Court Holds There Was a Genuine Issue of Material Fact Regarding Employer’s Excuse From Performance Due to Employee’s Initial Breach
Shoals Extrusion, LLC v. Beal
In
Shoals Extrusion, LLC. v. Beal
, the Alabama Supreme Court was faced with the question of whether Shoals Extrusion, LLC (“Shoals Extrusion”) or one of its former employees (“Beal”) breached a five-year employment agreement that both parties executed on March 27, 2015. The employment agreement obligated Shoals Extrusion to pay Beal a $20,000 signing bonus, a first-year salary of $70,000, and Beal’s health insurance premiums. In return, Beal agreed to work a 40-hour plus work week at a work period to be directed by Shoels Extrusion. The employment agreement also contained a severance package which provided that Shoals Extrusion would pay Beal wages and benefits for the term of one year if it terminated Beal during the five-year term of the agreement.
Although Beal had only worked for Shoels Extrusion for eight months before his termination, Shoals Extrusion did not pay him severance benefits. Beal filed suit against Shoals Extrusion in the Lauderdale Circuit Court asserting a breach-of-contract claim and alleging he was entitled to the severance benefits. Shortly after filing his Complaint, Beal filed a motion for summary judgment on his breach-of-contract claim. Shoals Extrusion opposed Beal’s motion arguing it was not required to pay Beal under the employment agreement because Beal had breached the implied duty of good faith. Shoals Extrusion alleged that Beal refused to work at its directed work periods, refused to work the additional hours that he was requested to work, and threatened to reduce his working hours unless he was given an ownership interest in Shoels Extrusion. The trial court granted Beal’s motion for summary judgment after finding that Shoals Extrusion effectively terminated Beal for cause despite the absence of a provision in the employment agreement that authorized termination for cause. Shoals Extrusion appealed.
Unlike the circuit court, the Alabama Supreme Court did not frame the issue as to whether Shoals Extrusion had a right to terminate Beal for cause. Rather, it focused its analysis on whether Shoals Extrusion was excused from further performance under the employment agreement due to an initial breach by Beal. After reframing the issue, the Court held that there was a genuine issue of material fact regarding Beal’s performance under the employment agreement. Thus, the Court reversed the summary judgment and remanded.