On the worker's return, the operating officer and a supervisor beckoned him into an office to discuss the inconsistency. So as not to disturb the clerks outside, they shut the door, whereupon the worker turned on his heels and departed. The next day a sheriff served each manager with criminal complaints. Among them were (as they were actually stated) interference with the exercise of civil rights, assault and battery, stalking, and kidnapping. "I was held in a locked room against my will," the worker told the court. "Each time I tried to leave, the defendant threatened me. . . . The defendant pulled my arm so hard that he injured my shoulder permanently." A criminal trial was scheduled. While the plaintiff spent nothing, the defendants were obliged to pay for lawyers because directors' and officers' liability insurance doesn't cover criminal charges.
Until the late 1980s virtually all states allowed that a business owner had the right to fire an employee of that business without having to give a reason. Now in more than 30 states those "at will' powers have been severely limited by the courts. "A small-business owner expects that the at-will assumption is stronger than it really is and that he can fire someone for looking at him cross-eyed," says James Walsh, author of Rightful Termination and other books on employment principles. "Although there might be a kernel of that left in a given state's laws, increasingly that presumption is undermined by other kinds of laws."
Where it's still allowed, at-will termination remains a viable defense. "But," asks Ortego, "do you as a small company want to write that motion to dismiss? You go to a law firm and they tell you it'll cost $5,000, and even then there's no guarantee that a judge might not decide the plaintiff has a point, so let's do a little discovery. Wouldn't you rather pay $5,000 for the employee to go away?" Besides, savvy plaintiffs already know how to steer around an at-will situation via a tactic lawyers call "fraud theory." In one example, an employee charged that a company had hired him under false pretenses to get him away from a competitor. Once he was safely away, the employer dumped him as planned. As a result of the villainous scheme, he charged, his career was destroyed.
If the at-will doctrine is shaky at best, and if an unexpected effect of federal and state statutes is to enable vindictive employees to extort employers virtually at their will, are owners at the mercy of vipers from within? The facts, as gathered from dozens of interviews that Inc. recently held with small-business founders and executives, aren't reassuring. Here are some of the stories they told:
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Jay Estes, owner of newly founded Interior Motives, an office-furniture distributorship in New Jersey, followed good-employee-relations recipes to the letter: before any dismissal, perform an oral review and a written review; repeat twice. Thus Estes felt he was on solid ground when, after warning an unproductive regional manager three times in a year, he let the fellow go. The terminated employee turned in his company credit card and departed.
" That's the way to do it," Estes congratulated himself -- four weeks prematurely. The next month, Interior Motives got an invoice from American Express for a good $3,000 more than the company had budgeted for. Sensing his days were numbered, the about-to-be-fired employee had rented a Corvette, booked fancy hotel suites, downed hundred-dollar dinners, toured nightclubs, and charged it all to Interior Motives. Estes took the spendthrift to court, where he stipulated that the employee had misappropriated funds by essentially taking a vacation courtesy of Interior Motives' strained treasury -- which, the defendant was well aware, was backed by Estes's personal credit. The defendant argued that any travel application of a business charge card was an implied perk; why else would he have been granted one carte blanche? The suit remains unsettled.
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A shingler for a siding chain on the East Coast fell from a scaffold owing to, according to witnesses, his own carelessness in not following prescribed safety procedures. Inasmuch as workers' compensation laws provide benefits to anyone injured on the job no matter who's at fault, the incapacitated employee was eligible for wages and medical payments for up to 160 months, a 13.3-year period during which the employer would have to keep him on the payroll at two-thirds of his pay, even as he stayed home. Facing a future of shelling out $28,000 a year, the employer protested the case, holding that the worker was malingering and was really physically fit. "But," the company president complains, "he'd hobble into the Industrial Accidents Board with some doctor's statement in hand, and the judge found for him every time." To add insult to back injury (the most popular workers' comp plaint nationwide), when the siding company advertised an opening in management, the idled worker applied for the position. The job went to a person with executive experience. The employee sued, charging discrimination against the handicapped.
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Daily Keep, a southern office-park-maintenance service, hired a woman manager and put her in charge of overseeing a subcontracted construction crew doing a rehab. She visited the site every Friday. In a few weeks the crew's foreman phoned in a complaint: the woman was sexually harassing his workers. "Wouldn't it be great to be in a Jacuzzi right now with a bottle of chardonnay and no clothes on and see what happens?" she was reported to be speculating among the tradesmen. The guys in Daily Keep's back room had a "good giggle," admits the company's founder, Balsa Woods. "If a man had been doing it, I'd have been all over it," he admits. "But the reverse we handled like a joke!"
The laugh was on Woods. The construction workers filed a suit against Daily Keep for sexual harassment. Woods went to investigate and determined that indeed they were serious. "She was hitting on 10 at a time," he discovered. Declaring her job performance "not very good," he fired the woman, who immediately sued him for $25,000 for wrongful termination. The grounds: sex discrimination.
Woods had the case adjudicated. At the hearing the woman whipped out a bundle of original Daily Keep invoices that, Woods claims, she had illicitly sneaked out of the office. The papers, she purported, demonstrated that Woods was a nogoodnik from way back, unconscionably overcharging the county, the city, and the state for services. In the end Woods won, but Daily Keep never got back its purloined paperwork, because the arbitration referee didn't have the authority to order it. However, he did award Woods $30,000 in repayment of legal fees. But the vindication was Pyrrhic: the woman never paid. When Woods garnished her wages at her new job, she declared personal bankruptcy, wiping out the obligation. The score: Daily Keep was out $30,000, with the suit filed by the construction company still yet to hit.
