Recent Developments from Around the States

This case was brought by a group of female employees who were working for the California Department of Corrections (CDC) at the Valley State Prison for Women. These particular employees alleged that their rights under FEHA were violated when other female coworkers were promoted, or received more favorable treatment because they engaged in consensual sexual relations with a supervisor at the prison. For example, Edna Miller and Cagie Brown both applied for a promotion. Brown received the promotion, even though she was not as qualified for the job as Miller, allegedly because she was the male warden's 'paramour.' Other forms of 'paramour' preference were also alleged, not only based on alleged affairs with the warden, but also on 'close and powerful relationships' with the female chief deputy warden. When there was an investigation of the situation by the CDC, and 'paramour' favoritism was reported, retaliation allegedly occurred as a result of the complaints. The aggrieved women then sued, alleging sex discrimination and retaliation.

The California Court of Appeals followed federal precedent by refusing to recognize 'paramour' preferences as a form of sex discrimination, ruling that as with Title VII, 'paramour' preferences are not a form of sex discrimination prohibited by FEHA. According to the California court, FEHA prohibits distinctions based on sex, not based on sexual affiliations, and a supervisor's sexual relationship with one or more employees, standing alone, was held not to create an offensive work environment for employees.

As to the retaliation claims, the trial court found that because there was no sexual harassment, the complaint about affairs at the prison was not a form of protected activity. The Court of Appeals indicated that the test is whether the employees reasonably believed that they were reporting unlawful activity, not whether the activity was in fact illegal.

The employees here did not engage in protected activity because they never actually reported any conduct they perceived as sexual harassment; rather, they were reporting actions that they perceived to be unfair.

Complaints about unfair treatment, the court held, are not a form of protected activity under FEHA.

FLORIDA

Non-Compete Agreement Unenforceable

A Florida District Court of Appeal has ruled a doctor's non-compete agreement unenforceable, because in order to qualify as a 'legitimate business interest' under the Florida law governing covenants not to compete, prospective patient relationships had to be with identified individuals. The University of Florida, Board of Trustees v. Sanal, No. 1D02-833 WL 183296 (Fla. Dist. Ct. App. Jan. 29, 2003).

The University hired Dr. Salahattin Sanal in August 1999 as a clinical associate professor of medicine. The written employment contract contained a non-compete provision providing that upon the termination of his employment, Dr. Sanal would not engage in a community-based clinical practice within a 50-mile radius of the University. Dr. Sanal's employment ended in July 2001, and he began working in violation of the non-compete.

The University sued Dr. Sanal, seeking preliminary and permanent injunctive relief, alleging that he was violating the non-compete agreement and causing irreparable injury to its 'legitimate business interests,' which it identified as 'substantial relationships with prospective and existing patients within the geographic area defined by the [a]greement.' Dr. Sanal filed an answer, asserting that the non-compete was 'not reasonably necessary to protect any legitimate business interest of the [University] and [w]as, therefore, unenforceable as a matter of law.'

The trial court concluded that Dr. Sanal was violating his non-compete agreement, but held that the University failed to establish that it had any 'legitimate business interest' for the covenant, denying the motion for injunction. There was no proof of any patients transferring their care from the University to Dr. Sanal's new practice. However, on appeal, the University argued that he was interfering with prospective patients, pointing to a section of the Florida non-compete statute which recognized, as a legitimate business interest, protection of relationships with 'specific prospective customers,' or in the case of physicians, 'specific prospective patients.' The University argued that the statute should be interpreted to include as prospective patients all persons within the geographic area who might need medical care, while Dr. Sanal relied on the adjective 'specific,' modifying 'prospective,' and argued that there was no proof relating to loss of 'specific' patients. The appellate court affirmed the lower court, holding that to qualify as a 'legitimate business interest' under the Florida statute governing non-competes, a 'relationship' with a prospective patient had to be with a particular, identifiable individual. The proof was insufficient to establish a legitimate business interest.

NEW JERSEY

Discharge for Subjective Reasons OK, Says Court

The Supreme Court of New Jersey has ruled that a computer software company did not breach a manager's contract by discharging him for subjective reasons. Silvestri v. Optus Software, Inc., No. A-95, 2003 WL 151717 (N.J. Jan. 23, 2003).

Optus Software, Inc., a small computer software company, hired Michael Silvestri as director of support services in January 1999, with a 2-year contract. Silvestri was responsible for supervising the provision of technical support services to the company's customers. His employment contract included a 'satisfaction clause,' allowing Optus to terminate him for 'failure or refusal to perform faithfully, diligently or completely his duties ' to the satisfaction' of the company. For 6 months, Silvestri received positive feedback from the company president. However, by the summer of 1999, several clients had complained about the company's performance, and in some cases, mentioned Silvestri specifically. The president terminated Silvestri by mid-September.

Silvestri sued Optus, contending that the company's dissatisfaction was objectively unreasonable and that his termination was a breach of the employment contract. The trial court granted summary judgment in favor of Optus, but the appellate court reversed, holding that an employer must meet an objective standard for satisfaction in order to invoke a right to terminate pursuant to a satisfaction clause in an employment contract. The New Jersey Supreme Court concluded, absent contract language to the contrary, that a subjective assessment of personal satisfaction applied, and that the trial court's grant of summary judgment to Optus was appropriate. The subjective standard still obligated the employer to act in good faith, but genuine dissatisfaction on the part of the employer, honestly held, would be sufficient for discharge.

