The situation with Enoch Thomson at the White Arch Casino requires consideration of contractual law and its legal applicability in this case. It is critical consider the validity of the oral agreement as a contract and Thomson’s ability to enforce it as well as the extent of remedies which he may be entitled to.
In business law, a contract an enforceable agreement or exchange of promises. There must be a transaction of value (goods, services, or information) between two sides during which an offer is made and accepted through a mutual agreement (Gordon, n.d.).
A promise is a statement of an intention to act or refrain from carrying out a specific agreed-upon action. A contract can be written or verbal and does not have to be labeled as a contract if it adheres to the mentioned guidelines. A contract can only be modified per consensual agreement of both sides (essentially creating a new contract) or a breach of the established parameters by one of the sides which opens the possibility of a lawsuit.
Employment falls under the legal treatise of the Restatement (Second) of the Law of Contracts in United States common law. Contract law, usually at the state legislature level governs the process of making business and private agreements.
A valid contract must follow the process of offer, acceptance, and consideration (“Restatement second of contracts,” n.d.) According to Nevada law, a breach of contract occurs when the defendant (in this case, the casino) does not fulfill their side of a valid contract without excuse.
If the plaintiff fulfilled his requirements and was damaged (or there are foreseeable consequences) by the violation, then the contract is breached. The plaintiff must be able to show the validity of the contract and the fulfillment of his side of the agreement (Young, 2015).
The contract, in this case, is valid and enforceable. Sal Pending was in a legal position to make an offer as the manager of the White Arch Casino. Both the manager and the employee were at capacity to negotiate a contract and had free consent to do so without any extenuating influences or circumstances that could void the agreement.
This was an oral contractual agreement that is not required to be in writing by law. The contract contained terms that were clearly defined, leaving no room for possible arguments of misunderstanding between the parties. Consideration is fulfilled in the contract by the value that was agreed upon.
Thomson agreed to remain working at WAC and refrain taking the offer from Shirley Eugest in exchange for a salary raise and a promise of a guaranteed 5-year employment contract. WAC’s consideration was maintaining Thomson’s employment and services.
Thomson as promisee explicitly accepted the contract offered by Pending as a promisor and legal representative of WAC interests. Under the contract, Thompson has achieved complete performance from his side by denying the employment offer from Eugest and continuing to perform his duties at WAC.
In order to enforce the contract, Thompson may lean on the Bargain Theory of Consideration. As worded in the Second Restatement of Contracts §71, consideration is a performance or promise must be “bargained” for. A bargain constitutes a performance which is given in exchange for the specific promise.
While a bargain for consideration is sufficient for enforcement, it is not necessary since Thompson can legally use the doctrine of promissory estoppel if he is unable to prove the concept of bargaining (Kessler, Gilmore, & Kronman, 2014). It holds as an exception to any requirement of a written contract.
A promissory estoppel is applicable when one side relies to their detriment on a promise of the other party. The plaintiff suffers a loss if the defendant does not uphold their end of the agreement. It is applicable in this situation as Thompson relied on Pending’s promise for employment and salary raise at WAC, agreeing to forgo a lucrative offer from the rival casino.
Since WAC has chosen to terminate Thompson in the process of downsizing, that was not due to a fault or breach of promise from his side; he is now facing the loss of income which is a tangible detriment. He relied on the verbal contract to maintain employment, making it eligible to qualify as a promissory estoppel.
If Thompson to pursue this issue legally and wins, he may be eligible for remedies from the company. Remedies are a legal method of enforcement which compensate the plaintiff if the defendant is found to be in breach of a valid contract. In modern day law, breach of contract can result in reimbursement through remedies at law and equitable remedies.
In the Second Restatement, §90 states “remedy granted for breach may be limited as justice requires” (Kessler et al., 2014, par. 10). This emphasizes a two-track system of contractual liabilities. One is based on the concept of the bargain while the other is focused on subsequence consequences which follow if an act of reasonable reliance is violated in the contract.
Therefore, Thompson would be most likely eligible for remedy because even if the contract is proven to be invalid, he is protected by the promissory estoppel clause. In this case, it is possible that the court may award compensatory damages for the loss of profit that Thompson experienced.
In addition, consequential damages may be awarded for mental distress, purposeful deceit, or compromising the employee’s career since there was a concrete employment offer on the table from Eugest.
Business ethics come into consideration investigating this case. The behavior of the company and its agents, within the context of business practice, is critical for setting standards within the corporate culture and significantly impacts adherence to the mission.
WAC had a high degree of involvement in this case by creating and then violating the contract in the process of making its business decisions. Therefore, there was a definite possibility of harm done to Thompson as an employee. The severity of this harmful action can be evaluated as significant due to the circumstance of events around his career decision and the promise of opportunity on which he strongly relied.
