Eric Teter v. Republic Parking System, Inc.

The dispute in this case arises out of an employment contract which provides severance pay for an employee who is terminated for reasons “other than gross misconduct, fraud, embezzlement, theft or voluntary termination.” The defendant employer ceased providing severance pay to the employee after the employer discovered that the employee had engaged in gross misconduct while still employed by the company. The employee sued for breach of contract, seeking the severance pay due under the contract; the employer responded that had it known previously of the gross misconduct, it would have fired the employee, thus absolving it of any duty to provide severance pay. The trial court granted summary judgment for the employee, after concluding that the employee had been involuntarily terminated, thus triggering the severance pay provision, and that there was no clear and convincing evidence that the employer would have fired the employee had it known of the gross misconduct. The employee was awarded $795,037.35, less thirty days severance pay already paid, plus prejudgment interest. The Court of Appeals affirmed. We hold that after-acquired evidence of employee misconduct need only be shown by a preponderance of the evidence in order to avoid liability in a breach of contract action, and because there is a genuine issue of material fact as to whether the employee would have been fired had the employer discovered the gross misconduct, we remand the case for trial. On the remaining issues raised by the employer, we affirm the Court of Appeals: the employee did not voluntarily resign from his position but was involuntarily terminated; the payment schedule found in the “Employment Protection Plan” regarding severance pay was incorporated into the employment contract; and the severance pay provisions did not constitute an illegal penalty.