OREGON

Oregon Expands Tort of Wrongful Discharge

The Oregon Court of Appeals, deciding a question of first impression in that state, has held that when an employee is working pursuant to an employment contract guaranteeing a right not to be fired except for just cause, and is subsequently dismissed without such cause, the employee may sue both for breach of contract, seeking lost earnings, and for wrongful discharge, seeking compensatory damages for mental distress, where the dismissal would contravene Oregon public policy. In other words, the existence of a claim for breach of contract does not limit an employee's right to sue for wrongful discharge in Oregon. Dunwoody v. Handskill Corp., No. 9908-08919; A112093, 60 P.3d 1135 (Or. Ct. App. Jan. 8, 2003).

Cathleen Dunwoody's husband was murdered. She was working for Handskill Corporation at the time of the murder, and subsequently signed a 'contract for services' with Handskill, with a 3-year term, specifically drafted to provide her with sufficient time (without pay) to assist with the prosecution of her husband's murderers. She was given permission by the company to attend the murder trial, but at the time the case moved into a penalty phase following a guilty verdict, Dunwoody was fired, apparently because she had missed too much work in connection with the trial and her part in it.

Oregon law permits a cause of action for wrongful discharge where there is no applicable statutory cause of action, and when important public interests or societal interests would be served by recognizing the claim. Thus, Oregon courts view wrongful discharge as an 'interstitial tort, designed to fill a gap where a discharge in violation of public policy would not otherwise be adequately remedied.' In this case, the trial judge held that where an employee has a claim for breach of employment contract, there is no need to recognize a cause of action for wrongful discharge, and granted a motion to dismiss Dunwoody's wrongful discharge claim for that reason. However, the Oregon Court of Appeals overruled the trial court, holding that an employee may sue for common-law wrongful discharge even though he or she may also have a cause of action for breach of an employment contract, where the employee's contractual remedies would not remedy all the injuries purportedly suffered as a result of the wrongful discharge. Because Dunwoody's contractual remedies were limited to recovery of lost wages, less interim earnings, and because her contract provided no remedy for the emotional distress she allegedly suffered through her dismissal in the midst of the penalty phase of the murder trial, she was given leave to proceed with both her contract and her wrongful discharge claims.

PENNSYLVANIA

Employer Liable for Breakdown of Interactive Process with Disabled Employee

The Commonwealth Court of Pennsylvania has held that because an employer failed to engage in the interactive process once a disabled employee informed the company of her need for a reasonable accommodation, the employer was responsible for the breakdown of that process. Canteen Corp. v. Pennsylvania Human Relations Commission, No. 1258 C.D. 2002, WL 31898007 (Pa. Jan. 2, 2003).

In 1985, Sophie Weber began working for Canteen, a Philadelphia based vending services supplier, as an accounting clerk. Weber's job required her to handle documents, folders and envelopes weighing up to 5 pounds. The job required lifting and bending. In 1987, Weber suffered a back injury requiring surgery and a 5-month medical absence. Upon returning to work, she brought a doctor's note stating that she should refrain from lifting any object weighing 25 pounds or more. Weber was able to continue performing her job as she had prior to her injury.

In 1999, Canteen sought to cross-train Weber to assist in the 'coin room,' requiring her to lift bags of coins weighing up to 20 pounds all day long. Weber expressed concern about the lifting requirements to the general manager, who told Weber to obtain an updated doctor's note. A new note indicated that Weber could not do any lifting or bending. Canteen management proceeded to have a brief conference call with Weber, the only discussion with Weber regarding her disability. The next day, Weber was told that she could not continue working, because her accounting clerk position required lifting and bending, and no other job was available.

Weber filed a complaint with the Pennsylvania Human Relations Commission alleging she was terminated because of her age (over 60) and disability. The age claim was dismissed, but a probable cause finding was issued regarding her disability discrimination claim. An administrative law judge subsequently found that Canteen failed to engage in a good-faith interactive process to reasonably accommodate Weber's disability. Canteen was ordered to pay Weber 6 months of back pay plus prejudgment interest, and to offer her the next available accounting clerk or equivalent position.

In affirming the decision of the Commission, the court adopted a 3-part test requiring an employee such as Weber to establish: 1) that the employee was a disabled person within the meaning of applicable law; 2) that the employee was otherwise qualified to perform the essential functions of the job; and 3) that the employee suffered an otherwise adverse employment decision as a result of discrimination. Canteen argued that because Weber could not do any lifting or bending, she was not qualified to perform the essential functions of her job. However, the court ruled that Canteen needed to initiate an informal, interactive process to ascertain Weber's limitations and any possible way of accommodating them. The court found that Weber requested a reasonable accommodation when she expressed concern with the lifting requirements of the coin room. However, because Canteen failed to engage in the interactive process, Weber never had a chance to demonstrate that she could perform her job, perhaps with the accommodation of a dolly or hand-cart.

TEXAS

Employer's Promises Insufficient to Support Non-Compete

The Texas Court of Appeals has ruled that an employer's promises to give 90 days notice of termination without cause to an 'at will' employee, and to compensate the employee in the event of economic hardship resulting from the non-compete provision, were not the kind of employer promises that would create an interest worthy of protection by a covenant not to compete. Strickland v. Medtronic, Inc., No. 05-02-01161-CV, 2003 WL 187436 (Tex. Ct. App. Jan. 29).

In 1997, Valerie Strickland signed a 'sales employee agreement' with Medtronic that contained a 360-day non-compete provision. Two days after resigning to join St. Jude Medical, a competitor of Medtronic, Strickland sued Medtronic seeking a declaratory judgment, claiming that her non-compete commitment was unenforceable. Medtronic counterclaimed, and filed a motion for temporary injunction enforcing the covenant not to compete. The trial judge issued an injunction enforcing the covenant, and Strickland appealed.

