Fortune-ate twist leads to successful settlement

Issue October 2005 By Andrea R. Barter, Esq.

David Rusk found himself in an uncertain position. After working as an accountant for The First Years, Inc. for 25 years, his employer was bought out by RC2, an Illinois company that manufactured baby products. As with any buyout, positions were sure to be cut.

There were various layoffs, but Rusk was told he was a "go-forward" employee and had a secure position with the new company. During the transition of ownership, he watched as other employees who were not "go-forward" employees received severance packages and were let go. Then, eight months after the buyout was completed, Rusk was terminated, allegedly for poor performance. Had he been let go at the time of sale, he would have received 26 weeks severance pay. RC2 offered him only four weeks and did not offer any compensation for his vacation time.

Rusk contacted the Massachusetts Bar Association's Lawyer Referral Service, which put him in contact with Hanover attorney David H. Stillman, Stillman & Associates. Within two months, Stillman successfully negotiated a settlement for his client, netting Rusk his missing vacation pay and nearly 23 weeks of severance pay.

First, Stillman pointed out that under the Payment of Wages Statute, an employer who intentionally withholds vacation pay can be subject to a fine and a prison term. That got their attention: RC2 immediately agreed to pay Rusk's outstanding vacation pay. Negotiations then turned to the issue of severance.

Stillman relied on the common law doctrine of Fortune v. National Register Co., 373 Mass. 96 (1977), which speaks to the covenant of good faith and fair dealing implied in every contract. An employer breaches this covenant when it terminates an at-will employee for the purpose of depriving the employee of compensation for past services which he has fairly earned and expected. The purpose of the covenant of good faith and fair dealing is to deny an employer a financial windfall resulting from an employee's termination.

But "this case was different from the Fortune case because the new company said the promises weren't made by them, but by the old company. We said the promises were endorsed by RC2 and they were bound by them. That was the wild card," said Stillman.

Ultimately, RC2 agreed to settle. According to Stillman, RC2 "saw that we had some good arguments. Our case was different from Fortune because it was a new company. But in light of what my client was telling me, these promises were made with knowledge of the new company."

Stillman has been practicing for 16 years but started his own office in March. "Obviously, I am looking for clients and have been happy with the response from the Bar Association Referral Service. I've gotten some very interesting cases from LRS and am very happy to be working with them."

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