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No just cause jury instruction required on breach of implied contract claim

By Ronald Miller, J.D.

A jury verdict dismissing an employee’s claim for breach of implied contract against her employer for failing to adhere to its progressive discipline steps contained in an employee handbook was affirmed on appeal to the Vermont Supreme Court (Straw v Visiting Nurses Association and Hospice of VT/NH, October 18, 2013, Dooley, J). The employee’s contention that the jury instructions in her case were erroneous and prejudicial because they failed to instruct the jury on the standard for “just cause” termination was rejected by the state high court.

The employee, a nurse practitioner, worked as a hospice coordinator answering patient and family calls to the employer’s telephone hotline. She was hired as an at-will employee and the employee handbook stated in many instances that employment with the Visiting Nurses Association (VNA) was at-will. However, the handbook also contained corrective action discipline policy — though the language went to great lengths to emphasize that it was not mandatory. According to VNA management, immediate termination was limited to severe misconduct that “impacts patient care and safety.”

In 2009, VNA received a complaint from a patient’s family member claiming that the employee had been rude and unprofessional. The result of the family’s conversation with plaintiff was that the patient was transported to a hospital, where he died, despite his expressed wish to die in his home. The employee’s supervisor conducted an investigation, which included speaking with the patient’s family and the employee regarding the incident. Thereafter, VNA’s president decided to terminate the employee without engaging in any of the steps under its corrective action policy as outlines in the employee handbook.

Just cause instruction. After being terminated, the employee brought suit under the Vermont Fair Employment Practices Act and for wrongful discharge, including breach of implied employment contract created by dissemination of the employee handbook. Ultimately, the implied employment contract claim went to a jury trial. The employee prepared a draft jury instruction that included reference to a just cause standard for termination. However, the trial court dropped any reference to just cause, and instead referred more generally to whether the employer had breached implied contract. The jury returned a verdict for the employer on breach of contract claim. This appeal followed.

On appeal, the employee asserted that the trial court erred in failing to give a jury instruction on “just cause” termination standard. The crux of the employee’s argument was that “[o]nce the employer modifies the ‘at-will’ employment relationship it is bound to terminate only for cause.” According to the employee, the exclusion of a “just cause” instruction was prejudicial because it did not allow the jury to evaluate either (1) whether she engaged in the alleged conduct; or (2) whether the conduct was enough to merit termination under the “just cause” standard as opposed to misconduct that impacts “patient care and safety” under VNA’s standards.

Nature of implied contract of employment. The Vermont high court observed that this case involved a fundamental disagreement about the nature of an implied contract of employment, which its decisions have created. The employee’s theory was that once the at-will status of an employee had been modified by an implied contract, termination is henceforth subject to a “just cause” requirement. Thus, the employee advocated adopting a “just cause” standard adopted by the state high court for determining the validity of public employee firings. On the other hand, the employer contended that situations under an employee can be terminated are defined by the implied contract rather than by an external “just cause” standard. Therefore, the employer argued that there was no need for any instruction on cause because the analysis of cause as defined under the contract was subsumed into the jury instruction about the breach of employment contract

Here, the state high court agreed that the employer was correct that simply modifying an employee’s at-will status does not, on its own, automatically import the court’s previously defined “just cause” standard into the contract. Vermont’s “just cause” standard traces back to In re Brooks, which involved the interpretation of “just cause” as it appeared in a collective bargaining agreement for public employees. In Brooks, the state high court held that a discharge under this standard could be upheld “only if it meets two criteria of reasonableness: (1) that it is reasonable to discharge employees because of certain conduct, and (2) that the employee had fair notice, express or fairly implied, that such conduct would be ground for discharge.”

Confusingly, the court has also applied this test to cases involving implied employment contracts. Here, the court declined to apply the “just cause” definition to this case. Under the employee’s view of the doctrine of implied employment contracts, courts would have to: (1) begin with a presumption of at-will employment; (2) find that presumption to be defeated by policies inconsistent with at-will employment; and therefore (3) subject the employer to an entirely different, external standard — namely, the Brooks “just cause” standard.

However, in Taylor v National Life Insurance Co, a comprehensive decision on wrongful termination in private employment, the high court adopted a contractual rationale for holding that employers — by their employment policies and actions — could assume obligations inconsistent with an employment-at-will relationship with their employees. What obligations employers assume have to be based on their policies and actions. Thus, to adopt the employee’s view would be inconsistent with the contractual theory of liability, and the employer would effectively be unable to set up any standards for termination other than “just cause” standard. Therefore, the employee was not entitled to an instruction on just cause as she requested.