The sales employee agreement guaranteed Strickland 90 days' notice prior to a termination without cause, and further provided that the non-compete provision would not apply if she was discharged without cause. Medtronic had also promised to compensate Strickland in the event that adherence to the non-compete commitment created hardships for her. Although Medtronic argued that its notice commitment created a contract that had at least a 3-month definite term, and that Strickland was not an 'at will' employee for that reason, the Texas appellate court disagreed, holding that to alter the presumption of 'at will' employment under Texas law, there must be an agreement that limits the right to fire the employee in some meaningful or special way. The Medtronic agreement was not sufficiently restrictive, which meant that the relationship was 'at will.'

In Texas, where there is an 'at will' employment, a non-compete covenant is only enforceable where it is ancillary to or part of an otherwise enforceable agreement between employer and employee. This test is satisfied only when the employer's consideration is sufficient to support the covenant not to compete. In this instance, Medtronic could not meet this test, because the promises to give 90 days' notice prior to a termination without cause, and to compensate Strickland in the event of a hardship resulting from compliance with the non-compete commitment, were found not to create an interest worthy of protection by a covenant not to compete.

This month's National Litigation Hotline, and Recent Developments from Around the States were both written by Mark A. Konkel, an associated with Winston & Strawn, New York, and Associate Editor of this publication.

The University hired Dr. Salahattin Sanal in August 1999 as a clinical associate professor of medicine. The written employment contract contained a non-compete provision providing that upon the termination of his employment, Dr. Sanal would not engage in a community-based clinical practice within a 50-mile radius of the University. Dr. Sanal's employment ended in July 2001, and he began working in violation of the non-compete.

The University sued Dr. Sanal, seeking preliminary and permanent injunctive relief, alleging that he was violating the non-compete agreement and causing irreparable injury to its 'legitimate business interests,' which it identified as 'substantial relationships with prospective and existing patients within the geographic area defined by the [a]greement.' Dr. Sanal filed an answer, asserting that the non-compete was 'not reasonably necessary to protect any legitimate business interest of the [University] and [w]as, therefore, unenforceable as a matter of law.'

The trial court concluded that Dr. Sanal was violating his non-compete agreement, but held that the University failed to establish that it had any 'legitimate business interest' for the covenant, denying the motion for injunction. There was no proof of any patients transferring their care from the University to Dr. Sanal's new practice. However, on appeal, the University argued that he was interfering with prospective patients, pointing to a section of the Florida non-compete statute which recognized, as a legitimate business interest, protection of relationships with 'specific prospective customers,' or in the case of physicians, 'specific prospective patients.' The University argued that the statute should be interpreted to include as prospective patients all persons within the geographic area who might need medical care, while Dr. Sanal relied on the adjective 'specific,' modifying 'prospective,' and argued that there was no proof relating to loss of 'specific' patients. The appellate court affirmed the lower court, holding that to qualify as a 'legitimate business interest' under the Florida statute governing non-competes, a 'relationship' with a prospective patient had to be with a particular, identifiable individual. The proof was insufficient to establish a legitimate business interest.The Supreme Court of New Jersey has ruled that a computer software company did not breach a manager's contract by discharging him for subjective reasons. Silvestri v. Optus Software, Inc., No. A-95, 2003 WL 151717 (N.J. Jan. 23, 2003).

Optus Software, Inc., a small computer software company, hired Michael Silvestri as director of support services in January 1999, with a 2-year contract. Silvestri was responsible for supervising the provision of technical support services to the company's customers. His employment contract included a 'satisfaction clause,' allowing Optus to terminate him for 'failure or refusal to perform faithfully, diligently or completely his duties ' to the satisfaction' of the company. For 6 months, Silvestri received positive feedback from the company president. However, by the summer of 1999, several clients had complained about the company's performance, and in some cases, mentioned Silvestri specifically. The president terminated Silvestri by mid-September.

Silvestri sued Optus, contending that the company's dissatisfaction was objectively unreasonable and that his termination was a breach of the employment contract. The trial court granted summary judgment in favor of Optus, but the appellate court reversed, holding that an employer must meet an objective standard for satisfaction in order to invoke a right to terminate pursuant to a satisfaction clause in an employment contract. The New Jersey Supreme Court concluded, absent contract language to the contrary, that a subjective assessment of personal satisfaction applied, and that the trial court's grant of summary judgment to Optus was appropriate. The subjective standard still obligated the employer to act in good faith, but genuine dissatisfaction on the part of the employer, honestly held, would be sufficient for discharge.The Oregon Court of Appeals, deciding a question of first impression in that state, has held that when an employee is working pursuant to an employment contract guaranteeing a right not to be fired except for just cause, and is subsequently dismissed without such cause, the employee may sue both for breach of contract, seeking lost earnings, and for wrongful discharge, seeking compensatory damages for mental distress, where the dismissal would contravene Oregon public policy. In other words, the existence of a claim for breach of contract does not limit an employee's right to sue for wrongful discharge in Oregon. Dunwoody v. Handskill Corp., No. 9908-08919; A112093, 60 P.3d 1135 (Or. Ct. App. Jan. 8, 2003).

Cathleen Dunwoody's husband was murdered. She was working for Handskill Corporation at the time of the murder, and subsequently signed a 'contract for services' with Handskill, with a 3-year term, specifically drafted to provide her with sufficient time (without pay) to assist with the prosecution of her husband's murderers. She was given permission by the company to attend the murder trial, but at the time the case moved into a penalty phase following a guilty verdict, Dunwoody was fired, apparently because she had missed too much work in connection with the trial and her part in it.

