New York Law Review

Tag: Employee Termination

  • Matter of Board of Education of the Greenburgh Central School District No. 7 v. Derrico, 99 N.Y.2d 550 (2002): Upholding Termination for Breach of Trust

    Matter of Board of Education of the Greenburgh Central School District No. 7 v. Derrico, 99 N.Y.2d 550 (2002)

    A penalty of termination for employee misconduct, especially involving a breach of trust, should not be overturned unless it is so disproportionate to the offense as to shock the judicial conscience.

    Summary

    The case concerns the termination of a head custodian, Derrico, for misconduct, specifically, removing and copying a document from the principal’s desk, which constituted a breach of trust. The school district adopted the Hearing Officer’s findings and penalty determination, leading to Derrico’s termination. The Appellate Division deemed the termination disproportionate to the offense. The Court of Appeals reversed, holding that given the circumstances, and Derrico’s indication he would repeat the behavior, the penalty did not shock the judicial conscience and should be upheld.

    Facts

    Derrico was employed as the head custodian of a high school. He removed and copied a document he found on the principal’s desk. The school district initiated disciplinary proceedings against him. The Hearing Officer found Derrico had engaged in misconduct constituting a breach of trust.

    Procedural History

    The school district adopted the Hearing Officer’s findings and terminated Derrico. Derrico appealed to the Appellate Division, which concluded that the penalty of termination was disproportionate to the offense. The school district appealed to the New York Court of Appeals.

    Issue(s)

    Whether the Appellate Division erred in determining that the school district’s termination of Derrico was disproportionate to the offense and thus should be overturned.

    Holding

    No, because under the circumstances of this case, particularly in light of Derrico’s statement that he “probably would” act in a similar manner if placed in the same situation, the penalty of dismissal does not shock the judicial conscience.

    Court’s Reasoning

    The Court of Appeals reversed the Appellate Division’s decision, reinstating the school district’s determination to terminate Derrico. The Court emphasized that the standard for overturning an administrative penalty is whether it “shocks the judicial conscience,” citing Matter of Kelly v Safir, 96 NY2d 32, 39-40 (2001) and Matter of Pell v Board of Educ., 34 NY2d 222, 233 (1974). The court found that Derrico’s breach of trust, compounded by his statement suggesting he would repeat the action, justified the termination. The court reasoned that the Appellate Division overstepped its bounds in substituting its judgment for that of the school district, as the penalty was not so disproportionate as to warrant judicial intervention. The Court implicitly acknowledged the importance of maintaining trust and integrity in positions of responsibility within the school system. The decision underscores the limited scope of judicial review in administrative penalty cases, particularly where the agency’s decision is rationally based and not shockingly disproportionate to the misconduct.

  • Gillen v. Smithtown Library Bd. of Trustees, 97 N.Y.2d 776 (2002): Upholding Termination for Falsifying Civil Service Reports

    Gillen v. Smithtown Library Bd. of Trustees, 97 N.Y.2d 776 (2002)

    A penalty imposed by an administrative body will be upheld unless it is so disproportionate to the offense as to be shocking to one’s sense of fairness, even if some original charges were dismissed on appeal.

    Summary

    Gillen, a library employee, was terminated for misconduct after submitting false reports to the Department of Civil Service. These reports incorrectly stated that certain employees were working at lower titles when they had been temporarily promoted and paid at a higher rate without being on a civil service eligible list. After an initial appeal where some charges were dismissed, the library board again terminated Gillen. The Court of Appeals affirmed the termination, holding that the penalty was not disproportionate to the sustained offenses, despite the dismissal of other charges in an earlier appeal. The Court emphasized the repeated violations of the Civil Service Law.

    Facts

    Gillen temporarily promoted lower-level library employees to higher positions and compensated them accordingly. These employees were not on a civil service eligible list for the higher titles. Gillen then submitted reports to the Department of Civil Service that falsely indicated these employees were working at their original, lower titles. He did this despite the requirement to report any changes to the employees’ title and character of employment. This also resulted in false payroll certifications.

    Procedural History

    1. Gillen was initially terminated by the Library’s Board of Trustees for misconduct.

    2. Gillen commenced a CPLR Article 78 proceeding challenging his termination.

    3. The Appellate Division dismissed four of the charges, annulled the penalty, and remanded the matter for a new penalty determination (Gillen I).

