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Contract Employee May Be Discharged for Subjective Reasons, Says New Jersey Supreme Court

  • February 20, 2003

A decision by the New Jersey Supreme Court has given new support to the use of subjective measures in making a decision to discharge an employee. In the case decided in January 2003, the court upheld the termination, for purely subjective reasons, of an employee under an employment contract containing a "satisfaction clause."

Nine months into the employment contract, the employer exercised its option to terminate the employee for "failure or refusal to perform faithfully, diligently or completely his duties . . . to the satisfaction of" the employer. After he was terminated, the employee sued his former employer, claiming the employer did not have objectively reasonable reasons to discharge him.

The New Jersey Supreme Court upheld the dismissal of the case, holding that, absent language to the contrary, the employer was free to terminate the employee for purely subjective reasons based on the satisfaction clause contained in the employment contract. As long as the employer genuinely and honestly believed the employee's performance was unsatisfactory, the employer did not need to be objectively reasonable in its termination decision. [Silvestri v. Optus Software (NJ Supreme Court, January 23, 2003).]

In light of this decision, New Jersey employers should consider the inclusion of similar "satisfaction clause" language in all employment contracts. Any references to potentially objective measures of performance should be carefully scrutinized or avoided. Using a properly worded satisfaction clause, employers can maintain maximum discretion to terminate employees when they honestly and genuinely believe performance is unsatisfactory.

For more information about enforceable employment contracts or other employment law matters, please contact Jackson Lewis.

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