Where a business declines to renew an employment contract, such action does not give rise to an at-will employment relationship. Kelley v. Charlotte Radiology, P.A., 2019 NCBC 14 (J. Conrad). Because no at-will employment relationship existed, a spurned employee cannot maintain a claim for wrongful discharge.
Plaintiff was an employee and shareholder in Defendant when, in 2015, he announced his plan to retire at the end of 2016. Toward the end of 2016, Plaintiff expressed a desire to continue working beyond the end of the year, but on a reduced role. He then entered into a Retiree Employment Agreement (“REA”) with Defendant, which provided him a reduced employment schedule through June 2017. Pursuant to a stock redemption agreement which Plaintiff signed when he originally became a shareholder, Plaintiff’s retirement at the end of 2016 triggered the automatic repurchase of his shares. Defendant sent Plaintiff a check for $1,000 for his shares, which Plaintiff cashed. In June 2017, Plaintiff and Defendant renewed the REA for another 12 months. During those twelve months, Plaintiff learned that Defendant was in the process of a refinancing transaction which would result in all Defendant’s shareholders receiving a substantial payout. Plaintiff contended he was entitled to be included as a shareholder, but Defendant disagreed. In June 2018, while negotiating another extension of the REA, Plaintiff filed suit against Defendant. As a result of the lawsuit, Defendant ceased all negotiations with Plaintiff over an extension of the REA and Plaintiff’s employment ended on June 30, 2018. In his amended complaint, Plaintiff contended Defendant’s failure to enter into an extension of the REA constituted a wrongful discharge.
The Business Court disagreed. Recognizing that North Carolina permits a wrongful discharge claim to be asserted only by an at-will employee, the Court recognized Plaintiff’s admission that he was not actually terminated prior to the REA’s natural expiration meant no wrongful discharge could have occurred vis-à-vis the REA the ended June 30, 2018. Turning to the issue of Defendant’s decision to withdraw from negotiations concerning extending the REA, the Court adopted numerous federal court decisions and held that Defendant’s mere failure to renew the REA did not give rise to an “at-will” employment relationship, even if the REA could have been considered the embodiment of an at-will relationship. In short, the Court recognized that the failure to enter into the employment agreement did not constitute an “at-will” relationship, and thus Plaintiff could not maintain his wrongful discharge related to the non-renewal of the REA.
Based upon this decision, a business should keep in mind that it is free to withdraw potential offers of employment without the risk of a claim for wrongful discharge.
Categories: Key Business Court Decisions