Siles v. Travenol Laboratories, Inc.
115 L.R.R.M. (BNA) 4178, 433 N.E.2d 103, 13 Mass.App.Ct. 354 (1982)
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Rule of Law:
An employer's termination of an at-will employee does not constitute a bad faith breach of the implied covenant of good faith and fair dealing unless the termination is intended to deprive the employee of earned compensation or violates a clear public policy. The mere absence of good cause for termination is insufficient to support a bad faith claim.
Facts:
- In October 1977, Travenol Laboratories, Inc. hired Richard J. Siles as a sales specialist under an at-will employment agreement.
- Approximately five months into his employment, Siles and his supervisor, Howard Small, were involved in a verbal confrontation with an employee at Miriam Hospital, a major customer, during a sales call.
- Following the incident, the hospital's director of purchasing sent a letter to Travenol complaining about the conduct of both Siles and Small.
- The letter demanded an apology, banned both men from the hospital for one year, and stated the hospital was considering switching to an alternative supplier.
- About a week later, Small met Siles and informed him that he was fired, citing dissatisfaction with his sales performance.
- Vito Manon, a national sales representative for Travenol, made the final decision to fire Siles to preserve customer goodwill.
- Under Travenol's compensation policy, commissions from accounts originated by Siles would be paid to his successor, not retained by the company.
Procedural Posture:
- Richard J. Siles sued his former employer, Travenol Laboratories, Inc., in a Massachusetts Superior Court (trial court) for wrongful termination.
- A jury trial resulted in a verdict for Siles, with an award of $250,000 in damages.
- Travenol filed a motion for judgment notwithstanding the verdict (JNOV), asking the judge to overrule the jury's decision.
- The trial judge granted Travenol's motion for JNOV, concluding the evidence was insufficient as a matter of law to support a finding of bad faith.
- Siles (the appellant) appealed the trial judge's granting of the JNOV to the Appeals Court of Massachusetts.
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Issue:
Does terminating an at-will employee due to a customer complaint and perceived performance issues, where the employer does not financially gain from the termination, constitute a breach of the implied covenant of good faith and fair dealing?
Opinions:
Majority - Rose, J.
No, terminating an at-will employee under these circumstances does not constitute a breach of the implied covenant of good faith and fair dealing. A claim for a 'bad faith' termination of an at-will employment contract is generally not enforceable unless the employee can show either that the employer intended to benefit financially at the employee's expense or that the reason for the discharge was contrary to public policy. Here, there was no evidence Travenol discharged Siles to retain his sales commissions for itself; in fact, the commissions would be paid to his successor. Furthermore, firing an employee to appease a major customer and preserve a business relationship does not violate public policy but rather serves a legitimate business interest. The employer must have wide latitude in deciding whom to employ, and the mere absence of good cause is not enough to establish a bad faith claim.
Analysis:
This case significantly clarifies and narrows the 'bad faith' exception to the employment-at-will doctrine established in Fortune v. National Cash Register Co. It establishes that the exception is not a broad 'just cause' requirement for termination but is limited to specific, egregious circumstances. The decision sets a high bar for plaintiffs, requiring them to prove either a direct financial motive by the employer (like depriving them of earned compensation) or a clear violation of public policy. This precedent reinforces employer discretion in personnel decisions, protecting them from liability for terminations based on legitimate business judgments, even if those judgments seem harsh or are not based on perfect information.