    4. The Board again terminated Gillen’s employment based on the two remaining charges.

    5. Gillen commenced a second Article 78 proceeding, which was upheld by the Supreme Court.

    6. The Appellate Division affirmed the Supreme Court’s decision.

    7. Gillen appealed to the Court of Appeals.

    Issue(s)

    Whether the Library Board’s decision to terminate Gillen’s employment was so disproportionate to the sustained offenses as to be shocking to one’s sense of fairness, especially considering the prior dismissal of several original charges.

    Holding

    No, because given Gillen’s repeated violations of the Civil Service Law, the penalty of termination was not “ ‘so disproportionate to the offense * * * as to be shocking to one’s sense of fairness.’ ”

    Court’s Reasoning

    The Court of Appeals affirmed the Appellate Division’s decision, finding that the termination was not disproportionate to the offense. The court emphasized that Gillen violated multiple provisions of the Civil Service Law, including § 97(1) (reporting employee title and character) and § 100(1) (payroll certifications). The court stated, “Given petitioner’s repeated violation of the Civil Service Law, it cannot be said that the penalty imposed is ‘so disproportionate to the offense * * * as to be shocking to one’s sense of fairness’” citing Matter of Pell v Board of Educ., 34 NY2d 222, 233.

    The Court clarified that the prior dismissal of some charges in Gillen I did not alter the standard of review. Even when an appellate court remits a case for a new penalty after dismissing charges, the standard for reviewing the new penalty remains the same, focusing on the sustained charges. The court reasoned that a reviewing court generally “will not presume to determine the precise sanction to be imposed” (Harris v Mechanicville Cent. School Dist., 45 NY2d 279, 285), implying the administrative body has the authority to determine an appropriate penalty.

    The Court’s decision underscores the importance of upholding administrative determinations unless they are clearly excessive in light of the sustained misconduct, even if some initial allegations are later dismissed.

  • Gallagher v. Lambert, 746 N.E.2d 562 (N.Y. 1989): Enforceability of Stock Buy-Back Agreements Upon Termination

    Gallagher v. Lambert, 746 N.E.2d 562 (N.Y. 1989)

    A stock buy-back agreement in a close corporation, which mandates repurchase of shares at book value upon termination of employment before a specified date, is enforceable even if the employee is terminated to trigger the lower buy-back price, provided the agreement is clear and unambiguous.

    Summary

    Gallagher, a minority shareholder and employee of Eastdil Realty, was fired before a specific date, triggering a stock buy-back agreement at book value. He sued, claiming a breach of fiduciary duty, arguing the firing was in bad faith to avoid a higher buy-back price tied to company earnings after that date. The New York Court of Appeals held that the buy-back agreement was enforceable. The court reasoned that parties in close corporations can contractually agree to stock repurchase terms, and these agreements define the scope of fiduciary duty. Absent fraud or illegality, courts should not interfere with such agreements based on claims of unfairness, as doing so would undermine the certainty and predictability these agreements are designed to provide.

    Facts

    Gallagher was employed by Eastdil Realty and later became an officer, director, and executive of a subsidiary.
    In 1981, Eastdil offered executive employees the opportunity to purchase stock subject to a mandatory buy-back provision.
    The buy-back provision stipulated that upon termination before January 31, 1985, the stock would be repurchased at book value; after that date, the price would be based on company earnings.
    Gallagher accepted the offer, purchased 8.5% of Eastdil’s stock, and helped draft the buy-back agreement.
    On January 10, 1985, Eastdil fired Gallagher.
    Gallagher claimed entitlement to the higher buy-back price, arguing his termination was timed to avoid it.

    Procedural History

    Gallagher sued Eastdil, asserting multiple causes of action, including breach of fiduciary duty.
    The trial court denied Eastdil’s motion for summary judgment, finding factual issues regarding Eastdil’s motive in firing Gallagher.
    The Appellate Division reversed, dismissed the claims based on breach of fiduciary duty, and ordered payment at book value.
    The Appellate Division granted leave to appeal to the New York Court of Appeals and certified the question of whether its order was properly made.

    Issue(s)

    Whether a close corporation breaches a fiduciary duty to a minority shareholder/employee when it terminates their employment to trigger a stock buy-back agreement at a lower price, where the agreement is clear and unambiguous.

    Holding

    No, because the parties negotiated a clear buy-back provision, and absent evidence of fraud or illegality, courts should enforce the agreement as written to maintain certainty and predictability in such transactions.

