Lack of forfeiture clause ensures benefits for alleged harasser.

A company that fired an employee based on allegations of sexual harassment must pay all benefits outlined in the employment contract, the Third Circuit has ruled. The court also held that the company's CEO cannot be held personally liable, reversing the lower court's decision. (Fields v. Thompson Printing Co., Nos. 02-2763, 02-2764, 2004 WL 626531 (3d Cir. Mar. 31, 2004).)

Gilbert Thompson, the CEO of Thompson Printing Co. (TPC), fired plaintiff Gerald Fields after three female employees alleged that Fields had sexually harassed them. Fields, the company's president at the time, filed claims against TPC under state law and the Employee Retirement Income Security Act, seeking reinstatement of all his pre and post-retirement benefits, including salary, raises, medical insurance, and cars. The women sued the company, Fields, Thompson, and another supervisor, and the case settled with no admission of wrongdoing.

Fields argued that the employment contract between him and TPC included a provision stating that his benefits would continue even if the company terminated his employment. The Third Circuit agreed.

"This provision not only prohibits TPC from terminating the contract, but it provides further that if it should 'terminate' Fields's 'employment,' Fields's benefits will continue," wrote Justice Marjorie Rendell for the court. "In other words, if TPC should fire him, it must still pay him."

Although the company argued that Fields's benefits should not continue because his termination was the result of the alleged sexual harassment, the employment contract did not make the distinction between termination with cause or without, the court stated.

"TPC asks us to save it from its own failure to include such a forfeiture clause," Rendell wrote. "Doing so would essentially force us to read clauses thought desirable from a policy stand point into every employment contract. This we cannot do. Employers may legitimately otter compensation and benefits that can be taken away only for specific reasons, or that cannot be taken away at all, in order to lure or reward employees. The absence of a forfeiture clause here suggests that this may well have been what was intended."

The defendants offered two arguments for reversing the trial court's judgment: that in light of Fields's alleged acts of sexual harassment, enforcing the employment agreement would violate public policy; and, in the alternative, that Fields's alleged acts breached the agreement and terminated the company's obligation to him.

"Both of these arguments essentially urge us to look past the plain language of a relatively straightforward contract," the court stated. "Given the fact pattern before us, we decline to do so."

The court also noted in the decision that even if it were "inclined to look with disfavor on the rights of a harassing executive to continue to receive compensation in this situation, there has been no finding that Fields was in fact guilty of harassment."

"One of the things in this case that came to the surface is that there wasn't even a hearing as to whether or not Fields had harassed the plaintiffs in the sexual harassment case," said plaintiff counsel Noel Schablik of Parsippany, New Jersey. "The company didn't do anything to investigate it; all they did was summarily fire him, and they didn't try to determine whether remediation could correct the situation if there was harassment in one form or another."

Despite the ruling, the contract dispute is not over. The company, which has filed a bankruptcy petition, is pursuing a legal malpractice claim against the law firm that drafted the employment agreement. Schablik said the claim is the only asset the company has that might provide some return to his client.

"My client now stands in the shoes of an unsecured creditor who may or may not have a preference over other unsecured creditors," he said. The appellate court's finding that Thompson was not personally liable was also a blow to Fields, because the CEO had assets that could have been seized to satisfy the judgment, Schablik added.

He noted that one potential reason the contract appears to have been drafted so informally is that Thompson and Fields are cousins.

"The human sides of these cases are always more complicated than the legal sides," he said.