Charles S. Plumb and Sam R. Fulkerson, Editors
McAfee & Taft

Vol. 16, No. 5
May 2008

EMPLOYMENT CONTRACTS

Hoosier legal adviser Sampson? The dangers of terminating without 'just cause'

Courtney Bru

Former University of Oklahoma basketball coach Kelvin Sampson was recently terminated by Indiana University with just cause for misleading both the NCAA and Indiana about recruiting violations. While at Oklahoma, Sampson was placed on probation by the NCAA for placing 577 impermissible phone calls to recruits in violation of NCAA regulations. His employment contract with Indiana specifically provided he could be terminated "with cause" in the event he committed similar infractions at Indiana.

Facts

On February 13, 2008, the NCAA released a report alleging Sampson placed more than 100 impermissible phone calls to recruits as head coach of Indiana. The report found Sampson "failed to deport himself in accordance with the generally recognized high standard of honesty normally associated with the conduct and administration of intercollegiate athletics by providing [Indiana University] and the NCAA enforcement staff false or misleading information."

With the release of its report, the NCAA tossed the ball into Indiana's court. The university's employment agreement with Sampson gave it the right to terminate him for "just cause." That included "significant, intentional, or repetitive violation of any law, rule, regulation, constitutional provision, bylaw or interpretation of the University . . . or the NCAA, which violation may, in the sole judgment of the University, reflect adversely upon the University or its athletic program," "fraud or dishonesty of Employee in the performance of his duties or responsibilities under this Agreement," and "knowingly misleading the University about any matters relating to the men's basketball program." The agreement set forth a specific procedure for determining whether Indiana had just cause to terminate Sampson.

The situation generated a lot of commentary about whether Indiana had just cause to terminate Sampson's contract. The just-cause concern wasn't just fancy legal speak. In reality, it meant the difference between a payout of either $750,000 or $2.5 million to the former coach. Indiana ultimately determined it had just cause to terminate him because he had been untruthful about violating NCAA rules. Eventually, Sampson agreed to a $750,000 buyout.

Intentional foul: termination without just cause

Sampson was the latest in a string of NCAA coaches to find themselves on the wrong side of a just-cause termination. (Rick Neuheisel, former head football coach of the University of Washington, was terminated for cause for participating in an NCAA basketball pool, and Jerry Tarkanian, former head basketball coach at the University of Nevada, Las Vegas, was terminated for cause for NCAA violations.)

Occasionally, however, college employers get the determination wrong and end up paying millions of dollars to coaches they thought they had cause to terminate. (Jim O'Brien, former head basketball coach at Ohio State University, was allegedly terminated for cause. However, the Ohio Supreme Court recently upheld an award of $2.2 million for wrongful termination after finding that the Buckeyes failed to perform a full-scale investigation before termination, as required by the terms of O'Brien's contract.)

The dangers are no less real in the context of private employment. Oklahoma courts have awarded hundreds of thousands of dollars in actual and punitive damages to employees who were wrongfully terminated without cause in violation of a written contract that imposed a just-cause requirement.

Oklahoma playing field

Oklahoma is an at-will employment state. Oklahoma employers therefore have the right to "discharge an employee for good cause, for no cause or even for cause morally wrong, without being thereby guilty of a legal wrong." Oklahoma courts regularly justify the at-will principal with the theory of freedom of contract or the need for economic growth.

An employment contract of indefinite duration will be presumed to create an at-will employment relationship. That presumption may be overcome if the employee can present some sort of evidence that the parties didn't intend for the relationship to be terminable at will or can cite an applicable law that limits the employer's discretion to terminate her. A written employment contract can also place limits on when an employer may end the employment relationship. Coach Sampson's contract with Indiana University requiring the school to have just cause before terminating employment is one example.

For public employers, such as municipal governments, employees may have a constitutionally protected property right in their employment. The employment relationship may be protected by the Due Process Clause of the U.S. Constitution if the employee has "a legitimate expectation of continued employment." Many things can lead to that type of expectation, such as contracts of employment that state a definite duration and state statutes or regulations imposing substantive restrictions on the termination of employment. Many of the substantive restrictions appear in the form of procedural mechanisms that must be followed either before or after the termination of an employee. A good example is found in the Oklahoma Fire and Police Arbitration Act, which sets forth a detailed procedural mechanism that must be followed after the termination of a covered employee.

Although due-process concerns don't apply in the context of private employment relationships, private employees also may be able to show substantive restrictions limiting the employer's ability to terminate that relationship. Oral assurances of continued employment or statements in personnel manuals or handbooks may lead to an oral or implied contract that prevents at-will termination. Even comments by managerial or supervisory employees to the effect that an employee will continue to be employed so long as her performance remains satisfactory may limit an employer's ability to terminate that employee. Contracts, employee handbooks, and collective bargaining agreements may set forth applicable procedural mechanisms that must be followed in the event of termination.

Practice makes perfect

You are strongly advised to review the facts regarding a particular employee before deciding to terminate him. Ask yourself, "Is this particular employee entitled to a finding of just cause before termination?" Review all applicable contracts, collective bargaining agreements, and employee handbooks to determine whether he has been afforded the protection of a just-cause provision. Meet with his supervisors to determine whether any comments have been made to the employee that would lead him to believe that his employment is for a specific duration. Comply with any applicable procedures, whether they are to be implemented before or after termination.

In addition, take steps to ensure that your ability to terminate an at-will employee isn't inadvertently lost. Counsel and train your management and supervisory employees about the dangers of making promises about continued employment. Revise all employee handbooks or manuals to ensure that employment relationships are characterized as "at-will." Failure to do so may mean significant liability for your company in the event that an employee is terminated without just cause. Wrongful termination won't get you on SportsCenter, but it may get you into court.

The author may be contacted at cbru@dsda.com.

Copyright 2008 M. Lee Smith Publishers LLC

OKLAHOMA EMPLOYMENT LAW LETTER does not attempt to offer solutions to any individual problems or to provide legal advice to its readers. Rather, the OKLAHOMA EMPLOYMENT LAW LETTER seeks to provide information about current developments in Oklahoma employment law. Questions about individual problems or requests for legal advice should be addressed to an employment law attorney of your choice.