Notes on Risk and Opportunity in Contract - Newcorp Liability

NewCorp Liability

According to InvestorWords.com (2010), liability is "an obligation that legally binds an individual or company to settle a debt. When one is liable for a debt, they are responsible for paying the debt or settling a wrongful act they may have committed" (p. 1). NewCorp provided Pat with an employee manual that stipulated the terms and conditions under which unsatisfactory job performance would be handled. As such, NewCorp is liable for the printed statements within the manual even if the material directly or indirectly negates NewCorp's at-will policy. The Notice of Unsatisfactory Performance/Corrective Action Plan clause outlined in the personnel manual states:

If the job performance of an employee is unsatisfactory, the employee will be notified of the deficiency and placed on a corrective action plan. If the employee's performance does not improve to a satisfactory level in the specified period of time, termination will follow (University of Phoenix, 2010, p. 1)

Because no corrective action plan was followed, NewCorp could be held liable for breach of contract. An employee manual could represent a contract, especially in those cases in which employees are required to sign them. According to Jennings (2006), many courts have considered employee manuals an implied contract because the employee has relied on the statements therein as a promise of sorts, which may fall under the legal principle of promissory estoppel. BusinessDictionary.com (2010) defines promissory estoppel as a "legal principle that a promise (even if made without consideration) is enforceable where the promisor makes, by conduct or words, an unambiguous representation to the promisee who relies on it to his or her

detriment" (p. 1). As a result, it would be unjust and unreasonable for the courts not to obligate NewCorp to stick to the terms of the implied promises within the personnel manual.

If Pat decides to pursue litigation and NewCorp is found guilty of breach of contract or promissory estoppel, NewCorp could be held liable for Pat's lost wages after termination and any future lost wages for the duration of his contract. Pat could also sue for the cost of selling his home, finding another job, and relocating his family, and mental distress for himself and his family because his termination will undoubtedly affect his family and their financial situation.

Legal Principles

Several legal principles apply in this situation. Although no statutory law applies because Vermont is an at-will state and is therefore not limited in its ability to terminate, Jennings (2006) describes a similar scenario in Case 18.7, Dillon versus. Champion Jogba, Inc. (2002). Linda Dillon, like Pat, experienced an unforeseen termination from an at-will company within 10 days of being hired for a new position within the company. "Prior to the termination, Ms. Dillon was never told her job was in jeopardy, nor did Jogbra follow the procedures laid out in its employee manual when terminating her" (Jennings, 2006, p. 728). Ms. Dillon brought suit against Jogbra for wrongful termination with claims for breach of contract and promissory estoppel. Jogbra filed a motion for summary judgment, which the trial court granted. Ms. Dillon appealed. "Although the appellate court affirmed the lower court's decision with respect to Dillon's claim for promissory estoppel, the court did reverse and remand on her breach of contract claim" (Jennings, 2006, p. 728).

NewCorp is also an at-will company, and Pat reserves the right to file a case against the company because of the contradicting clause in NewCorp's Notice of Unsatisfactory Performance/Corrective Action Plan. The manual itself is at the very least ambiguous regarding

employees' status, and NewCorp's employment practices appear to be both "consistent with the manual and inconsistent with an at-will employment arrangement. The manual's very structure describes an environment in which an employer can fire an employee or good cause or for no cause, or even for bad cause" (Jennings, 2006, p. 728). If NewCorp wishes to present itself as an at-will company, meaning the start and duration of employment is uncertain, there is no need for a preventive/corrective plan. "Recent cases have placed some restrictions on this employer freedom to hire and fire at will, as courts have been giving employees/agents the benefit of their reliance" (Jennings, 2006, p. 727). Based on these legal principles, NewCorp could be held liable for breach of contract because there is no provision in the personnel manual stating that the manual is to be used as a principle for information only and not as a promise or binding contract.

To avoid the potential for future litigation NewCorp should follow the procedures outlined in its personnel manual for the Corrective Action Plan before pursuing termination.

Legal Encounter Two

Sam is a supervisor of electrical manufacturing for auto under-dash wiring harnesses at NewCorp. Sam had a relationship with Paula, a female subordinate of childbearing age, which recently ended. Since the breakup, Sam has displayed "unwelcome behaviors even after Paula told him to stop. Because she stopped dating him, Sam suggested that Paula's work might be suffering from a lack of interest" (University of Phoenix, 2010, p. 2). Paula now wishes to transfer to the coating department to be away from Sam; however, Sam refuses to approve Paula's transfer citing, "possible danger to early fetus development," (University of Phoenix, 2010, p. 2) due to the chemicals used for coating of the wires. NewCorp, unwilling to risk being liable for potential birth defects of Paula's future children because of exposure to chemicals, supports Sam's decision in blocking Paula's request to be transferred. Paula believes that Sam's

actions are out of spite because their relationship has ended and feels discriminated against because of her sex.

NewCorp Liability

Employers are responsible for their employees' behavior. The Equal Employment Opportunity Commission (2010) defines sexual harassment as:

Unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature... Harassment is illegal when it is so frequent or severe that it creates a hostile or offensive work environment or when it results in an adverse employment decision (such as the victim being fired or demoted) (p. 1).

Sam's actions are tantamount to harassment and can be a liability for himself and NewCorp as well