Oregon law permits a cause of action for wrongful discharge where there is no applicable statutory cause of action, and when important public interests or societal interests would be served by recognizing the claim. Thus, Oregon courts view wrongful discharge as an 'interstitial tort, designed to fill a gap where a discharge in violation of public policy would not otherwise be adequately remedied.' In this case, the trial judge held that where an employee has a claim for breach of employment contract, there is no need to recognize a cause of action for wrongful discharge, and granted a motion to dismiss Dunwoody's wrongful discharge claim for that reason.

However, the Oregon Court of Appeals overruled the trial court, holding that an employee may sue for common-law wrongful discharge even though he or she may also have a cause of action for breach of an employment contract, where the employee's contractual remedies would not remedy all the injuries purportedly suffered as a result of the wrongful discharge.

Because Dunwoody's contractual remedies were limited to recovery of lost wages, less interim earnings, and because her contract provided no remedy for the emotional distress she allegedly suffered through her dismissal in the midst of the penalty phase of the murder trial, she was given leave to proceed with both her contract and her wrongful discharge claims.The Commonwealth Court of Pennsylvania has held that because an employer failed to engage in the interactive process once a disabled employee informed the company of her need for a reasonable accommodation, the employer was responsible for the breakdown of that process. Canteen Corp. v. Pennsylvania Human Relations Commission, No. 1258 C.D. 2002, WL 31898007 (Pa. Jan. 2, 2003).

In 1985, Sophie Weber began working for Canteen, a Philadelphia based vending services supplier, as an accounting clerk. Weber's job required her to handle documents, folders and envelopes weighing up to 5 pounds. The job required lifting and bending. In 1987, Weber suffered a back injury requiring surgery and a 5-month medical absence. Upon returning to work, she brought a doctor's note stating that she should refrain from lifting any object weighing 25 pounds or more. Weber was able to continue performing her job as she had prior to her injury.

In 1999, Canteen sought to cross-train Weber to assist in the 'coin room,' requiring her to lift bags of coins weighing up to 20 pounds all day long. Weber expressed concern about the lifting requirements to the general manager, who told Weber to obtain an updated doctor's note. A new note indicated that Weber could not do any lifting or bending. Canteen management proceeded to have a brief conference call with Weber, the only discussion with Weber regarding her disability. The next day, Weber was told that she could not continue working, because her accounting clerk position required lifting and bending, and no other job was available.

Weber filed a complaint with the Pennsylvania Human Relations Commission alleging she was terminated because of her age (over 60) and disability. The age claim was dismissed, but a probable cause finding was issued regarding her disability discrimination claim. An administrative law judge subsequently found that Canteen failed to engage in a good-faith interactive process to reasonably accommodate Weber's disability. Canteen was ordered to pay Weber 6 months of back pay plus prejudgment interest, and to offer her the next available accounting clerk or equivalent position.

In affirming the decision of the Commission, the court adopted a three-part test requiring an employee such as Weber to establish: 1) that the employee was a disabled person within the meaning of applicable law; 2) that the employee was otherwise qualified to perform the essential functions of the job; and 3) that the employee suffered an otherwise adverse employment decision as a result of discrimination.Canteen argued that because Weber could not do any lifting or bending, she was not qualified to perform the essential functions of her job. However, the court ruled that Canteen needed to initiate an informal, interactive process to ascertain Weber's limitations and any possible way of accommodating them. The court found that Weber requested a reasonable accommodation when she expressed concern with the lifting requirements of the coin room. However, because Canteen failed to engage in the interactive process, Weber never had a chance to demonstrate that she could perform her job, perhaps with the accommodation of a dolly or hand-cart.The Texas Court of Appeals has ruled that an employer's promises to give 90 days notice of termination without cause to an 'at will' employee, and to compensate the employee in the event of economic hardship resulting from the non-compete provision, were not the kind of employer promises that would create an interest worthy of protection by a covenant not to compete. Strickland v. Medtronic, Inc., No. 05-02-01161-CV, 2003 WL 187436 (Tex. Ct. App. Jan. 29).

In 1997, Valerie Strickland signed a 'sales employee agreement' with Medtronic that contained a 360-day non-compete provision. Two days after resigning to join St. Jude Medical, a competitor of Medtronic, Strickland sued Medtronic seeking a declaratory judgment, claiming that her non-compete commitment was unenforceable. Medtronic counterclaimed, and filed a motion for temporary injunction enforcing the covenant not to compete. The trial judge issued an injunction enforcing the covenant, and Strickland appealed.

The sales employee agreement guaranteed Strickland 90 days' notice prior to a termination without cause, and further provided that the non-compete provision would not apply if she was discharged without cause. Medtronic had also promised to compensate Strickland in the event that adherence to the non-compete commitment created hardships for her. Although Medtronic argued that its notice commitment created a contract that had at least a 3-month definite term, and that Strickland was not an 'at will' employee for that reason, the Texas appellate court disagreed, holding that to alter the presumption of 'at will' employment under Texas law, there must be an agreement that limits the right to fire the employee in some meaningful or special way. The Medtronic agreement was not sufficiently restrictive, which meant that the relationship was 'at will.'

In Texas, where there is 'at will' employment, a non-compete covenant is only enforceable where it is ancillary to or part of an otherwise enforceable agreement between employer and employee. This test is satisfied only when the employer's consideration is sufficient to support the covenant not to compete. In this instance, Medtronic could not meet this test, because the promises to give 90 days' notice prior to a termination without cause, and to compensate Strickland in the event of a hardship resulting from compliance with the non-compete commitment, were found not to create an interest worthy of protection by a covenant not to compete.

