QUESTION:
How does the New Hampshire Department of Labor (NHDOL) determine whether a salaried employee has been terminated "for cause," such that the employee's final pay may be pro-rated for only those days actually worked in the pay period prior to termination?
ANSWER:
Under New Hampshire law, a salaried employee who is involuntarily terminated must "receive [his or her] full salary for any pay period in which such employee perform[ed] any work without regard to the number of days or hours worked." NH RSA 275:43-b, I. Since 2005, however, employers have been permitted to prorate the employee's salary on a daily basis "when a salaried employee is terminated for cause by the employer." NH RSA 275:43-b, II. What constitutes termination "for cause" is not defined in the statute or in the NHDOL regulations, and has not yet been ruled on by the New Hampshire Supreme Court. Therefore, the NHDOL currently applies the following standard, based on a Superior Court case, to determine whether an employee's final salary was properly prorated on the basis of his or her "for cause" termination:
"The current standard for a 'for cause' termination is established by Lakeshore Estates Associates LLC v. Michael F. Walsh (Belknap Superior Court No. 06-E-259, April 4, 2007). The Decision sets the standard as, 'articulated at 82 Am. Jur. 2D Wrongful Discharge § 183 (2003), which provides that an employer may dismiss an employee 'for cause' if the employee engages in misconduct. An employee's misconduct must comprise reasonable grounds for termination, and the employee must have received notice, express or fairly implied, that such misconduct would be grounds for termination. 82 Am. Jur. 2D Wrongful Discharge § 179 (2003); see also Lowell v. U.S. Sav. Bank, 132 N.H. 719, 726 (1990) (an employer must offer an employee a proper reason for a 'for cause' dismissal). In reviewing a 'for cause' dismissal, 'the fact finder must focus not on whether the employee actually committed misconduct, but rather on whether the employer reasonably determined it had cause to terminate.' 82 Am. Jur. 2D Wrongful Discharge § 179 (2003)."
Todd Lopes v. Carrabba's Italian Grill, NHDOL Case No. 44938 (Decision of the Hearing Officer, Feb. 4, 2013).
Applying this standard in the recent Lopes decision, the NHDOL upheld the employer's "for cause" termination of the Claimant and associated proration of the Claimant's final pay. In that case, the Claimant was three-and-a-half hours late for his scheduled shift, and the employer's handbook identified such misconduct as grounds for termination. Specifically, the Hearing Officer found that "the employer reasonably determine[d] that it had cause to terminate the claimant when he failed to appear for his regularly scheduled shift after being warned via the handbook that this action could result in termination."
The NHDOL has also applied this standard to uphold "for cause" terminations where the employee was terminated in accordance with the terminable offenses outlined in the employer's handbook or where the employee was terminated after receiving clear written or verbal warnings related to the misconduct for which he or she was eventually terminated. However, as addressed in our Dec. 14, 2012 E-Alert, applying the standard set out above, the NHDOL found that an employer did not reasonably determine that it had cause to terminate the Claimant, where the Claimant was terminated after a suspension, related to a separate incident, on the basis of information revealed during his suspension. The NHDOL granted the Claimant's wage claim on the basis that the employer's written policies did not define "cause" and the suspension notice had not provided the Claimant with notice of the misconduct for which he was terminated.
Employers wishing to take advantage of this right to pro-rate the final salary of an employee dismissed for "cause" would be wise to have standards of conduct or other similar written policies in place that describe potential grounds supporting a "for cause" termination. These written documents will be very important in defending any wage claims filed by employees seeking payment for full pay periods based on the argument that their terminations were not "for cause" or, alternatively, that the employer failed to provide advance "notice" that the alleged misconduct could result in termination. A note of caution, however, for employers that may want to amend their employee handbooks to include specific definitions of "for cause" termination. Such language, unless crafted carefully, may negate an employee's "at will" status, which allows employers to terminate employees without cause (so long as the termination is not in violation of public policy or otherwise unlawful).
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