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Central Michigan University Fired Employee Case Study

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The Case of the Fired Employee

Sally Birch, a vice president of the Acme Trailer Company, enjoyed a wonderful reputation as a capable and trustworthy financial officer. She, her husband, and their two children lived in a beautiful suburb in a large, comfortable home. The CEO of a competitor firm, International Trailers Ltd., wanted to hire Birch for a similar position and offered her an increased salary and many employee benefits. The CEO of International had extensive phone conversation with her about this offer..The CEO offered to email a written memorandum to Birch but she said that wasn’t necessary. Birch accepted the offer, sold her home, moved to the city in which her new employer was located, and purchased a home there. She did not have a written contract, but she was told she had a great future with the company and was given a salary of $150,000 per year with a promise of a promotion every 6 months for the first two years. A bonus could be paid to her after 18 months on the job.

Four months after Birch joined the company, she was fired because of a downturn in the trailer production business, requiring a scaling back of expenses at International. She sued International for a breach of contract.

The Trial

During the trial, Sally testified about the reputation she had earned while at Acme Trailer and the wonderful life that she and her family had enjoyed. She told of the difficulties involved in moving, the expense of buying a new home, and the uprooting of her family. She described the difficulties involving in selling her new home and looking for a new position.

An officer of International testified about the recession in the trailer industry and how economic conditions were such that if International failed to cut expenses, it might be forced out of business. She also mentioned that Birch had turned down the offer of a written memorandum regarding the terms Birch and the CEO had discussed.

The Arguments at Trial

Sally’s attorney argued that although she did not have a written contract, oral representations made to her implied that her job would last longer than a year; that she was going to earn a yearly salary indicated that her employment would, at a minimum, last at least two years. The attorney stressed the difficulties involved in the move and the expenses occurred by the Birch family, arguing that it would be unfair to terminate her employment except for cause relating to her activities. The argument was also made that the “employment at will” doctrine was an outmoded and unfair concept and should not be applied based on the facts in this case.

International’s attorney argued that the lack of a written contract, the fact she had turned down a written memorandum, and the existence in the state in which International was located of the “termination at will” doctrine gave International the right to terminate Birch’s employment at any time. No reason was necessary , particularly when economic conditions required cutting at International ‘s expenses, including termination of the employment of executives with high salaries.

Questions for Discussion

  1. Based on the facts of this case, who do you think should prevail, Birch or International? Why?
  2. Are there other facts that would make it easier for the court to decide who should prevail?
  3. Do you feel that the employment at will doctrine should no longer apply? If so, who should make the change, the legislatures or the courts? Why?


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