JANUARY 2004

LEGAL UPDATE

 

DILLMAN PUTS EMPLOYER IN A CONTRACTUAL PICKLE

 

            Under New Hampshire law, the employment relationship is presumed to be "at will" in the absence of an enforceable contract setting forth a specific period of employment.  The term "at will" means that the employee may quit, at any time, with or without cause, and the employer may terminate the employee, at any time, with or without cause.  As a recent case from the New Hampshire Supreme Court demonstrates, however, an employer can deprive itself of the substantial discretion associated with "at will" employment by putting imprecise language in employment documents and thereby imposing on itself the requirement of "cause" for termination.

 

The Seemingly Sweet Employment Relationship

 

            David Dillman became the Audio-Visual Director of New Hampshire College in 1988.  Beginning in 1991, Dillman and the College executed annual letters of reappointment that governed the terms of their employment relationship for the upcoming academic year.  The letter in effect for the 1999-2000 academic year provided:  "This letter is written to confirm New Hampshire College's intent to employ you as Director of AV Studio which is a (twelve) month position.  For the period commencing September 1, 1998 and continuing through August 31, 1999, your monthly salary will be $3,239.51 to be paid in 12 installments, normally $38,874.12 per year."  The 1999-2000 letter of reappointment further stated that Dillman's position was "a non-contracted staff appointment which is covered under the policies and procedures outlined in the New Hampshire College Unified Handbook."

 

            The College's written handbook expressly stated that its provisions "shall not be considered a contract of employment."  Moreover, Dillman signed a receipt reflecting his review and understanding of the handbook, and that receipt specifically provided that "this Handbook is not intended to be a contract or part of a contractual agreement between you and the College."

 

The Employment Relationship Sours

 

            In May 1999, the College terminated Dillman's employment, apparently without providing a reason for the discharge.  In addition, the College refused to reappoint Dillman for subsequent academic years.  In making these decisions, the College believed that Dillman's employment was "at will" as opposed to contractual.

 

            Dillman, however, disagreed with the College's characterization of their employment relationship and sued the College for alleged breach of contract.  The judge rejected the College's efforts to have Dillman's lawsuit dismissed prior to trial.  In essence, the judge concluded that the nature of Dillman's employment relationship with the College ("at will" or contractual) was sufficiently unclear to require a full-blown jury trial.  At the conclusion of the ensuing trial, the jury found in favor of Dillman for breach of contract in connection with both his employment termination and the failure to reappoint him for subsequent academic years.

 

The College Fails to Eliminate the Unpleasant Aftertaste

 

            Unwilling to accept the judge's legal rulings or the jury's verdict, the College appealed to the New Hampshire Supreme Court.  In its appeal, the College again advanced its argument that Dillman's 1999-2000 letter of reappointment referred to his position as "non-contracted" and incorporated the College's handbook, which expressly provided that it did not constitute a "contract of employment."  The College urged the Supreme Court to find that the employment relationship was purely "at will," justifying the College's termination of Dillman without cause.

 

            The Supreme Court rejected the College's arguments and affirmed the jury’s verdict in favor of Dillman.  In reaching its decision, the court reiterated the general rule that "when an employee is not hired for a definite term he is considered an employee-at-will."  The court emphasized, however, the contrary principle that when "an employment agreement specifies a definite term, it is generally implied that the employee can be discharged only for cause."  Because Dillman's 1999-2000 letter of reappointment specifically covered a term of 12 months, the court ruled that the jury acted reasonably in finding "that the letter of reappointment constituted a contract for a definite term."

 

            As part of its reasoning, the court also noted that neither the letter of reappointment nor the handbook defined or explained the term "non-contracted" to mean "at will."  Moreover, certain provisions of the College’s handbook supported the notion that Dillman's employment was governed by protections against arbitrary termination or refusal to reappoint.  Specifically, the reappointment section of the handbook stated that the "College shall not arbitrarily or capriciously refuse to issue a letter of reappointment to continuing professional employees" and the termination subsection provided that the "College may suspend, discharge or otherwise discipline a professional employee during the term of his/her appointment for just cause."  According to the Supreme Court, the jury could reasonably have determined that these subsections were incorporated into the terms and conditions of Dillman's letter of reappointment through its express language that his position was "covered under the policies and procedures outlined in the New Hampshire College Unified Handbook."

 

David Dillman v. New Hampshire College, New Hampshire Supreme Court (December 30, 2003).

 

Bottom Line

 

            In order to enjoy the substantial discretion accorded to New Hampshire employers in an "at will" relationship, you must ensure that none of your offer letters, policies or handbooks suggest that an employee has been hired for a definite period or that an employee is entitled to "cause" for dismissal.  This can be accomplished by making sure that each critical document affecting an employee's employment relationship includes a reminder that the employment is "at will" and an appropriate definition of "at will" employment.  Indeed, if New Hampshire College's letter of reappointment to Dillman had made clear that his employment could be terminated, at any time, with or without cause, the College would likely have avoided the lengthy litigation and the unfavorable jury verdict.

 

 

 

 

 

 

 

 

 

 

 

 

 

This article was initially written for publication in the February, 2004 New Hampshire Employment Law Letter, a newsletter written for New Hampshire employers by the labor and employment attorneys at Sulloway & Hollis and published by M.Lee Smith Publishers LLC in Brentwood, Tennessee.