The ethical theory of rule utilitarianism can be applied. Utilitarian theories are focused on foreseeing consequences for one’s action. A rule utilitarian approach seeks to stay accountable to the law and emphasizes fairness. Justice is the key concept in this theory.
In addition, deontology is also relevant to an ethical theory which emphasizing upholding one’s duty and obligations to another individual. It directly correlates with following any given promises and strictly adhering to the law (Chonko, 2012).
Both legally and ethically, the White Arch Casino was in the wrong. Legally, the promise was valid on all levels as a verbal agreement between an employer and an employee. Thompson was making a career decision which was influenced by Pending as his manager.
It was a reasonable decision by Thompson which chose to remain with his company and decline a lucrative offer from a rival. It was in no form a “bad gamble” nor did it compromise Thompson’s job performance. As a promise which relied on to make a decision about the next several years of his life, it was both illegal and unethical to downsize him as an employee.
It is unethical because the decision causes significant harm Thompson who is now forced in difficult position in life, career, and possibly financially.
As shown by the concept of remedies under promissory estoppel, there are far-reaching consequences in terms of mental distress and compromising career opportunities which Thompson will experience. Therefore, a viable solution must be found to compensate him for the breach of contract which WAC violated.
It is evident that WAC is in violation of breaching the contract. Viable solutions for breaching a contract include a negotiated settlement, arbitration, or litigation. I suggest that the Colossal Corporation take the negotiated settlement approach, which focuses on working out a voluntary resolution with Thompson.
Since there are a convincing case and evidence support for Thompson, the court would be compelled to award considerable damage payouts from the company. In addition, litigation would result in accruing legal costs with a small chance of winning.
It is possible to cut costs by reaching an out-of-court settlement since Thompson would attempt to sue for additional damages for mental distress and compromising a promising career through a lengthy legal process. An option can be considered to hire Thompson back under the promised contract terms with an agreement to not sue. It would be unethical and potentially looked upon as deceitful if the company chooses to not act at this point in time.
There is an employee rights legal issue arising at Big Brain Solutions. Employees Liz Bennett and Ralph Nickleby signed a contract at hire which had a mandatory arbitration clause in case of arising problems. Arbitration is an Alternative Dispute Resolution (ADR) method which eliminates the necessity for litigation by choosing to resolve any conflict through an independent third-party.
The unbiased arbitrator is brought in based on the situation and area of expertise to efficiently carry out judgment without the costly and complex process of litigation. The process is simple as sides submit to arbitration by presenting the dispute in question. An agreement is formulated with the arbitrator. A proceeding is conducted to examine perspectives, evidence, and overall factors of the situations.
Finally, the arbitrator issues an award or a decision in favor of one side. If there is a need for the enforcement of an award, courts can do so through contract law and issue a judgment (Gordon, n.d.). Overall, arbitration is an effective mechanism of disputing problems within a workplace environment.
It helps save a significant amount of money, time, and legal resources for both the company and the employee while delivering a non-partial outcome. If a company maintain fairness and federal standards during the process of arbitration, it is an appropriate clause to include in an employment contract.
The United States courts most commonly enforce arbitration agreements. The Federal Arbitration Act of 1925 mandates arbitration if it was a clause in a contractual obligation. It applies to both federal and state level courts. No organization can prevent a U.S. citizen from practicing their rights to the due process of law and a trial by jury.
However, the company can file a motion to withhold any legal proceedings until an arbitration process has been conducted under the terms of an agreement. Most courts will uphold that process and the resulting award unless there is substantial and concrete evidence that the arbitration is inherently unfair due to bias, discrimination, or corruption/fraud.
That is rarely the case since arbitration agreements are modeled based on the Federal Arbitration Act (“Arbitration agreement enforceability,” 2017). Claims based on specific federal laws do not have an effect on arbitration provisions.
However, any other challenged policies or actions by the company will be reviewed when the court examines the award of arbitration as required by the Federal Arbitration Act. If these violate federal laws, they are not enforceable, and the court may allow the case to go to trial.
There are stringent labor laws on both federal and state levels which protect various employee rights and govern company policies or actions. In this case, Bennett is suing the company for violation the Family Medical Leave Act (FMLA) of 1993. It allows employees of either sex to take up to 12 weeks of unpaid medical leave from work in appropriate situations relating to health or family matters.
The act prevents discriminatory action against an employee during a time of leave, and the worker should be allowed to return to work at the end of the time period (Gordon, n.d.). However, FMLA regulation 825.216 states that the job position is not protected by the law from layoff or termination as long as it is not related to the employee’s absence.
If the company chooses to layoff the worker, as occurred with Bennett, it must prove that such events would have occurred regardless of medical leave.
