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Foley v. Kyocera Mita America, Inc.

A-4262-02T3 (N.J. Super. App. Div. 2004) (Unpublished)

EMPLOYER-EMPLOYEE; CONTRACTS; SEVERANCE—An employee whose contract provides a severance payment for being fired within a given period after hiring may be fired during that period without being entitled to the payment if the effective date of the firing is after the period expires.

An employee entered into a one-year employment agreement. The agreement provided that the employer could terminate the employee within the first year, would have to pay him $45,000. The agreement also stated that the employer preferred that its employee start work on October 1, 2000. The employee signed, indicating that he agreed to the agreement’s terms. Because October 1 fell on a Sunday, the employee’s first working day was Monday, October 2. The employee, however, was enrolled in the savings and investment plan as of October 1, 2000. The enrollment form was signed and dated as of October 1, 2000, making the employee eligible to receive matching contributions for the forth calendar quarter. Had the employee waited until October 2 to enroll in the plan, he would not have been eligible to receive the matching contributions for the fourth quarter.

The employer fired the employee on September 27, 2001, but the termination was effective, and the employee was discharged, on October 2, 2001. By that time, the employee had been paid a full year’s salary. He was also paid two week’s severance pay. The employee then sued, alleging a breach of contract. He argued that the employer had decided to fire him within the first year, but made the termination effective after the year had passed to avoid paying the $45,000. On that basis, the employee also argued that the employer had breached its implied covenant of good faith and fair dealing.

The lower court found no contract breach. It held that October 1, 2000 was the agreement’s starting date and, therefore the employee was terminated more than one year later. The Court also found no breach of the implied covenant of good faith and fair dealing because the employee received what he reasonably expected under the terms of the agreement and hadn’t shown that his employer acted in bad faith.

On appeal, the Appellate Division agreed that even though the employee’s first workday was October 2, 2000, he became an employee as of October 1, 2001. It based its conclusion on the evidence that the employee signed the employer’s investment plan participation form as of October 1, 2000 to be eligible to receive the employer’s matching contributions. More importantly, the Court pointed out that the employee was terminated on October 2, 2001, and thus it would not matter whether or not the employee started working on October 1 or 2, 2000. Even though the employer decided to fire its employee on September 27, 2001, the employee remained with the employer through October 2. Therefore, he was not terminated within twelve months of his October 1, 2000 start date.

The Court also agreed that there was insufficient evidence to establish a breach of the implied covenant of good faith and fair dealing. The employer’s decision to terminate the employee did not wrongfully deprive or injure the employee’s right to receive the “fruits of the contract.” He had worked for a full year and was paid for a full year’s work. In those circumstances, the Court stated that the employee could not reasonably expect that he would receive the $45,000 severance pay. Although the employer may have delayed the firing to avoid paying the extra money, that fact alone did not raise an inference of bad faith. For that reason, the Appellate Division affirmed the lower court’s decision, granting the employer’s motion for summary judgment.

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