Wednesday, December 04, 2013

Maryland Court of Appeals Will Review Employment Contract Case. (Update: Affirmed).

   The Maryland Court of Appeals granted certiorari in Spacesaver Systems v. Adam.   The case involves a dispute between family members in a family-owned business.  All of the family members signed identical employment agreements that contained a provision the defined "cause."   The company terminated Adam.   She sued.  

  The issues at trial was whether the company had the right to terminate her without cause and the length of the employment contract.    The trial court ruled that the written employment agreement created a lifetime employment contract that could only be terminated for cause, death or disability.   The trial court awarded Adam back pay through the date of trial ($255,868.20) and expressed no opinion as to whether Adam could continue to sue for breaches of contract for unpaid wages into the future.

  The Court of Special Appeals modified the trial court's rulings on one key point.  Adam's contract was not a lifetime contract, but a "continuous contract terminable for cause."  Lifetime contracts may require special consideration such as when the employee provides a substantial benefit other than his or her services.  According to the Court of Special Appeals, Maryland Courts have not yet decided whether special consideration is required or exactly what special consideration would be sufficient consideration.  But, because the Court decided Adam's contract was not a lifetime contract, the Court did not address the issue.

Recently, the Court of Appeals granted cert. on the five issues set forth below.  The fact pattern gives the Court of Appeal an opportunity to clarify the at will presumption, "for-cause" contracts, and life term contracts (including what special consideration may be needed to support them).

1) Under MD Law, is there a distinction between a lifetime employment contract and a “continuous for-cause contract,” both terminable for any reason by employee and only for cause by employer, such that each should have different amounts and degrees of proof and different consideration required? 

2) Where an employment contract contains no provision addressing duration of employment, must the contract be clear, specific and definite that the parties intended to create continuous and indefinite employment, terminable only for cause? 

3) Where an employment contract contains no provision addressing the duration of employment, does a “for-cause” provision transform the contract to one providing employment for life where there is no “special consideration” to establish a contract for lifetime employment? 

4) Is this Court’s dicta in Towson University v. Conte, 384 Md. 68, 862 A.2d 941 (2004) suggesting that a “just cause” provision transforms “at-will” employment into employment terminable only for cause inconsistent with this Court’s holding in Suburban Hospital v. Dwiggins, 324 Md. 294, 596 A.2d 1069 (1991) that employment contracts of an indefinite duration create “at-will” employment and remain so even if that agreement sets forth some bases that provide the employer cause for termination? 

5) Does the presence of a “for cause” provision in an employment contract transform at-will employment to lifetime employment terminable only for cause?

Update:  The Court held oral argument in the case on June 5, 2014.

Update #2:  The Court of Appeals affirmed   and held Adam's contract was not a lifetime contract, but a "continuous contract terminable for cause."   No special consideration was needed because Adam’s Employment Agreement contained an express for-cause provision in

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