnham goes on to state that disclaimers “must be evaluated in the context of all the other provisions” in an employee handbook, as well as “any other circumstances bearing on the status of the employment agreement.” Farnham held that the jury could have reasonably concluded, from the various versions of the employee handbooks which were in evidence, that they created an implied contract precluding the employer from discharging the plaintiff without cause.
The Farnham employee handbooks permitted termination, without previous warning, in cases of “serious
misconduct.” The employer argued that the term “serious misconduct” was too indefinite for the jury to be permitted
to substitute its judgment for that of the employer as to whether serious misconduct had been committed. The Court rejected the employer’s contention, pointing out that the handbooks had set forth specific examples of misconduct warranting immediate termination. One of the cases cited by the Court permitted a plaintiff to recover pursuant to a handbook which did not define “serious misconduct” but “provided procedures definite enough for a jury to consider whether employee’s contractual rights had been violated.” Farnham also rejected the employer’s argument that the actions of the employee were such as a constitute “serious misconduct” as a matter of law.
A footnote in Farnham provides some potential succor to an employer. The employer in that case argued that a jury must defer to an employer’s reasonable determination that it had good cause to discharge an employee. The Court refused to discuss the issue, because the employer had not preserved the issue below.23 The author suggests that if the Supreme Court were to adopt this standard, many of the protections it has provided to workers in its recent cases would prove illusory.
M. Promissory Estoppel
Promissory estoppel is defined in the Restatement (Second) of Contracts § 90(1) (1981) as follows:
A promise which the promisor could reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
The difference between promissory estoppel and an implied contract is that a contract requires consideration to support it, whereas promissory estoppel requires only reliance by the person to whom the promise is made, in lieu of consideration.24
The Vermont Supreme Court, in the seminal case of Foote v. Simmonds Precision Products Co., 158 Vt. 566, 613 A.2d 1277 (1992), held that an employer who promised to take no adverse action if an employee complained in accordance with its grievance policy was liable to an employee who was fired for utilizing the policy. The creative use of promissory estoppel theories have been an important aspect of employment termination litigation, and promissory estoppel accordingly provides a useful tool to workers’ attorneys.
The use of promissory estoppel to argue that an employment contract is permanent has been undercut by the analysis in Ross v. Times Mirror, Inc., 164 Vt. 13, 18, 665 A.2d 580 (1995). The analysis would be the same as previously discussed in reference to implied contracts; one would need to identify a very specific “promise” in light of the holding in Ross that “the term ‘permanent,’ when used in an employment contract with reference to a term of employment, normally means nothing more than indefinite employment.”
It is interesting to note the similarity between the doctrine of promissory estoppel and the torts of negligent failure to disclose and negligent misrepresentation used so successfully by the plaintiff in Pearson v. Simmonds Precision Products, Inc., supra, in the context of promises made to an employee during hiring.
II. WHAT CONSTITUTES TERMINATION FOR CAUSE
In Nadeau vs. Intec, Inc., 164 Vt. 471, 670 A.2d 841 (1995), the Supreme Court quoted earlier cases to define just cause for termination of employment as “some substantial shortcoming detrimental to the employer’s interests, which the law and a sound public opinion recognize as a good cause” for dismissal. Nadeau held that a discharge for just cause must meet two criteria: “first, that the employee’s conduct was egregious enough that the discharge was reasonable, and second, that the employee had fair notice, express or implied, that such conduct could result in discharge.” Of course, the employer cannot use a pretextual reason to fire someone, if the actual reason was illegal.25 In Nadeau, the employer ordered the employee in writing to limit his contact with a particular co-worker to work-related tasks. The co-worker was a woman with whom the plaintiff had previously had a consensual romantic affair, but who now claimed that the plaintiff’s attentions were unwelcome. The Court held that the order “was a reasonable attempt to prevent unrest in any future conduct that might be construed as sexual harassment,” and that the plaintiff was accordingly discharged for good cause when he failed to comply with the order. Finally, Nadeau held that whether the plaintiff was sexually harassing the co-worker or not, he could be fired for failure to follow the employer’s order, even though the employer had told the plaintiff he was being fired for sexual harassment, not for failure to follow the employer’s order.
Taylor v. National Life Insurance Co., 161 Vt. 457, 652 A.2d 466 (1993), held that an employer’s economic circumstances can constitute good cause for termination. Termination necessitated by economic circumstances does not constitute a breach of contract absent a “clear and specific” promise to the contrary in an employment manual or in an oral or written agreement. Id., 161 Vt. at 468; 652 A.2d at 473.