CALIFORNIA

'Paramour Discrimination' Not Recognized in California

The California Court of Appeals has held that there is no cause of action for 'paramour discrimination' under the California Fair Employment and Housing Act (FEHA) and that complaints regarding unfair favoritism of paramours by supervisors are not a form of protected activity sufficient to support a retaliation claim. Mackey v. Department of Corrections, No. C040262, 2003 WL 178751 (Cal. App. Jan. 28).

This case was brought by a group of female employees who were working for the California Department of Corrections (CDC) at the Valley State Prison for Women. These particular employees alleged that their rights under FEHA were violated when other female coworkers were promoted, or received more favorable treatment because they engaged in consensual sexual relations with a supervisor at the prison. For example, Edna Miller and Cagie Brown both applied for a promotion. Brown received the promotion, even though she was not as qualified for the job as Miller, allegedly because she was the male warden's 'paramour.' Other forms of 'paramour' preference were also alleged, not only based on alleged affairs with the warden, but also on 'close and powerful relationships' with the female chief deputy warden. When there was an investigation of the situation by the CDC, and 'paramour' favoritism was reported, retaliation allegedly occurred as a result of the complaints. The aggrieved women then sued, alleging sex discrimination and retaliation.

The California Court of Appeals followed federal precedent by refusing to recognize 'paramour' preferences as a form of sex discrimination, ruling that as with Title VII, 'paramour' preferences are not a form of sex discrimination prohibited by FEHA. According to the California court, FEHA prohibits distinctions based on sex, not based on sexual affiliations, and a supervisor's sexual relationship with one or more employees, standing alone, was held not to create an offensive work environment for employees.

As to the retaliation claims, the trial court found that because there was no sexual harassment, the complaint about affairs at the prison was not a form of protected activity. The Court of Appeals indicated that the test is whether the employees reasonably believed that they were reporting unlawful activity, not whether the activity was in fact illegal.

The employees here did not engage in protected activity because they never actually reported any conduct they perceived as sexual harassment; rather, they were reporting actions that they perceived to be unfair.

Complaints about unfair treatment, the court held, are not a form of protected activity under FEHA.

FLORIDA

Non-Compete Agreement Unenforceable

A Florida District Court of Appeal has ruled a doctor's non-compete agreement unenforceable, because in order to qualify as a 'legitimate business interest' under the Florida law governing covenants not to compete, prospective patient relationships had to be with identified individuals. The University of Florida, Board of Trustees v. Sanal, No. 1D02-833 WL 183296 (Fla. Dist. Ct. App. Jan. 29, 2003).

The University hired Dr. Salahattin Sanal in August 1999 as a clinical associate professor of medicine. The written employment contract contained a non-compete provision providing that upon the termination of his employment, Dr. Sanal would not engage in a community-based clinical practice within a 50-mile radius of the University. Dr. Sanal's employment ended in July 2001, and he began working in violation of the non-compete.

The University sued Dr. Sanal, seeking preliminary and permanent injunctive relief, alleging that he was violating the non-compete agreement and causing irreparable injury to its 'legitimate business interests,' which it identified as 'substantial relationships with prospective and existing patients within the geographic area defined by the [a]greement.' Dr. Sanal filed an answer, asserting that the non-compete was 'not reasonably necessary to protect any legitimate business interest of the [University] and [w]as, therefore, unenforceable as a matter of law.'

The trial court concluded that Dr. Sanal was violating his non-compete agreement, but held that the University failed to establish that it had any 'legitimate business interest' for the covenant, denying the motion for injunction. There was no proof of any patients transferring their care from the University to Dr. Sanal's new practice. However, on appeal, the University argued that he was interfering with prospective patients, pointing to a section of the Florida non-compete statute which recognized, as a legitimate business interest, protection of relationships with 'specific prospective customers,' or in the case of physicians, 'specific prospective patients.' The University argued that the statute should be interpreted to include as prospective patients all persons within the geographic area who might need medical care, while Dr. Sanal relied on the adjective 'specific,' modifying 'prospective,' and argued that there was no proof relating to loss of 'specific' patients. The appellate court affirmed the lower court, holding that to qualify as a 'legitimate business interest' under the Florida statute governing non-competes, a 'relationship' with a prospective patient had to be with a particular, identifiable individual. The proof was insufficient to establish a legitimate business interest.

NEW JERSEY

Discharge for Subjective Reasons OK, Says Court

The Supreme Court of New Jersey has ruled that a computer software company did not breach a manager's contract by discharging him for subjective reasons. Silvestri v. Optus Software, Inc., No. A-95, 2003 WL 151717 (N.J. Jan. 23, 2003).

Optus Software, Inc., a small computer software company, hired Michael Silvestri as director of support services in January 1999, with a 2-year contract. Silvestri was responsible for supervising the provision of technical support services to the company's customers. His employment contract included a 'satisfaction clause,' allowing Optus to terminate him for 'failure or refusal to perform faithfully, diligently or completely his duties ' to the satisfaction' of the company. For 6 months, Silvestri received positive feedback from the company president. However, by the summer of 1999, several clients had complained about the company's performance, and in some cases, mentioned Silvestri specifically. The president terminated Silvestri by mid-September.

Silvestri sued Optus, contending that the company's dissatisfaction was objectively unreasonable and that his termination was a breach of the employment contract. The trial court granted summary judgment in favor of Optus, but the appellate court reversed, holding that an employer must meet an objective standard for satisfaction in order to invoke a right to terminate pursuant to a satisfaction clause in an employment contract. The New Jersey Supreme Court concluded, absent contract language to the contrary, that a subjective assessment of personal satisfaction applied, and that the trial court's grant of summary judgment to Optus was appropriate. The subjective standard still obligated the employer to act in good faith, but genuine dissatisfaction on the part of the employer, honestly held, would be sufficient for discharge.

