Maddaloni v. Western Mass. Bus Lines, Inc.
386 Mass. 877, 438 N.E.2d 351, 1982 Mass. LEXIS 1645 (1982)
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Rule of Law:
An employer may not terminate an at-will employee in bad faith to avoid paying compensation related to the employee's past services. Damages for such a breach of the implied covenant of good faith and fair dealing are limited to the amount of compensation the employee was denied and do not include future lost wages or fringe benefits.
Facts:
- In April 1964, Maddaloni was hired as general manager by Western Mass. Bus Lines, Inc. (WMBL).
- Shortly after being hired, Maddaloni and WMBL executed an at-will employment contract which stipulated that Maddaloni would receive a 5% commission on charter revenues once he secured interstate charter rights for the company from the Interstate Commerce Commission (ICC).
- In September 1970, Mario Cantalini purchased WMBL and became its president. Cantalini and his attorney reviewed Maddaloni's contract and agreed it was 'all right with the company.'
- Maddaloni, using his expertise, successfully secured the interstate charter rights for WMBL on October 1, 1973.
- When Maddaloni informed Cantalini that the commission provision was now in effect, Cantalini complained it was 'a lot of money' and 'cream off the top.'
- WMBL paid Maddaloni the commissions for October, November, and December 1973.
- On January 19, 1974, Cantalini terminated Maddaloni's employment, citing poor profits and stating, 'besides, you wanted to get paid the commission under the agreement.'
Procedural Posture:
- Maddaloni sued Western Mass. Bus Lines, Inc. in the Superior Court (a trial court), alleging bad faith termination.
- Following a trial, the jury returned a verdict for Maddaloni, finding he was discharged in bad faith.
- In response to special interrogatories, the jury found that Maddaloni was entitled to $61,000 in commissions under the contract and $28,000 under a quantum meruit theory.
- The trial judge entered a judgment for Maddaloni in the amount of $28,000.
- Both parties appealed to the Appeals Court of Massachusetts (an intermediate appellate court).
- The Appeals Court ruled that Maddaloni was entitled to the $61,000 in commissions and that the trial court should have allowed the jury to consider damages for lost wages and benefits.
- The Supreme Judicial Court of Massachusetts then took the case for final review.
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Issue:
Does an at-will employee who is terminated in bad faith to avoid the payment of commissions for past services have a claim for damages that includes not only the lost commissions but also future lost wages and fringe benefits?
Opinions:
Majority - Abrams, J.
No, an at-will employee terminated in bad faith is entitled to recover the compensation they were unjustly deprived of, but not damages for future lost wages and fringe benefits. The court held that every at-will employment contract includes an implied covenant of good faith and fair dealing. Terminating an employee to avoid paying commissions they fairly earned through past services constitutes a breach of this covenant. The evidence, including Cantalini's statements and the timing of the discharge, supported the jury's finding that Maddaloni was fired in bad faith to prevent him from receiving his commissions. However, the remedy for this breach is limited to preventing the employer's unjust enrichment. Therefore, damages are restricted to the 'fruits' of the employee's past labor—in this case, the earned commissions—and do not extend to compensation for the loss of the job itself, such as future wages, which were not contemplated by the contract.
Analysis:
This decision reaffirms the principle established in Fortune v. National Cash Register Co. that a bad faith termination of an at-will employee is a breach of contract, but it critically clarifies and limits the scope of damages. By denying recovery for future lost wages, the court preserves the fundamental nature of at-will employment, preventing a bad faith claim from transforming an at-will relationship into a for-cause one. The ruling strikes a balance, protecting employees from being deprived of fairly earned compensation while shielding employers from liability for the loss of the job itself in most bad faith termination cases.