Clement v. Woodstock Resort Corp., 687 A.2d 886 (1996) involved a dispute whether a critical and profane note written by an employee was written to himself and never intended to be read by his supervisor, or whether it was intended to be sent to his supervisor. Other issues were whether the plaintiff had sexually harassed a co-worker and read confidential documents on the supervisor’s desk. There was evidence that the plaintiff was a good worker and that any problems on the job stemmed from overconscientiousness compounded by a learning disability. The jury found the factual issues in the plaintiff’s favor, the Supreme Court held that the jury could reasonably have determined that plaintiff’s misconduct did not justify immediate termination and that he should have been given further verbal and written warnings.
III. COVENANTS NOT TO COMPETE – AN EMERGING
Covenants not to compete are enforceable in Vermont if they are reasonable in scope and duration. The problem is that an employee who is changing jobs often has neither the time nor the money to litigate with his former employer concerning this issue. The author believes that covenants not to compete are being substantially abused by employers — the author has seen a contract for a teenage clerk at a video rental store which prohibited her from working at any other video store! It is becoming not unusual for employers to include covenants not to compete in contracts with relatively low-level employees.
In this light, the Supreme Court’s decision in Madden v. Omega Optical, Inc., 683 A.2d 386 (1996), is most unfortunate. In that case, the Supreme Court upheld the termination of five employees who refused to sign a
non-competition agreement. The Court held that this termination was not in violation of public policy, even if the non-competition agreement was itself unreasonable. The Court held that the “plaintiffs took no risk by signing [the non-competition agreement] because they could later challenge the Agreement when defendants sought to enforce it.” The author believes that the Supreme Court did not properly appreciate the practical difficulties this presents to employees. An employee offered another job often cannot wait while he or she litigates the validity of a covenant not to compete, and many employees do not have the financial resources for such litigation in any event.
The author believes that legislation is crucial to protect against the anti-competitive effects of abusive covenants not to compete. For example, a statute prohibiting covenants not to compete except in connection with the purchase of a business may be appropriate.
IV. PRACTICE POINTERS
Some impressive recent verdicts have raised the interest of members of the Bar.26 It is important,
however, for practitioners to recognize the difficulties attendant with employment law cases. It is the experience of the author that the vast majority of potential clients who believe they have been fired wrongfully do not have a viable claim. Moreover, it is sobering to realize that some attorneys who have received substantial employment law verdicts report that their contingent fee resulted in a payment significantly below their hourly rates. Employment cases often result in an emotional “litigate to the end — never settle” reaction from the employer, and many employers can afford substantial litigation expenses. On the other hand, jury sympathy is usually with the fired employee.
The author’s advice to an attorney considering handling an employment termination case is as follows. First, screen cases very carefully. As opposed to areas such as personal injury law, the attorney must be prepared to turn away many potential clients before accepting a case. Second, determine if there is a strong theory of liability. Third, consider whether there are sufficient damages to make the claim worth bringing. This latter issue is often insufficiently considered; if an employee has obtained a new job paying as much as the old job, the case is usually not worth bringing, no matter how strong the liability. If the fired employee does not yet have a new job, it may be necessary to wait before filing suit to see what type of a job he or she will obtain. Finally, the attorney should ask whether the jury will like the plaintiff, and whether the client’s personality is such that the attorney and client will have a good working relationship.
In summary, helping a fired employee can result in great satisfaction. Many employment termination cases are also worth taking from a financial point of view. In evaluating these cases, an attorney must, however, carefully analyze the case, have full knowledge of the potential pitfalls, and be willing to devote a substantial amount of time to the case; the attorney must also take a creative and innovative approach.
Roger E. Kohn, of Kohn Rath Danon & Lynch, Hinesburg, is in general practice. He is a founding member of the Vermont Employment Lawyers Association, and a former Chair of the VBA Workers’ Compensation Committee.
1. E.g., Mullaney v. C.H. Goss Co., 97 Vt. 82, 122 A. 430 (1923); Jones v. Keogh, 137 Vt. 562,
409 A.2d 581 (1979); Brower v. Holmes Transp., Inc. 140 Vt. 114, 435 A.2d 952 (1981); Larose v. Agway, Inc., 147 Vt. 1, 508 A.2d 1364 (1986); Benoir v. Ethan Allen, Inc., 147 Vt. 268, 514 A.2d 716 (1986).