OREGON

Oregon Expands Tort of Wrongful Discharge

The Oregon Court of Appeals, deciding a question of first impression in that state, has held that when an employee is working pursuant to an employment contract guaranteeing a right not to be fired except for just cause, and is subsequently dismissed without such cause, the employee may sue both for breach of contract, seeking lost earnings, and for wrongful discharge, seeking compensatory damages for mental distress, where the dismissal would contravene Oregon public policy. In other words, the existence of a claim for breach of contract does not limit an employee's right to sue for wrongful discharge in Oregon. Dunwoody v. Handskill Corp., No. 9908-08919; A112093, 60 P.3d 1135 (Or. Ct. App. Jan. 8, 2003).

Cathleen Dunwoody's husband was murdered. She was working for Handskill Corporation at the time of the murder, and subsequently signed a 'contract for services' with Handskill, with a 3-year term, specifically drafted to provide her with sufficient time (without pay) to assist with the prosecution of her husband's murderers. She was given permission by the company to attend the murder trial, but at the time the case moved into a penalty phase following a guilty verdict, Dunwoody was fired, apparently because she had missed too much work in connection with the trial and her part in it.

Oregon law permits a cause of action for wrongful discharge where there is no applicable statutory cause of action, and when important public interests or societal interests would be served by recognizing the claim. Thus, Oregon courts view wrongful discharge as an 'interstitial tort, designed to fill a gap where a discharge in violation of public policy would not otherwise be adequately remedied.' In this case, the trial judge held that where an employee has a claim for breach of employment contract, there is no need to recognize a cause of action for wrongful discharge, and granted a motion to dismiss Dunwoody's wrongful discharge claim for that reason. However, the Oregon Court of Appeals overruled the trial court, holding that an employee may sue for common-law wrongful discharge even though he or she may also have a cause of action for breach of an employment contract, where the employee's contractual remedies would not remedy all the injuries purportedly suffered as a result of the wrongful discharge. Because Dunwoody's contractual remedies were limited to recovery of lost wages, less interim earnings, and because her contract provided no remedy for the emotional distress she allegedly suffered through her dismissal in the midst of the penalty phase of the murder trial, she was given leave to proceed with both her contract and her wrongful discharge claims.

PENNSYLVANIA

Employer Liable for Breakdown of Interactive Process with Disabled Employee

The Commonwealth Court of Pennsylvania has held that because an employer failed to engage in the interactive process once a disabled employee informed the company of her need for a reasonable accommodation, the employer was responsible for the breakdown of that process. Canteen Corp. v. Pennsylvania Human Relations Commission , No. 1258 C.D. 2002, WL 31898007 (Pa. Jan. 2, 2003).

In 1985, Sophie Weber began working for Canteen, a Philadelphia based vending services supplier, as an accounting clerk. Weber's job required her to handle documents, folders and envelopes weighing up to 5 pounds. The job required lifting and bending. In 1987, Weber suffered a back injury requiring surgery and a 5-month medical absence. Upon returning to work, she brought a doctor's note stating that she should refrain from lifting any object weighing 25 pounds or more. Weber was able to continue performing her job as she had prior to her injury.

In 1999, Canteen sought to cross-train Weber to assist in the 'coin room,' requiring her to lift bags of coins weighing up to 20 pounds all day long. Weber expressed concern about the lifting requirements to the general manager, who told Weber to obtain an updated doctor's note. A new note indicated that Weber could not do any lifting or bending. Canteen management proceeded to have a brief conference call with Weber, the only discussion with Weber regarding her disability. The next day, Weber was told that she could not continue working, because her accounting clerk position required lifting and bending, and no other job was available.

Weber filed a complaint with the Pennsylvania Human Relations Commission alleging she was terminated because of her age (over 60) and disability. The age claim was dismissed, but a probable cause finding was issued regarding her disability discrimination claim. An administrative law judge subsequently found that Canteen failed to engage in a good-faith interactive process to reasonably accommodate Weber's disability. Canteen was ordered to pay Weber 6 months of back pay plus prejudgment interest, and to offer her the next available accounting clerk or equivalent position.

In affirming the decision of the Commission, the court adopted a 3-part test requiring an employee such as Weber to establish: 1) that the employee was a disabled person within the meaning of applicable law; 2) that the employee was otherwise qualified to perform the essential functions of the job; and 3) that the employee suffered an otherwise adverse employment decision as a result of discrimination. Canteen argued that because Weber could not do any lifting or bending, she was not qualified to perform the essential functions of her job. However, the court ruled that Canteen needed to initiate an informal, interactive process to ascertain Weber's limitations and any possible way of accommodating them. The court found that Weber requested a reasonable accommodation when she expressed concern with the lifting requirements of the coin room. However, because Canteen failed to engage in the interactive process, Weber never had a chance to demonstrate that she could perform her job, perhaps with the accommodation of a dolly or hand-cart.

TEXAS

Employer's Promises Insufficient to Support Non-Compete

The Texas Court of Appeals has ruled that an employer's promises to give 90 days notice of termination without cause to an 'at will' employee, and to compensate the employee in the event of economic hardship resulting from the non-compete provision, were not the kind of employer promises that would create an interest worthy of protection by a covenant not to compete. Strickland v. Medtronic, Inc. , No. 05-02-01161-CV, 2003 WL 187436 (Tex. Ct. App. Jan. 29).

In 1997, Valerie Strickland signed a 'sales employee agreement' with Medtronic that contained a 360-day non-compete provision. Two days after resigning to join St. Jude Medical, a competitor of Medtronic, Strickland sued Medtronic seeking a declaratory judgment, claiming that her non-compete commitment was unenforceable. Medtronic counterclaimed, and filed a motion for temporary injunction enforcing the covenant not to compete. The trial judge issued an injunction enforcing the covenant, and Strickland appealed.

