November 2007

In This Issue

Preparation Every Employer Should Take Before Discharging an Employee
This will help you defend against a wrongful discharge suit

By Natalie M. McLaughlin

Whether you are an employer for a business, government entity, or non-profit, you will likely at some point confront the need to discharge an employee. In Ohio, an employer can discharge an at-will employee for any reason, or no reason at all, so long as it is not contrary to law. Taylor v. Volunteers of Am., 153 Ohio App.3d 698, 701 (1st Dist. 2003). If you have made an explicit or implicit agreement with your employee concerning discharge, then you are bound by the terms of that agreement. Mers v. Dispatch Printing Co., 19 Ohio St.3d 100, 103 (1985).

However, even if you have a completely legitimate reason for your actions, there is always a risk that an employee who is angry, hurt, or desperate will sue you for wrongful discharge. That employee will not hesitate to charge you with acting unlawfully, and no matter how unwarranted the charge is, this can tie you up in time-consuming and expensive litigation.

There are six steps that you, as an employer, can take to help prepare you to defend against a wrongful discharge suit. These steps will aid you in resolving the suit quickly and favorably.

First, give your employees a handbook or other written document that lays out your policies and expectations for your employees. Though you cannot prepare for every conceivable scenario, you can at least lay out some basic standards of productivity and behavior. This puts all employees on notice of expectations. It also serves as a documented source existing before the terminating incident to support your decision to terminate. To ensure that your handbook does not create contractual terms that will bind you, include a disclaimer and have each employee sign it. Such a disclaimer will negate any inference that the handbook creates any contractual obligations upon you as employer. Gaumont v. Emery Air Freight Corp., 61 Ohio App.3d 277, 286 (2d Dist. 1989).

Second, follow the written policies that you gave to your employees, and do not make representations that are inconsistent with those policies. For example, if you have a procedure for warning and disciplining an employee prior to termination, then you need to follow that procedure.

Third, when called for, perform an investigation. For example, if the termination is due to complaints from other employees, a supervisor, or customers, investigate to ascertain the truth. This helps show good faith on your part. Even with at-will employment, exhibiting good faith in your decision to terminate will help you defend against a charged unlawful motive. And outside of employment at-will, there is a standard of good faith required of every contract. Ziegler v. Findlay Industries, Inc., 464 F.Supp.2d 733, 740 (N.D. Ohio 2006).

Fourth, apply your policy to the employee you are discharging consistently with how you have applied your policy to employees in the past. For example, if your written policy is that an employee is allowed three late arrivals before termination, but you have allowed other employees in the past to be tardy five times before terminating them, then you need to likewise apply your unwritten procedure to this employee (allowing her five late arrivals before termination). As long as you consistently apply your policy, then that shows that you treat all your employees the same and supports applying the policy in the current discharge. If you have repeatedly not followed your policy, then you may want to consider revising it to conform with your actual practice.

Fifth, clearly and succinctly communicate to your employee your legitimate reason for terminating her. Employers, wanting to avoid awkwardness, may be tempted to give an inaccurate or incomplete reason. For example, you may tell the employee that the reason for termination is because business is slow, though the real reason is because the employee has proven incompetent at performing the required tasks. The risk is, if you tell an employee the termination is for one reason, but then try to assert down the road that the real reason is something else, this detracts from your credibility. Rehearse what you will tell the employee ahead of time, then give the employee a brief but clear explanation for the termination. Do not argue with the employee, and do not allow her to put you on the defensive or make you feel you have to justify your decision.

Sixth, keep detailed documentation that is timely-recorded. You should be able to open the employee's personnel file and have listed the reason the employee was discharged and the incidents that support that reason. For instance, if an employee is terminated for tardiness, you need to have a record of that tardiness, documented warnings, etc. You should also prepare a summary of the termination meeting right after it occurs, with as many details as possible regarding what you told the employee and the employee's response.