2. State employees have a property interest in their employment as a result of the collective bargaining agreement. E.g., In Re Muzzy, 141 Vt. 463, 472, 449 A.2d 970, 974 (1982); In Re Towle, 164 Vt. 145, 153, 665 A.2d 55, 61 (1995); In Re Gregoire, 689 A.2d 431 (Vt. 1996).
3. Judge Meaker has held that a probationary teacher does not have a “property interest” in continued employment. Rich v. Montpelier Supervisory Dist., 1 Vt.Tr.Ct.Rep. 135, 136 (Wash. Super. Ct., Dec. 5, 1996). Judge Meaker distinguished Burroughs v. West Windsor Board of School Directors, 138 Vt. 575, 420 A.2d 861 (1980), which held that teachers generally have a property interest in continued employment.
4. 42 U.S.C. § 2000e, et seq.; 29 U.S.C. §§ 621-34; 21 V.S.A. § 495.
5. Americans with Disabilities Act, 42 U.S.C. § 12101 et seq.; Vermont Fair Employment Practices Act, 21
V.S.A. §§ 495-496.
6. Americans with Disabilities Act; Vermont FairEmployment Practices Act, 21 V.S.A. § 495d(5)(A).
7. Americans With Disability Act; Vermont FairEmployment Practices Act, 21 V.S.A. § 495d(6); see also,21 V.S.A. § 495d(12) (defining reasonable accommodation). In Trombley v. Southwestern Vermont Medical Center, Inc., 1 Vt.Tr.Ct.Rep. 139 (Benn. Super. Jan. 22, 1997), Judge Norton discusses burden of proof issues under Vermont Fair Employment Practices Act and other issues concerning a discrimination claim by a handicapped individual.
8. Payea v. The Howard Bank, 164 Vt. 106, 663 A.2d 937 (1995), considered the implications of the
reinstatement right in a situation in which an employer had downsized. The Court found that the plaintiff was entitled to reinstatement if there was an available, suitable position for her despite the fact that had she not been injured, her job would have been eliminated anyway because of the employer’s reorganization.
9. 29 U.S.C. § 2615(b); 21 V.S.A.§ 473. Although the Vermont Act prohibits retaliation for filing a complaint or because the employer believes the employee may file a complaint, it does not specifically prohibit termination for requesting leave (as does the federal statute). Nevertheless, termination would be actionable as a violation of a clear and compelling public policy.
10. 5 U.S.C. § 1201, et seq. See especially 5 U.S.C. §§ 1212, 1213, 1214, 1221, 2302.
11. 38 U.S.C. §§ 2021(a), 2024(b)(1), (2), (f).
12. 29 U.S.C. § 215. The Federal Equal Pay Act, 29 U.S.C. § 206(d) prohibits discrimination in payment of wages
on the basis of sex.
13. See Jones v. Keogh, 137 Vt. 562, 409 A.2d 581 (1979); Payne v. Rozendaal, 147 Vt. 488, 520 A.2d 586 (1986). Superior Court decisions dealing with this doctrine are listed in the notes to the author’s previous April, 1993 article.
14. See the discussion in footnotes 12 and 13 of the author’s previous article in April of 1993. In Raymond v. IBM, ____ F.Supp.___ (D.Vt. Jan. 27, 1997), Judge Sessions concluded that the Vermont Supreme Court would be likely to recognize the doctrine of “compelled self-publication” in defamation cases. The “prima facie tort” referred to in the Restatement (Second) of Torts § 870, and discussed at some length in Porter v. Crawford & Co., 611 S.W.2d, 265, 268-272 (Mo.Ct.Ap. 1981) should also be kept in mind. See also Blythe, Workplace Defamation: Public Policy, Compelled Self-Publication, and the Vermont Constitution, 16 Vt.L.Rev. 341 (1991).
15. Sheltra v. Smith, 136 Vt. 472, 392 A.2d 431 (1978); Crump v. P & C Food Markets, Inc., 154 Vt. 284, 576 A.2d 441 (1990); Birkenhead v. Coombs, 143 Vt. 167, 174-75, 465 A.2d 244 (1983).
16. In Shappy v. Rutland Hospital, Inc., 1 Vt.Tr.Ct.Rep. 137 (Rutland Super. Dec. 5, 1996), Judge Bryan rejected the defendant’s argument that plaintiff could not bring a tort claim because she was “attempting to fashion a breach of contract claim into a tort claim”, but also found that the facts of that case did not rise to a sufficient level to constitute outrageous conduct.