    Court’s Reasoning

    The court emphasized the importance of upholding contractual agreements, especially in close corporations where buy-back provisions are designed to maintain control of the company within the remaining owners-employees.
    It distinguished the duty owed to a shareholder from the duty owed to an employee, noting that the plaintiff’s claim was based on his status as a shareholder but was inextricably linked to his employment status due to the buy-back agreement’s terms.
    The court reasoned that allowing the claim to proceed would undermine the purpose of the buy-back agreement, which is to provide a certain formula for valuing stock and avoiding costly litigation.
    The court stated that “[t]hese agreements define the scope of the relevant fiduciary duty and supply certainty of obligation to each side. They should not be undone simply upon an allegation of unfairness. This would destroy their very purpose, which is to provide a certain formula by which to value stock in the future”.
    The court distinguished this case from situations involving fraud or illegality, where intervention might be warranted. Here, the buy-back provision was clear, negotiated, and agreed upon by both parties.
    The court emphasized that the employer had the right to terminate the employee at will, and the buy-back agreement was a mutually agreed-upon mechanism for handling stock ownership upon termination.
    The court rejected the dissenting opinion’s characterizations, asserting that its decision rested on fundamental contractual principles applied to the stock repurchase agreement.

  • Matter of Smith v. O’Shea, 55 N.Y.2d 774 (1981): Termination of Disabled Employee Under Civil Service Law

    Matter of Smith v. O’Shea, 55 N.Y.2d 774 (1981)

    An employee continuously absent from and unable to perform their duties for one year or more due to a disability may be terminated under Civil Service Law § 73 without a pre-termination hearing unless there is a factual dispute impacting the employer’s right to discharge.

    Summary

    The New York Court of Appeals affirmed the Appellate Division’s order, holding that the petitioner’s termination under Civil Service Law § 73 was valid. The petitioner, an employee continuously disabled for over a year, was terminated without a hearing. The Court found that the petitioner failed to raise the veteran status argument in lower courts and that § 73 is constitutional. The Court reasoned that a hearing is only required when there is a factual dispute impacting the employer’s right to discharge, and the petitioner’s own statements and those of his physicians obviated any such dispute. The Court also held that the petitioner’s application for reinstatement was insufficient to mandate reinstatement on his preferred date.

    Facts

    The petitioner was an employee who was continuously absent from his position for more than one year due to a disability. The Department terminated his employment pursuant to Civil Service Law § 73. The Department called to his attention in its termination letter of his right to reinstatement depended on making application for a medical examination by a doctor selected by the department. The petitioner sent letters to the department on January 28, 1978 and May 22, 1978.

    Procedural History

    The petitioner challenged his termination, arguing that he was entitled to a hearing before termination and that he was entitled to be reinstated on June 6, 1978 rather than August 1, 1978. The lower courts rejected his arguments. The Court of Appeals affirmed the Appellate Division’s order upholding the termination.

    Issue(s)

    1. Whether the petitioner, as a veteran, was protected by Civil Service Law § 75 from termination without a hearing.

    2. Whether Civil Service Law § 73 is unconstitutional because it permits termination without a hearing of an employee continuously absent from and unable to perform the duties of his position for one year or more by reason of a disability.

    3. Whether the petitioner was entitled to be reinstated on June 6, 1978, rather than August 1, 1978.

    Holding

    1. No, because the argument regarding veteran status was not raised in the lower courts and the record lacked evidence to support it.

    2. No, because a hearing is only required under § 73 when there is a factual dispute impacting the employer’s right to discharge, and in this case, the petitioner’s own statements and those of his physicians obviated any such dispute.

    3. No, because the petitioner’s application for a medical examination was insufficient to require reinstatement on June 6, 1978; the statute did not give the petitioner the right to fix the date of the examination.

    Court’s Reasoning

    The Court found that the petitioner’s argument regarding veteran status was not properly before the court because it was not raised in the lower courts. Regarding the constitutionality of § 73, the Court relied on its prior decision in Matter of Economico v. Village of Pelham, stating that “only when there is ‘some factual dispute impacting upon the employer’s right to discharge’ is a hearing required by that section and that hearing may, in the absence of demonstrated serious hardship, be held posttermination.” The Court determined that no such factual dispute existed in this case, as the petitioner’s own statements and those of his physicians established his continuous disability. The court also found that “by the many written statements by petitioner and his physicians filed with the department petitioner has obviated any question that he was continuously disabled for the requisite period.”

    Regarding the reinstatement date, the Court found that the petitioner’s letters were insufficient to constitute a proper application for a medical examination, as required by § 73. The first letter assumed the right to continued sick leave and the second simply stated his availability for an examination on a specific date. The Court emphasized that “[t]he statute did not give petitioner the right to fix the date of the examination.” Because of this, the petitioner failed to show what caused the department’s failure to reinstate him prior to August 1, 1978, or whether or when he was in fact examined by a department doctor.