Written by attorney Roger L. Pettit

May an Employee Be Fired to Save Money?

May an Employee Be Fired to Save Money?

In today’s economy, with many employees being laid off both temporarily or permanently,one would presume the answer to this question to be “of course". But as with most legal principles, there are exceptions. In a decision dated February 2, 2010, Wisconsin’s Court of Appeals decided the case of Phillips vs. U.S. Bank. According to the bank, Phillips’ employment was terminated because she violated the bank’s code of ethics. Phillips, however, claimed the firing was because the bank didn’t want to pay her under a performance benefit plan that required an employee to be employed at the time the benefits were to be paid.

In defending its position, the bank reminded the Court of Appeals that Phillips was an employee at-will and as such could be fi red for any reason or for no reason at all. Therefore, argued the bank, the reason for the termination didn’t make any difference,and the bank didn’t have to pay Phillips the performance benefit because her employment had been lawfully terminated.

The Appeals court decided that the bank was only half right. For the first time in Wisconsin, the court held that if an employee (Phillips) could prove that the reason she was fired was not for violating the ethics code, but instead was to avoid having to pay her what she was owed under the benefits plan, Phillips would be entitled to be paid even though she was no longer an employee. Specifi cally, the court said in addressing the at-will status of Phillip’s employment: “That does not mean, however, that an at-will employee may be deprived of benefi ts that accrued before [Phillips] was let go if the firing was to prevent payment of those benefits."

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