17. Ross v. Times Mirror, Inc., 164 Vt. 13, 19, 665 A.2d 580 (1995); Taylor v. National Life Ins. Co., 161 Vt. 457, 462, 654 A.2d 466, 470 (1993); Foote v. Simmonds Precision Products Co., 158 Vt. 566, 570, 613 A.2d 1277
18. E.g., Shaw v. E.I. DuPont de Nemours and Co., 126 Vt. 206, 209, 226 A.3d 903 (1967); H.P. Hood
& Sons v. Heins, 124 Vt. 331, 338, 205 A.2d 561 (1964); McHugh v. University of Vermont, 758 F.Supp. 945, 953 (D.Vt. 1991); Phillips v. Aetna Life Insurance Co., 473 F.Supp. 984, 989 (D.Vt. 1979).
19. The Supreme Court reiterated this holding in Madden v. Omega Optical, Inc., 683 A.2d 386 (Vt. 1996).
20. See Sherman v. Rutland Hospital, Inc., 146 Vt. 204, 500 A.2d 230 (1985); Larose v. Agway,
Inc., 147 Vt. 1, 508 A.2d 1364 (1986) (partially overruled by Taylor); Benoir v. Ethan Allen, Inc., 147 Vt. 268, 514 A.2d 716 (1986).
21. In Farnham v. Brattleboro Retreat, 164 Vt. 488, 671 A.2d 1249 (1995), the Supreme Court did not decide whether a handbook which has been unilaterally adopted can be unilaterally changed by the employer, but the Court did cite a Michigan case which holds that an employer may make changes in a written discharge-for-cause policy, even without reserving the right to do so, as long as employees are given reasonable notice of policy changes.
22. Ross states that employee manuals or policy statements do not automatically become binding agreements. It is an issue of proof whether a particular policy is meant to be a unilateral offer. “Only those policies which are definitive in form, communicated to the employees, and demonstrate an objective manifestation of the employer’s intent to bind itself will be enforced.” Ross, 164 Vt. at 20; 665 A.2d at 580. This analysis would seem important in determining whether an unwritten or informal policy of the employer is enforceable. It is
difficult to picture a written employment manual which would fail this test, although this language is important in interpreting ambiguous language in the handbook. Thus definitive policies which include a promise for specific treatment in specific situations may constitute an implied contract, but a general provision in a written handbook that terminations will be handled in a “fair, just, and equitable manner” are general policy statements and do not imply a contract to discharge only for cause. Id. (cite to a Washington case).
23. The same issue was raised in Haynes v. Golub Corp., 692 A.2d 377 (Vt. 1997). Again, the Supreme Court found that the issue had not been preserved below.
24. See Overlook v. Central VermontPublic Service Corp., 126 Vt. 549, 553, 237 A.2d 354 (1967).
25. See Ainsworth v. Franklin County
Cheese Corp., 156 Vt. 325, 330-31, 592 A.2d 871, 874 (1991) (sufficient evidence for jury finding that the reason given for termination was pretext to avoid severance allowance).
26. See, e.g., Raymond v. IBM, No. 2:95-CV-158 (D. Vt., July 14, 1997) ($869,156 verdict for past and future wages); Trombley v. Southwestern Vermont Medical Center, Inc., 8 Vt. Trial Lawyers Assoc. Newsletter, No. 3 (Bennington Super. No. S0211-94BcC, 1997) ($139,052 for lost wages; motions pending); Haynes v. Golub Corp., 692 A.2d 377(1997) ($175,000; remittitur ordered on appeal); Clement v. Woodstock Resort Corp., 687 A.2d 886 (Vt. 1996) ($58,024); Farnham v. Brattleboro Retreat, Inc., 164 Vt. 488, 492, 671 A.2d 1249 (1995) ($90,000 for wrongful discharge; $50,000 for intentional infliction of emotional distress; and $5,850 for quantum meruit); Nadeau
v. Intec, Inc., 164 Vt. 471, 670 A.2d 841 (1995)($175,000 verdict); Pearson v. Simmonds Precision Products, Inc.,
160 Vt. 168, 624 A.2d 1134 (1993) ($92,000 for loss of past income; $71,200 for loss of future income; and $42,000 for emotional distress; emotional distress damages found not recoverable by the Court).
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