Prejean v. Guillory
2010 La. LEXIS 1652, 38 So.3d 274, 31 I.E.R. Cas. (BNA) 83 (2010)
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Rule of Law:
When the terms of an employment contract are clear and explicit, an employer does not breach the contract by providing timely written notice of its intent not to renew the contract due to 'inadequate performance,' where the record factually supports that the employee failed to fulfill essential job obligations.
Facts:
- In 1995, the Broussard Housing Authority (BHA) hired Kathy Prejean as its executive director.
- On January 3, 2002, Prejean and BHA executed an addendum, drafted by Prejean, which set her employment term to expire on January 1, 2006, but allowed for a four-year extension unless BHA gave written notice of non-renewal due to 'inadequate performance' by October 1, 2005.
- In April 2004, the BHA transferred its housing program to the Lafayette Housing Authority (LHA).
- In November 2004, Prejean was diagnosed with breast cancer and underwent a mastectomy, for which she provided doctor's notes excusing her from work for several weeks.
- In February 2005, Prejean was diagnosed with cancer in her other breast and underwent a second mastectomy, again providing doctor's notes for an extended absence until July 25, 2005.
- During her absence, Prejean failed to timely file a required IRS 941 Form, which prompted a visit from IRS agents to the BHA office in May 2005.
- On May 17, 2005, the LHA sent Prejean a letter stating her employment was terminated effective May 31, 2005, due to her being absent for over sixty continuous days.
Procedural Posture:
- On October 5, 2004, Kathy Prejean sued Walter Guillory and the Lafayette Housing Authority (LHA) in a Louisiana district court (the trial court).
- Prejean later amended her petition to seek damages for breach of her employment contract.
- Following a bench trial, the district court dismissed all of Prejean's claims.
- Prejean, as appellant, appealed the decision to the Louisiana Court of Appeal, Third Circuit.
- The Court of Appeal reversed the trial court's judgment, finding that the LHA, as appellee, had breached the contract and awarded damages to Prejean.
- The LHA then sought review from the Supreme Court of Louisiana.
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Issue:
Does a successor employer breach an employee's fixed-term employment contract by providing written notice of non-renewal, prior to the contractual deadline, on the grounds of 'inadequate performance' stemming from extended, medically necessary absences and a failure to perform key duties?
Opinions:
Majority - Per Curiam
No. The Lafayette Housing Authority (LHA) did not breach the employment contract because it properly followed the contract's non-renewal provision. The court reasoned that the contract's language was clear and unambiguous, setting an expiration date of January 1, 2006, unless extended. The contract permitted the employer to prevent this extension by providing written notice of non-renewal due to 'inadequate performance' before October 1, 2005. The LHA's letter of May 17, 2005, served as this timely notice. The court found that 'inadequate performance' was not ambiguous and that the record supported this finding on at least three grounds: 1) Prejean's extended absences, though medically necessary, meant she could not fulfill her basic employment obligation of attendance; 2) she failed to perform her duty as Secretary to the Board by not attending any LHA board meetings; and 3) she failed to timely file a required IRS tax form. As Prejean drafted the contract, any ambiguity would be construed against her. Therefore, the LHA did not breach the contract; it simply exercised its contractual right not to extend it, meaning Prejean was only entitled to her salary through the contract's original expiration date of December 31, 2005.
Analysis:
This decision reaffirms the principle of strict contractual interpretation under Louisiana law, emphasizing that courts will enforce the plain, unambiguous meaning of a contract's terms. It establishes that 'inadequate performance' can include an employee's inability to fulfill core job duties due to extended, albeit medically excused, absences. The ruling underscores the critical importance of the contra proferentem doctrine (construing ambiguities against the drafter), which here worked against the employee who had drafted her own contract. This case provides a clear precedent for employers seeking to not renew a fixed-term contract based on performance issues, provided they meticulously follow the notice procedures outlined in the agreement.
