Court: Employers Can Do Subjective Firing

In throwing out a lower-court decision, the New Jersey high court ruled in the case involving a computer engineer that companies can get subjective in deciding whether workers lived up to their contractual obligations without a specific requirement in the contract for objective criteria, according to a New Jersey Law Journal article.  

Justice Jaynee LaVecchia wrote that “application of another’s notion of satisfactory performance would undermine recognized and accepted notions of business judgment and individualized competitive strategy, as well as principles of freedom of contract.”

“The employer, not some hypothetical reasonable person, is best suited to determine if the employee’s performance is satisfactory,” she wrote.

The court reversed an appeals court that said firing decisions must meet objective standards. That would require a company sued for breach of contract to convince a jury – perhaps using expert evidence – that the worker’s performance was unsatisfactory. Under last week’s ruling, a good-faith judgment by the employer would be enough to cut short litigation.

Case Background

According to court documents as quoted by the New Jersey Law Journal, p laintiff Michael Silvestri had 31 years as a computer engineer and account manager when Optus Software in Somerset, New Jersey hired him in January 1999 as supervisor of technical support to customers.

Silvestri’s two-year contract called for an annual salary of $70,000 and included a clause, common in such contracts, permitting termination upon the “employee’s failure or refusal to faithfully, diligently, or completely perform his duties here under to the satisfaction of the company or to carry out any lawful instruction of the company.”

Optus fired him nine months later and he sued for breach of contract, contending that the company’s dissatisfaction was objectively unreasonable, making his termination a breach of the contract.

Company executives countered with evidence, including e-mails, saying that customers were finding fault with the performance and attitude of Silvestri and his staff. By that reckoning, he had not performed satisfactorily and could be fired.

Silvestri acknowledged that his boss was dissatisfied, but challenged the reasonableness of the dissatisfaction and argued that he had the right to present the question to a jury. The trial court did not agree, refused to substitute its judgment for the employer’s and dismissed the lawsuit.

Appellate Division Judges James Havey and Donald Coburn reversed in a decision thrown out by the most recent Supreme Court ruling.

The case is Silvestri v. Optus Software, Inc., A-95.