Key Business Court Decisions

If You Don’t Explicitly Bring Up A Term, You Might Impliedly Waive It

Where one’s contractual obligation to give notice before terminating employment might not be against public policy, the employer’s failure to insist on the notice might waive both the requirement for notice and any loss associated with the failure to give proper notice.  Tumlin v. Tuggle Duggins, 2018 NCBH 129 (J. Gale).   Such implied waive might occur even if the penalty for failing to give proper notice is never brought up or discussed.

In 2008, Plaintiff accepted an offer with the defendant law firm (“Firm”).  Shortly thereafter, Plaintiff became a shareholder and director of the Firm.  The Firm had a policy that required a shareholder/director to provide the Firm with 30-days’ notice before voluntarily terminating his employment if the shareholder wanted post-termination compensation.  Under the policy, the notice requirement was an explicit condition precedent that had to be satisfied to be eligible for any post-termination compensation.  (Opinion, ¶18).  On May 14, 2015, Plaintiff first advised the Firm’s President, Ross Hamilton, that he intended to leave the Firm.  During a meeting on May 18, Plaintiff allegedly advised Hamilton that he intended to leave on June 5.  Plaintiff claimed Hamilton agreed to the date.  However, Plaintiff admitted there was no discussion about the Firm’s 30-day notice requirement or whether the Firm would waive the 30-day requirement, in part because the Plaintiff claimed to be ignorant of the policy. On May 19, 2015, Plaintiff emailed Hamilton with his official letter of resignation, giving his last day as June 5, 2015. (Opinion, ¶21).  Hamilton responded the same day, noting that the Firm had received the resignation letter and that his resignation would be effective June 5, 2015.  (Opinion, ¶60).  Neither Plaintiff’s letter or Hamilton’s response mentioned the Firm’s 30-day notice requirement. Plaintiff resigned on June 5, 2015. In September 2015, Plaintiff inquired when he would receive his post-termination compensation.  Hamilton responded by informing Plaintiff he was not entitled to any such compensation.  Plaintiff filed suit, alleging that the 30-day notice requirement was contrary to public policy and, alternatively, that the Firm had impliedly waived the 30-day notice requirement by accepting his resignation.  Defendant filed for summary judgment.

The Court granted the Firm’s motion for summary judgment on Plaintiff’s claim seeking a declaration that the 30-day notice requirement violated public policy.  Because the notice requirement did not restrict the departing attorney’s ability to practice law; deny him compensation on the basis that he took firm clients with him, or deny him compensation that he would otherwise be entitled to receive, the Court refused to find the requirement violated public policy.  (Opinion, ¶81,82).

Even though it found the notice requirement was enforceable, the Court nonetheless denied the Firm’s motion for summary judgment on Plaintiff’s breach of contract claim.  The Court recognized the Firm had no affirmative obligation to bring up the issue of the 30-day notice during any meeting with Plaintiff (Opinion, ¶47), but then nonetheless held that a jury had to decide whether the Firm had impliedly waived the notice requirement when it accepted Plaintiff’s departure date that was less than 30-days away.  (Opinion, ¶54).  The Court determined there was evidence from which the jury could determine the Firm had waived the notice requirement, even though Plaintiff admitted the topic of the 30-day notice never came up in any pre-resignation meeting between himself and Hamilton.   The Court found that the Firm’s acceptance of the June 5 date could be evidence that the Firm not just accepted Plaintiff’s resignation, but affirmatively intended to relinquish the notice requirement.  (Id., ¶41).

A business that requires another party (employee, vendor or otherwise) to give notice before ending the contractual relationship in order to receive some post-termination benefit would be well served to either refuse to accept the termination that violates the notice or make it clear that, by accepting the resignation, the business reserves all of its rights under the contract.  Otherwise, the other party might later sue for the post-termination benefit, even though it did not even know about it at the time.

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