The sales employee agreement guaranteed Strickland 90 days' notice prior to a termination without cause, and further provided that the non-compete provision would not apply if she was discharged without cause. Medtronic had also promised to compensate Strickland in the event that adherence to the non-compete commitment created hardships for her. Although Medtronic argued that its notice commitment created a contract that had at least a 3-month definite term, and that Strickland was not an 'at will' employee for that reason, the Texas appellate court disagreed, holding that to alter the presumption of 'at will' employment under Texas law, there must be an agreement that limits the right to fire the employee in some meaningful or special way. The Medtronic agreement was not sufficiently restrictive, which meant that the relationship was 'at will.'

In Texas, where there is an 'at will' employment, a non-compete covenant is only enforceable where it is ancillary to or part of an otherwise enforceable agreement between employer and employee. This test is satisfied only when the employer's consideration is sufficient to support the covenant not to compete. In this instance, Medtronic could not meet this test, because the promises to give 90 days' notice prior to a termination without cause, and to compensate Strickland in the event of a hardship resulting from compliance with the non-compete commitment, were found not to create an interest worthy of protection by a covenant not to compete.

This month's National Litigation Hotline, and Recent Developments from Around the States were both written by Mark A. Konkel, an associated with Winston & Strawn, New York, and Associate Editor of this publication.

The University hired Dr. Salahattin Sanal in August 1999 as a clinical associate professor of medicine. The written employment contract contained a non-compete provision providing that upon the termination of his employment, Dr. Sanal would not engage in a community-based clinical practice within a 50-mile radius of the University. Dr. Sanal's employment ended in July 2001, and he began working in violation of the non-compete.

The University sued Dr. Sanal, seeking preliminary and permanent injunctive relief, alleging that he was violating the non-compete agreement and causing irreparable injury to its 'legitimate business interests,' which it identified as 'substantial relationships with prospective and existing patients within the geographic area defined by the [a]greement.' Dr. Sanal filed an answer, asserting that the non-compete was 'not reasonably necessary to protect any legitimate business interest of the [University] and [w]as, therefore, unenforceable as a matter of law.'

The trial court concluded that Dr. Sanal was violating his non-compete agreement, but held that the University failed to establish that it had any 'legitimate business interest' for the covenant, denying the motion for injunction. There was no proof of any patients transferring their care from the University to Dr. Sanal's new practice. However, on appeal, the University argued that he was interfering with prospective patients, pointing to a section of the Florida non-compete statute which recognized, as a legitimate business interest, protection of relationships with 'specific prospective customers,' or in the case of physicians, 'specific prospective patients.' The University argued that the statute should be interpreted to include as prospective patients all persons within the geographic area who might need medical care, while Dr. Sanal relied on the adjective 'specific,' modifying 'prospective,' and argued that there was no proof relating to loss of 'specific' patients. The appellate court affirmed the lower court, holding that to qualify as a 'legitimate business interest' under the Florida statute governing non-competes, a 'relationship' with a prospective patient had to be with a particular, identifiable individual. The proof was insufficient to establish a legitimate business interest.The Supreme Court of New Jersey has ruled that a computer software company did not breach a manager's contract by discharging him for subjective reasons. Silvestri v. Optus Software, Inc., No. A-95, 2003 WL 151717 (N.J. Jan. 23, 2003).

Optus Software, Inc., a small computer software company, hired Michael Silvestri as director of support services in January 1999, with a 2-year contract. Silvestri was responsible for supervising the provision of technical support services to the company's customers. His employment contract included a 'satisfaction clause,' allowing Optus to terminate him for 'failure or refusal to perform faithfully, diligently or completely his duties ' to the satisfaction' of the company. For 6 months, Silvestri received positive feedback from the company president. However, by the summer of 1999, several clients had complained about the company's performance, and in some cases, mentioned Silvestri specifically. The president terminated Silvestri by mid-September.

Silvestri sued Optus, contending that the company's dissatisfaction was objectively unreasonable and that his termination was a breach of the employment contract. The trial court granted summary judgment in favor of Optus, but the appellate court reversed, holding that an employer must meet an objective standard for satisfaction in order to invoke a right to terminate pursuant to a satisfaction clause in an employment contract. The New Jersey Supreme Court concluded, absent contract language to the contrary, that a subjective assessment of personal satisfaction applied, and that the trial court's grant of summary judgment to Optus was appropriate. The subjective standard still obligated the employer to act in good faith, but genuine dissatisfaction on the part of the employer, honestly held, would be sufficient for discharge.The Oregon Court of Appeals, deciding a question of first impression in that state, has held that when an employee is working pursuant to an employment contract guaranteeing a right not to be fired except for just cause, and is subsequently dismissed without such cause, the employee may sue both for breach of contract, seeking lost earnings, and for wrongful discharge, seeking compensatory damages for mental distress, where the dismissal would contravene Oregon public policy. In other words, the existence of a claim for breach of contract does not limit an employee's right to sue for wrongful discharge in Oregon. Dunwoody v. Handskill Corp., No. 9908-08919; A112093, 60 P.3d 1135 (Or. Ct. App. Jan. 8, 2003).

Cathleen Dunwoody's husband was murdered. She was working for Handskill Corporation at the time of the murder, and subsequently signed a 'contract for services' with Handskill, with a 3-year term, specifically drafted to provide her with sufficient time (without pay) to assist with the prosecution of her husband's murderers. She was given permission by the company to attend the murder trial, but at the time the case moved into a penalty phase following a guilty verdict, Dunwoody was fired, apparently because she had missed too much work in connection with the trial and her part in it.

