Terminating an Employee Soon After Hire: How to Protect Yourself From a Lawsuit
When hiring new employees, employers engage in all sorts of activities to evaluate if the candidate is right for the job. There are background checks, credit checks, reference checks, and asking a myriad of what you think are all the right questions. Yet, despite these good practices, it sometimes becomes apparent in a short period of time that the candidate you selected sold you a bill of goods, is just not working out, and must be terminated. Since Pennsylvania generally presumes that employment is “at-will” —meaning that an employer or employee can end the employment at any time for any reason (with many exceptions)–employers often think there will be no legal repercussions when terminating a short-lived employee for performance reasons. However, there have been several types of successful lawsuits by employees in this situation.
Pennsylvania courts have permitted these terminated employees, under certain circumstances, to hold the employer liable for not giving them enough time or support to succeed in the new job. In cases where an individual was hired away from another job out-of-state, Pennsylvania courts have permitted juries to imply that the sacrifices made by the employee in moving to take the Pennsylvania job created an implied contract of employment for a “reasonable period of time” (often argued to be a year or longer), even though the employer gave no assurances of any length of employment. Ironically, these claims are called “Cashdollar” lawsuits, named after the individual who first succeeded in such a lawsuit, which happened to be in Pittsburgh (against Mercy Hospital).
Another way terminated employees have attacked their discharges is by bringing lawsuits for misrepresentation and fraud against the employer, claiming the employer knowingly misled the employee during interviews by saying it would do things it had no intention of doing—such as providing training, financial, or staff support. The argument here is that the employee would have been successful and not been fired if those alleged promises had been fulfilled. Pennsylvania courts have permitted these claims, even if an employment at-will disclaimer or notice was given by the employer to the employee prior to hire.
These various claims permit terminated employees to successfully get around the employment at-will presumption and prevail in lawsuits against their former employers. Recently, however, the Pennsylvania Supreme Court (and lower courts) agreed with the arguments of Houston Harbaugh attorney Craig M. Brooks, limiting this trend where a fuller written notice was given the prospective employee prior to accepting the job. This type of notice clearly states there are no contractual commitments to the employee (except through a clearly limited process) and that the employment can end at any time.
In the case of Wakeley v. M. J. Brunner, Inc., 2016 P.A. Super 88 (Pa. Super.Ct. 2016), petition for appeal denied, __ PA __ (2016), Craig Brooks represented the employer in defending against and successfully convincing the courts that neither the Cashdollar nor the misrepresentation claims made by the former employee hired from out-of-state should be permitted where the employer gave written notices prior to hire along the lines described above. The courts, early on in the lawsuit and at each appeal level, agreed that these explicit pre-hire statements made it unreasonable as a matter of law for the former employee to claim any promises, express or implied, had been made regarding job security or longevity. The Court denied the employee the ability to sue for an implied contract or alleged misrepresentations during interviews. Most importantly, not only did the employer win the lawsuit but it allowed us to get the lawsuit thrown out at an early stage, without the significant litigation expense of depositions, discovery and a trial. It can be very frustrating for an employer to have to spend lots of time and money defending a lawsuit based on mischaracterizations about what was said in job interviews. It is so easy for someone, once out of a job, to believe they were told things during the interviews that indicated this result wouldn’t happen. This new court decision, with its favorable ruling by the Pa. Supreme Court, provides a good roadmap for employers to avoid these potential lawsuits.
The “standard” employment at-will notices that many employers include in their employee handbooks, job applications, and, hopefully, job offers, are not enough to protect employers from the claims described here. For many years, Houston Harbaugh has included additional wording in job applications, handbooks, and offer letters, such as was successful for its client in the case described above. The particular wording of these notices is important. For example, many employers include a statement in their handbooks that employment is at-will and they reserve the right to change their policies or practices at any time. Some courts have considered such language to open the door to claims that a supervisor’s (likely unwitting) verbal statements can be considered a change to create a binding, express or implied commitment. If you have a “standard” provision like this or have only a general at-will notice, you should revise your documents to include a more protective contract disclaimer notice. By doing so, you may not only avoid liability on these claims, but may also prevent lawsuits or win them at an early stage.