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Termination Of Employment Of A Subordinate And Legal Liability

On Behalf of | Nov 1, 2011 | Employment Law

An employee who has the responsibility of terminating the employment of a subordinate rarely can be held legally liable to the terminated employee. This issue was addressed in the September 30, 2011 decision of the New Hampshire federal court in John Balsamo v. UNH. John Balsamo (hereinafter “Balsamo”) began working at UNH as a general maintenance technician in August 2006. Approximately one year later, on September 21, 2007, Balsamo notified his superior at the housing office that he would be out of work for approximately two weeks because of a pre-existing knee injury. Four days later Balsamo attended a meeting with his superiors and during the meeting he was confronted with allegations that he had engaged in improper sexual behavior and made several sexually explicit and racially offensive remarks. Balsamo admitted that he made some of the statements, but denied the remainder of the allegations. His superiors informed Balsamo that the allegations against him had been made by co-workers, but they refused to identify his accusers. They declined Balsamo’s request for them to hear from other co-workers who could confirm that he was “neither a sexual deviant nor a racist.”

On September 26, 2007, Balsamo’s superiors called him and read him a letter terminating his employment. The letter stated that Balsamo had engaged in repeated and unwelcome conduct constituting discriminatory harassment contrary to UNH’s standards of performance and conduct. The letter further told Balsamo he could challenge the termination in the UNH grievance process. The process went forward in a hearing on December 13, 2007 and on January 2, 2008 Balsamo received a letter informing him that the Review Panel upheld Balsamo’s employment termination.

Balsamo then filed a complaint in the New Hampshire superior court on September 13, 2010 against UNH and its employees involved in firing him. The case was then removed to the New Hampshire federal court. Balsamo’s claims included state law claims for breach of contract, breach of duty of good faith and fair dealing, wrongful discharge, and intentional interference with contractual relations.

The defendants filed a Motion for Judgment on the pleading. The Court granted it as to some claims leaving the other claims still susceptible to a motion for summary judgment after the facts were properly developed in discovery. First, the Court noted that Balsamo could not bring a claim against his superiors based upon breach of contract or a breach of duty of good faith and fair dealing as to a contract in that if he had a contract it was with UNH and not with his superiors. The Court let the breach of contract claim against UNH continue for now based upon its employment policies for notice and fair grievance process.

Under New Hampshire law, every contract contains an implied covenant of good faith, performance, and fair dealing. For such a claim, Balsamo would have had to make allegations that are separate and distinct from his underlining breach of contract claim or it would be considered redundant and covered under his separate breach of contract claim. Balsamo made no allegations in his complaint as to what duties were implied in the contract of UNH. Therefore that claim was dismissed.

As to the wrongful discharge claim against UNH, Balsamo would have had to allege facts showing that his termination was motivated by bad faith, retaliation, or malice and that he was terminated for performing an act that public policy would encourage or refuse to do something that public policy would condemn. Balsamo acknowledged he had no wrongful discharge claim against the individual defendants so that claim against them was dismissed. In Balsamo’s complaint he did not include non-conclusory factual allegations that UNH acted in bad faith, malice, or retaliation. Therefore, the wrongful discharge claim was dismissed.

Balsamo also alleged intentional interference with an employment contract against the individual defendants. Evidently, this is where Balsamo expected that he would be able to hold onto the individual defendants in the lawsuit by making such an allegation. However, to prove intentional interference with a contractual relationship in New Hampshire, Balsamo would have had to show that he had a contractual relationship with UNH, that the individual defendants knew of this relationship and intentionally and improperly interfered with the contractual relationship, and that Balsamo was damaged by such interference.

The law distinguishes between those who are acting as a representative of one of the contracting parties rather than individuals who are outside the contract. UNH employees could not be deemed to be a third party for an interference claim if those employees were acting within the scope of their employment when they engaged in the conduct that gives rise to the claim. Balsamo did not allege facts in his complaint that those individual defendants brought forth allegations against him and ultimately terminated his employment by acting outside the scope of their employment. Therefore, the Court dismissed that claim as well.

One of the more important points to take from this case is that as a supervisor or officer of a company, your decision to participate in the employment termination of a subordinate should not give rise to legal liability to you individually so long as you act in good faith and without malice. Notwithstanding the foregoing, the ultimate decision-makers in the company should review any employment termination with their employment counsel to discuss the propriety of the employment termination and the strategy and process in moving forward with effectuating that employment termination.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].