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Little Lamb Company needs an additional programmer for a special project. The company enters into a contract with Mary to complete this project. Just as the project is nearing completion, a new need arises for her services. She is asked to continue with the company to complete the new project. While completing the new project, the supervisor begins working more closely with Mary and requires her to use company materials and equipment while adhering to company work schedules. After two years, economic conditions force the company to make budget cuts. Mary is asked to leave. Thirty days later, a major contract is acquired by the company, which reinstates the need for Mary's services as a programmer. However, the supervisor chooses to hire his equally-qualified cousin and not offer Mary the opportunity to return.
b. Answer the following questions based on the scenario:
1) Is Mary an independent contractor or an employee? Describe the factors that led to your determination.
2) Has the employer/employee relationship changed over the course of time? If so, how?
3) Was Mary's release legal under the doctrine of employment-at-will? Why or why not? If not, which of the following exceptions to employment-at-will have been violated? Why?
a) Breach of public policy
b) Breach of implied covenant of good faith and fair dealing
c) Breach of implied contract
In 1992, the U.S. Supreme Court ruled that when determining when a person is an independent contractor or an employee (usually at-will), the courts are to look at the hiring party's right to control the "manner and means" by which the product or project is accomplished. The courts are to look at: the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additoinal projects to the hired party; the extent of the hired party's discretoin over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.
In looking at the fact pattern, this situation meets some of the elements for employee status: Mary obviously has a special skill the company needed; after Mary finished the special project, she started to work on other services for the company; Mary was asked to use company tooks and instrumentalities; Mary worked at the business's office; even though she originally had an employment contract with the business (independent contractor status), her employment morphed into employee status when she was asked to work on additional projects; the business told Mary to work within the company's regularly scheduled working hours; Mary's work was part of the regular business of the company; and the company was in business.
Mary's employment status at the time she was released was employee, unless the original contract had a renewal provision (which on these facts, I woudl assume not), which would extend Mary's status as an independent contractor (she would not be an employee). Unless your professor has stated otherwise, or lets you make assumptions about facts not in the fact pattern, I would say that Mary was an employee when she was terminated.
The employer/employee relationship changed over the course of time because Mary went from independent contractor status (hired to complete a specific project on contract) to employee status (asked to do other projects after she completed the contracted project) -- see above.
I believe Mary's release under the doctrine of employment-at-will was legal because the status of employee-at-will means the employer or the employee can terminate the working relationship at any time for any reason (with very limited exceptions).
In case you don't agree with my assumption, I've gone through the three exceptions and said what the elements are for each, what Mary would have to prove, and why I don't think it would work. Please feel free to disagree with my opinions!
The public policy exception is by far the most popular device used by courts to get around at-will discharge of employees. It varies from state to state, but in general, it provides that an employer may not discharge an employee for a reason that contravenes a substantial public policy of the state. Two major cases that dealt with this exception treated the violation of public policy as a tort rather than a breach of public policy in contract. The distinction is important because it affects the remedies Mary could get and the statutes of limitations (how long she has to bring her claim). In a tort action, the courts usually look for some refusal by the employee to do something unethical or illegal at the request of the employer, so something similar. In contract cases, it's usually some sort of discrimination or bad faith/malice or retalitation that gives rise to the cause of action. In general, it has to be "contrary to a fundamental and well-defined public policy as evidenced by existing law" (Brockmeyer v. Dun & Bradstreet). Usually the public policy exception to employment-at-will comes from one of two types of sources: "statutes or constitutional provisions which expressly prohibit an employer act of discharge or retaliation but which articulate no private right of action, and statutes or constitutional provisions lacking any specific proscription but whose purpose or function would be undermined by the discharge." (I found this in a labor law treatise on LexisNexis). I believe that because this is purely a private interest (not based in statutes or constitutional provisions), it is insufficient to provide a basis for a public policy exception.
Employment contracts are presumed to contain an implied covenant of good faith and fair dealing, so if Mary had been fired while she was still working out her contract, this definitely would give rise to a cause of action. However, most jurisdictions do not recognize good faith and fair dealing in employment-at-will situations (although there have been one or two that have allowed good faith and fair dealing in at-will contracts on the basis of longevity of the employment relationship (which is not an issue here), and you might possibly live in one of those jurisdictions). This would create a substantive limitation on the employer's right to discharge the employee (which defeats the purpose of employment-at-will). However, there are a growing number of jurisdictions that will accept such a cause of action in some limited circumstances.
Mary might be able to argue that her termination was not legal for breach of implied contract (promissory estoppel), but this would be a tough battle because she would have to show that the company should have reasonably expected its representation to be relied upon by Mary, and she also would have to show that this "promise" induced her to do something (or forgo something), like not seek other employment, and this action or forebearance must be reasonable. Reliance on a vague or indefinite statement (which is what I think is happening in the fact pattern) will not allow her to bring such a claim. I believe Mary's reliance was on a vague promise by the company to have her continue to work on special projects (which is not enough to show reasonable reliance). Based on the fact pattern, the company continued to give Mary special projects, but as soon as she completed one, she couldn't have reasonably expected that the company would keep her for another one (job security). Job security requires independent consideration, and I don't believe Mary gave independent or additional consideration for the company to offer her job security. It looks like she just did her job and got paid per job. If Mary can show that she gave up another job or relocated in reliance on a promise of job security, then some courts might hold that this would be sufficient consideration, but based on the facts you've given, I don't believe this is the case.