The layoff should have been a valid, documented, and preplanned business decision that was not anyhow connected with the worker unable to perform duties while on leave. Meanwhile, if a layoff was to occur, the business must follow all standard procedures of notifying the employee (Society for Human Resource Management, 2016).
The federal Worker Adjustment and Retraining Notification (WARN) Act of 1988 which is also supported by a counterpart California state law seeks to protect layoffs of employees without warning. While it does entitle employees to a job, it maintains that a warning of 60 days must be given to full-time employees in case of massive layoffs.
An employee is legally guaranteed pay and benefits for that duration (Guerin, n.d.). Another legal concept relevant to this case is the drug testing policy. The California constitution vigorously protects employee privacy which is considered to be violated by a random drug test. Courts evaluate whether the employer’s reason outweighs an employee’s privacy concerns.
Specific jobs such as government positions or ones that maintain safety risks are justified in conducting drug testing per policy. If the employer has a reasonable suspicion to conduct a test, it should be based on objective fact and affect company interests (“California laws on drug testing,” n.d.).
Liz Bennett was laid off during medical leave due to “reorganization.” Her lawsuit in court will be withheld in favor of the mandatory arbitration process clause in her contract (Sherman, 2012). It is unlikely she would be able to prove discrimination based on health status.
During the arbitration process, Bennett will have the backing of a solid legal defense by FMLA which courts strongly support in enforcing employee rights. It will be upon Big Brain Solutions to prove the business aspect of the reorganization process which terminated Bennett’s position.
Currently, the scale or purpose of this business decision is unclear. However, if the position was a small-scale rearrangement, Bennett may have legal ground to argue discrimination based on her pregnancy and health status since the FMLA guarantees that an employee is to be allowed to return to work to the same job.
Furthermore, it seems that Bennett was not provided appropriate warning of 60 days which is required by the WARN act in case of massive layoffs. The whole arbitration process strongly relies on investigating the reorganization process undertaken by Big Brain Solutions.
Legally, Bennett’s employee rights have been violated. If the layoff was part of a large-scale initiative, a warning should have been provided, allowing the employee to receive pay and benefits at the end of the 60 days. Meanwhile, a small-scale reorganization is grounds for discrimination since it most likely occurred due to Bennett’s medical leave.
Even if it was a business decision aimed to optimize efficiency, Bennett could argue that it was based on her health status which is supported by the lack of warning about the termination. Arbitration and courts would legally rule in Bennett’s favor.
Remedies may include the reinstatement of the employee and potential compensation based on the legal conclusion to which the arbiter arrives. Even if Bennett was on medical leave, it is possible she could have returned to work at any time in the span of those 60 days which incurs compensation based on salary during that time period if the sides agree not to reinstate the employee.
Ralph Nickleby was terminated after refusing to take a random drug test. Following the procedure, he chose to use the company arbitration for what he sees as wrongful termination. Despite being an employee at will in a privately held company, Nickleby feels that he was unrightfully terminated.
California law is inherently aimed towards the employee legal protection of privacy which is violated by randomized drug tests. As a simple administrative assistant in a privately held company, there was not federally mandated or safety-sensitive reason to conduct the testing.
Employers can better protect themselves by adopting written procedures and expectations of drug testing policies in a company. At this time, it is unknown whether Big Brain Solutions maintained such policies.
In addition, the reason for the conducted test is possibly unjustified. California recognizes that since employees have a job within a company, it can be used to evaluate performance. However, the company believed based on suspicion (which is highly subjective) that Nickleby would not be able to perform additional duties in his position due to a drug problem.
Company interests were not directly threatened enough to justify violating employee privacy. Therefore, Nickleby had a legitimate right to refuse the test. A termination based on these grounds is a significant legal liability risk due to termination in violation of public policy. Independent arbitration and the court system would be inclined to side with Nickleby in this specific case.
Remedies may include the reinstatement of the employee or a payout of an appropriate compensation since Nickleby may choose to not return to the company. It is advised to reconsider Big Brain Solutions company drug testing policies and includes training for managers on when such tests are appropriate under state law.
References
Arbitration agreement enforceability. (2017).
California laws on drug testing. (n.d.).
Chonko, L. (2012). Ethical theories.
Gordon, J. (n.d.). Business law: An introduction.
Guerin, L. (n.d.). Layoff protections for California employees
Kessler, F., Gilmore, G., & Kronman, A. (2014). The Bargain Theory of Contracts and the Reliance Principle introduction.
Restatement second of contracts. (n.d.).
Sherman, J. (2012). Court rules that plaintiff must arbitrate FMLA claims under his employer’s collective bargaining agreement with teamsters union.
Society for Human Resource Management. (2016). FMLA: Termination: Can we lay off someone while that employee is on leave under the Family and Medical Leave Act (FMLA)?
Young, J. (2015). The elements for a claim of breach of contract.