1250 Broadway, 27th Floor New York, NY 10001

AT-WILL EMPLOYEES CAN BE TERMINATED AT-WILL

In Smalley v. Dreyfus Corp. , five former at-will employees sued the Dreyfus Corporation for fraudulently inducing them to join and remain with the company under false pretenses.

In January of 2001, Gerald Thunelius, one of the five plaintiffs, heard a rumor that Dreyfus' parent corporation was considering the acquisition of Standish Ayer & Woods, a funds management company. When Thunelius confronted Dreyfus' Chief Executive Officer about the merger, the latter denied any negotiations were underway.

Of course, Standish was acquired three months later and, from 2001 to 2004, assurances were given to Thunelius, and others, that the "Taxable Fixed Income Group" (TFIG) wouldn't merge with Standish. In reliance of those promises, and presumably the inference of job stability, the five employees either remained with TFIG or accepted new employment with the Group. In 2004, Standish and TFIG merged, and every TFIG member was terminated.

When litigation ensued, the New York County Supreme Court denied the former employees' claims in their entirety, finding that "at-will employees cannot reasonably rely upon their employer's promises of continued employment, and that these employees failed to allege injuries apart from their termination."

On appeal, the Appellate Division, First Department, modified the Supreme Court's order by reinstating the fraudulent inducement claim. The AD2 noted that, "Dreyfus misrepresented a material fact" and held that the employees had asserted injuries apart from mere termination.

On review, the Court of Appeals reversed.

New York law provides that without "a constitutionally impermissible purpose, a statutory proscription, or an express limitation in the individual contract of employment, an employer's right at any time to terminate an employment at will remains unimpaired."

Since there was no promise to keep the individuals employed, the reliance of the "no-merger" representations was immaterial and no individual injury or damage could be established by their employment's termination.

Our state's highest court noted that, "Absent injury independent of termination, plaintiffs cannot recover damages for what is at bottom an alleged breach of contract in the guise of a tort."

No TGIF for TFIG.

To download a copy of  the Court of Appeals' decision, please use this link: Smalley v. Dreyfus Corp.

Categories: