If you’ve been discriminated against in the workplace, you should think twice before bringing your claims in federal court. In 2009, the Harvard Law & Policy Review will publish, Employment Discrimination Plaintiffs in Federal Court: From Bad to Worse?. The study, conducted by Cornell Law School Dean Stewart J. Schwab and Cornell Law Professor Kevin M. Clermont, examines official data from the Administrative Office of the United States Courts. The article reveals that plaintiffs who bring employment discrimination claims in the federal courts fare less favorably when compared to plaintiffs in other types of cases. As an example, the authors discovered that employers found liable for workplace discrimination at trial enjoy more than a 40% chance of reversal on appeal. In stark contrast, plaintiffs who lose at the trial court level have only an 8% chance of receiving a favorable appellate decision.
The First Circuit’s decision in Noonan v. Staples provides an informative example of how an employment contract should and should not be written. In that case, Staples discharged Noonan for allegedly padding his expense reports. In doing so, Staples refused to allow him to exercise his stock options, claiming that Noonan was ineligible because he had been fired for “cause.” In particular, Noonan’s employment contract stated as follows:
[I]f [Noonan’s] relationship with Staples is terminated by Staples for “cause” … the right to exercise this option with respect to any shares not previously exercised shall terminate immediately …
The contract provided a definition for “cause,” but gave Staples the discretion to ultimately interpret whether Noonan’s alleged transgressions fit that definition. The question before the First Circuit was whether it could review Staples’ interpretation.
In their respective arguments before the First Circuit, Staples argued that the court had no authority to review its “cause” determination, while Noonan argued that the court could review Staples’ decision de novo with no deference to Staples’ reasoning.
The court rejected both arguments and, relying on precedent, adopted a middle ground. In particular, the court held that while Staples’ decision could be reviewed, it would only be overturned if it was arbitrary, fraudulent, or made in bad faith. This is an extremely high standard. Not surprisingly, in light of this standard, the First Circuit affirmed Staples’ decision to terminate Noonan for “cause.”
The lesson learned: Review your employment contract with counsel before you sign it. Where possible and necessary, revise the language to ensure that your employer does not enjoy total discretion to decide the definition of “cause.”