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Silvestri v. Optus Software, Inc.

175 N.J. 113, 814 A.2d 602 (2003)

EMPLOYER-EMPLOYEE; DISSATISFACTION—Unless an employment contract provides for an objective standard, dissatisfaction clauses are judged on a subjective standard and a court cannot substitute its judgment for that of the employer.

When an employment contract contains a clause that allows the company to fire an employee for failing to perform to the company’s satisfaction, a court reviewing the termination must apply a subjective standard, unless the contract contains language showing an intent to use an objective standard. An employee challenged the termination of his employment because of the company’s dissatisfaction with his performance. The lower court granted the employer’s motion for summary judgment dismissing the complaint. The employee appealed. He did not dispute that he was terminated because the company was genuinely dissatisfied with his performance. Rather, he claimed that the company’s dissatisfaction was not objectively reasonable and that the question of whether that dissatisfaction was reasonable was an issue of material fact that should be decided by a jury. The Appellate Division agreed, holding that a company that terminates an employee based on a satisfaction clause in an employment contract must show that its dissatisfaction was reasonable using an objective standard.

The Supreme Court reversed. It held that unless the contract provides for an objective standard, dissatisfaction clauses in employment contracts are judged on a subjective standard and a court cannot substitute its judgment for that of the employer. It noted that there are two types of satisfaction contracts: subjective contracts that depend on personal taste and judgment; and contracts that, because they involve mechanical fitness or utility, can be measured by objective standards. Courts generally interpret satisfaction clauses in employment contracts using subjective standards for personal satisfaction because employers are entitled to use their personal judgment and taste in evaluating personnel hired to advance the company’s goals. There is some level of objectivity, however. An employer cannot claim personal dissatisfaction as the reason for firing an employee with a satisfaction clause, when there are factors, other than dissatisfaction, that were the actual reasons for firing the employee.


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