This article is meant for informational purposes only, and should not be relied on as legal advice. If you have any further questions about your current employment policies, would like help in revising your policies, seek advice on terminating an employee or need help defending against a suit by a terminated employee, please contact Kegler, Brown, Hill & Ritter.

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A New Tool for eBay Problems: Online Dispute Resolution

By Christy A. Prince

It's happened to the best of us. A few minutes of idle browsing on eBay become an obsession with finding a gravy boat in the exact pattern that matches the rest of your fine china. Or a mint-condition Chatty Cathy doll just like the one you had when you were a kid. Or a piece of autographed memorabilia that will prove for all time that you are the most fervent fan on the block. Whatever "it" is, we buy it sight unseen on eBay, trusting that the item will arrive on our doorstep exactly as it was described on the website.

But what happens if that gravy boat turns out to be robin's egg blue instead of the cornflower blue of the rest your dishes? Worse yet, what if the gravy boat arrives in pieces, and you opted to forgo the shipping insurance? A new form of conflict resolution has entered the online marketplace scene to help settle situations just like these. Instead of wrangling through the issue by messaging the seller's eBay account, you can turn to online dispute resolution (ODR).

ODR offers a web-based forum in which the buyer and seller work together to reach a mutually satisfactory resolution. SquareTrade is an independent website that offers ODR services specifically tailored for eBay members. You begin the process by filling out a form describing your complaint. SquareTrade then contacts the seller and encourages him or her to use the ODR forum to respond to your complaint. There is no charge to file a complaint or use the forum to settle a dispute. If the parties cannot reach agreement by themselves, SquareTrade can provide an unbiased mediator who will work to understand both parties' perspectives and help develop a fair settlement. Hiring a professional mediator through SquareTrade costs a flat fee of $15.

The benefits of ODR are obvious: the process is cost-effective, and most claims are settled within 10 days. ODR also has its drawbacks, however. In an anonymous setting like eBay, the only way to bring parties to the negotiating table is by threatening to post negative feedback because ODR cannot penalize parties who refuse to participate in the process. However, legitimate sellers are almost always willing to work with their customers to avoid customer dissatisfaction and negative feedback. ODR also lacks some of the human touches that make negotiation and settlement work. For example, if you're frustrated because the gift you ordered online didn't arrive in time for your kid's birthday, an e-mailed apology may not feel as heartfelt as a live apology. In addition, ODR cannot protect against outright scams; the scammer will be long gone by the time you realize there is a problem. In spite of these drawbacks, ODR still offers the opportunity to have a productive discussion with the other party without the cost or hassle of employing a more formal legal process.

ODR is gaining ground in areas outside of eBay as well. ODR is particularly well-suited to help connect parties who are in far-flung jurisdictions when the dollar amount at stake does not justify high travel expenses. Beyond the cost-cutting aspect, though, lawyers and clients agree that ODR helps speed up the negotiation process in conflict resolution, as well as in transactional areas of law. Using resources like discussion forums and websites, a document can be drafted, amended, and critiqued in a far shorter time period than traditional methods would require. If the parties need to talk in real-time, they can teleconference or log on to an instant messaging service. Better yet, if no real-time interaction is necessary, then there is no need to schedule a time when everyone is available.

Even as ODR becomes more prevalent to deal with conflicts arising from Internet transactions, you should still use caution when purchasing items online. Always use your credit card, not your debit card, to pay for items that you purchase online. That way, if a conflict cannot be resolved with the seller, you can contact the credit card company to receive reimbursement while the credit card company handles the seller. Also, don't post feedback for a seller until you receive the item and verify that (1) it is what you ordered, and (2) it works the way it's supposed to. Posting positive feedback for the transaction before you receive the item eliminates the seller's primary incentive to address your concerns. On the other hand, never post negative feedback until you've given the seller a chance to respond to the problem; it's poor eBay etiquette, and, more importantly, it's unlikely to resolve the situation.

Of course, we all hope that our gravy boats and other dubious treasures arrive on our doorsteps as promised and intact. But it's nice to know that there are tools like ODR to help resolve any problems that may appear along the way.