Oregon law permits a cause of action for wrongful discharge where there is no applicable statutory cause of action, and when important public interests or societal interests would be served by recognizing the claim. Thus, Oregon courts view wrongful discharge as an 'interstitial tort, designed to fill a gap where a discharge in violation of public policy would not otherwise be adequately remedied.' In this case, the trial judge held that where an employee has a claim for breach of employment contract, there is no need to recognize a cause of action for wrongful discharge, and granted a motion to dismiss Dunwoody's wrongful discharge claim for that reason.

However, the Oregon Court of Appeals overruled the trial court, holding that an employee may sue for common-law wrongful discharge even though he or she may also have a cause of action for breach of an employment contract, where the employee's contractual remedies would not remedy all the injuries purportedly suffered as a result of the wrongful discharge.

Because Dunwoody's contractual remedies were limited to recovery of lost wages, less interim earnings, and because her contract provided no remedy for the emotional distress she allegedly suffered through her dismissal in the midst of the penalty phase of the murder trial, she was given leave to proceed with both her contract and her wrongful discharge claims.The Commonwealth Court of Pennsylvania has held that because an employer failed to engage in the interactive process once a disabled employee informed the company of her need for a reasonable accommodation, the employer was responsible for the breakdown of that process. Canteen Corp. v. Pennsylvania Human Relations Commission, No. 1258 C.D. 2002, WL 31898007 (Pa. Jan. 2, 2003).

In 1985, Sophie Weber began working for Canteen, a Philadelphia based vending services supplier, as an accounting clerk. Weber's job required her to handle documents, folders and envelopes weighing up to 5 pounds. The job required lifting and bending. In 1987, Weber suffered a back injury requiring surgery and a 5-month medical absence. Upon returning to work, she brought a doctor's note stating that she should refrain from lifting any object weighing 25 pounds or more. Weber was able to continue performing her job as she had prior to her injury.

In 1999, Canteen sought to cross-train Weber to assist in the 'coin room,' requiring her to lift bags of coins weighing up to 20 pounds all day long. Weber expressed concern about the lifting requirements to the general manager, who told Weber to obtain an updated doctor's note. A new note indicated that Weber could not do any lifting or bending. Canteen management proceeded to have a brief conference call with Weber, the only discussion with Weber regarding her disability. The next day, Weber was told that she could not continue working, because her accounting clerk position required lifting and bending, and no other job was available.

Weber filed a complaint with the Pennsylvania Human Relations Commission alleging she was terminated because of her age (over 60) and disability. The age claim was dismissed, but a probable cause finding was issued regarding her disability discrimination claim. An administrative law judge subsequently found that Canteen failed to engage in a good-faith interactive process to reasonably accommodate Weber's disability. Canteen was ordered to pay Weber 6 months of back pay plus prejudgment interest, and to offer her the next available accounting clerk or equivalent position.

In affirming the decision of the Commission, the court adopted a three-part test requiring an employee such as Weber to establish: 1) that the employee was a disabled person within the meaning of applicable law; 2) that the employee was otherwise qualified to perform the essential functions of the job; and 3) that the employee suffered an otherwise adverse employment decision as a result of discrimination.Canteen argued that because Weber could not do any lifting or bending, she was not qualified to perform the essential functions of her job. However, the court ruled that Canteen needed to initiate an informal, interactive process to ascertain Weber's limitations and any possible way of accommodating them. The court found that Weber requested a reasonable accommodation when she expressed concern with the lifting requirements of the coin room. However, because Canteen failed to engage in the interactive process, Weber never had a chance to demonstrate that she could perform her job, perhaps with the accommodation of a dolly or hand-cart.The Texas Court of Appeals has ruled that an employer's promises to give 90 days notice of termination without cause to an 'at will' employee, and to compensate the employee in the event of economic hardship resulting from the non-compete provision, were not the kind of employer promises that would create an interest worthy of protection by a covenant not to compete. Strickland v. Medtronic, Inc., No. 05-02-01161-CV, 2003 WL 187436 (Tex. Ct. App. Jan. 29).

In 1997, Valerie Strickland signed a 'sales employee agreement' with Medtronic that contained a 360-day non-compete provision. Two days after resigning to join St. Jude Medical, a competitor of Medtronic, Strickland sued Medtronic seeking a declaratory judgment, claiming that her non-compete commitment was unenforceable. Medtronic counterclaimed, and filed a motion for temporary injunction enforcing the covenant not to compete. The trial judge issued an injunction enforcing the covenant, and Strickland appealed.

The sales employee agreement guaranteed Strickland 90 days' notice prior to a termination without cause, and further provided that the non-compete provision would not apply if she was discharged without cause. Medtronic had also promised to compensate Strickland in the event that adherence to the non-compete commitment created hardships for her. Although Medtronic argued that its notice commitment created a contract that had at least a 3-month definite term, and that Strickland was not an 'at will' employee for that reason, the Texas appellate court disagreed, holding that to alter the presumption of 'at will' employment under Texas law, there must be an agreement that limits the right to fire the employee in some meaningful or special way. The Medtronic agreement was not sufficiently restrictive, which meant that the relationship was 'at will.'

In Texas, where there is 'at will' employment, a non-compete covenant is only enforceable where it is ancillary to or part of an otherwise enforceable agreement between employer and employee. This test is satisfied only when the employer's consideration is sufficient to support the covenant not to compete. In this instance, Medtronic could not meet this test, because the promises to give 90 days' notice prior to a termination without cause, and to compensate Strickland in the event of a hardship resulting from compliance with the non-compete commitment, were found not to create an interest worthy of protection by a covenant not to compete.