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Know Your Opponent - Judicial Estoppel May End Litigation Before It Begins In Earnest

By Stewart H.Cupps and Margeaux Kimbrough

When a person is sued, a typical reaction is to think, "how can I get this lawsuit dismissed before it costs me a lot of money?" One way is knowing the right questions to ask early in the case. For example, one often overlooked defense may bring the litigation to a close before it begins in earnest: judicial estoppel. Judicial estoppel may provide a complete bar to a plaintiff's claims resulting in their quick dismissal or entry of summary judgment in favor of the defendant, even where those claims may be meritorious. This article discusses the doctrine of judicial estoppel and explores how it has been asserted successfully.

What is judicial estoppel? Judicial estoppel is an equitable doctrine that bars a party's assertion of a position or claim contrary to one it has successfully asserted previously. As the Supreme Court has explained, "where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position." New Hampshire v. Maine, 532 U.S. 742, 749 (2001). The Supreme Court has identified three non-exhaustive considerations in determining whether judicial estoppel should apply: (1) "a party's later position must be clearly inconsistent with its earlier position"; (2) "whether the party has succeeded in persuading a court to accept that party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled"; and (3) "whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped." New Hampshire v. Maine, 532 U.S. at 750-51 (internal quotations and citations omitted).

Although it clearly has broader applications, judicial estoppel has often been employed successfully by defendants in litigation in which the plaintiff, before filing the lawsuit, has been a debtor in a bankruptcy proceeding and failed to disclose the existence of its claim to the bankruptcy court. See, Lewis v. Weyerhaeser Co., 141 Fed. Appx. 420, 425 (6th Cir. 2005). A debtor's accrued, but yet to be asserted, legal claims clearly constitute assets of the debtor, and thus must be disclosed on the debtor's bankruptcy schedules. See 11 U.S.C. § 521(a)(requiring debtors to file a schedule listing all its assets, including causes of action). Where a debtor fails to make the required disclosure, and then later sues and attempts to recover on those claims, the defendant may assert judicial estoppel as a bar to the plaintiff's recovery. Id. The defense is not limited to a particular type or stripe of claim; instead, it may be applied across the board to all varieties of legal claims. Claims brought under the Family Medical Leave Act, wrongful and retaliatory discharge claims, claims of racial discrimination, personal injury claims and contract claims are just a few examples of claims that have been barred by judicial estoppel.

Judicial estoppel applies regardless of the underlying merit of the claims. Limitations on the defense have developed, however, including that the defense may not succeed where the plaintiff's omission of the claim from his or her schedules was the product of inadvertence or a good-faith mistake. See, e.g., Eubanks v. CBSK Financial Group, 385 F.3d 894 (6th Cir. 2004) Inadvertence may be presumed where the plaintiff lacks knowledge of the factual basis of the claim, or lacks a motive for concealing the claim. Furthermore, judicial estoppel may or may not be effective against the bankruptcy trustee. Compare Superior Crewboats, Inc., 374 F.3d 330, with Parker v. Wendy's International, Inc., 365 F.3d 1268 (11th Cir. 2004) and Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th Cir. 2006). Cannon-Stokes v. Potter, 453 F.3d at 448. Nevertheless, because judicial estoppel, where successful, results in a complete bar to the plaintiff's claims and can be asserted early in litigation before substantial costs are incurred, it is important to explore its applicability at the outset of the litigation.

A simple electronic search of the U.S. Party Index at the start of the case will reveal whether the plaintiff in your case has recently been a debtor in bankruptcy. If he or she has, a quick review of the bankruptcy schedules will determine whether a viable defense can be maintained under the doctrine of judicial estoppel. Knowing this simple fact about your plaintiff may end the litigation in your favor before it begins in earnest.

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Kegler, Brown, Hill & Ritter's Advocate: The Litigation Newsletter is edited by Jennifer L. Mackanos for the Litigation practice group.

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