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Firm Didn't Violate Montana Law by Firing Manager for Demeaning Remarks, Court Says

Monday, April 29, 2013
ByElliott T. Dube

A construction company did not violate Montana law when it fired a site supervisor for making derogatory comments about the firm's employees and subcontractors, the state's supreme court held April 23 (Sullivan v. Continental Constr. of Mont. LLC, Mont., No. DA-12-0489, 4/23/13).

The court affirmed summary judgment to Continental Construction of Montana LLC on Michael Sullivan's claim that the company violated the Montana Wrongful Discharge from Employment Act. This unique state law covers nonunion employees who have been on the job at least six months or passed probation and prohibits discharge for other than good cause.

Contrary to Sullivan's argument that Continental Construction lacked good cause to fire him, the court found that the company had a valid business reason for his termination. Specifically, the court afforded “considerable discretion” to the company's concerns that Sullivan was untrustworthy and that his continued employment as a manager could have been bad for business.

Neither the company nor the lower court that granted it summary judgment improperly used employees' hearsay statements about Sullivan's behavior, the supreme court found. In addition, it said, the company did not violate its employee handbook when it fired Sullivan. He was mistaken in his assertions that the handbook required two written warnings and a “fair” and “thorough” hearing before the company could terminate him, Justice Brian Morris wrote for the court.

Employees Complained About Sullivan's Remarks
Continental Construction's headquarters are located in Florida. As a site supervisor, Sullivan directly managed many of the company's employees in Montana and worked with many of its clients and subcontractors.

On Oct. 21, 2010, Sullivan went on vacation and was temporarily replaced by company official John Cecil, who travelled to Montana from Florida. That day, multiple employees approached Cecil to say they were dissatisfied with Sullivan's supervision. At the request of the company's office manager in Florida, Cecil and another official interviewed each employee about their interactions with Sullivan.

In the interviews, many employees said Sullivan repeatedly made demeaning remarks to both employees and nonemployees about Continental Construction's management. Interviewed employees said Sullivan also made derogatory comments to them and subcontractors about their work. Some employees added that he often showed up late to work.

The company's employee handbook states that a violation “will result in the issuance of a written warning unless the seriousness of the violation calls for a stronger disciplinary action.” The handbook lists types of conduct that may result in discipline “up to and including immediate termination of employment,” such as “excessive tardiness or absenteeism” and “conduct detrimental to Continental Construction and/or its efficient operation.”

Continental Construction called Sullivan Oct. 26, 2010, to say it was firing him. The company then sent him a letter stating that his termination was because of his demeaning treatment of employees and subcontractors, his speaking derogatorily to others about customers and employees, and behavior that generally did not meet company standards.

Sullivan sued Continental Construction under the WDEA in Gallatin County District Court, which granted summary judgment to the company.

Company Had Valid Business Justification
On appeal, Sullivan argued that he provided enough evidence that Continental Construction violated the WDEA by firing him without good cause. Under Montana law, the supreme court noted, a legitimate business reason would be good cause for Sullivan's firing.

“This Court has stressed the importance of the 'right of an employer to exercise discretion' over whom 'it will employ and keep in employment,' ” the court said. “We afford employers the greatest discretion where an employee occupies a 'sensitive' managerial position and exercises 'broad discretion' in his job duties.”

Continental Construction contended that it was especially important for its site manager in Montana to be trustworthy because of the lack of daily oversight from company executives in Florida. The company said it feared that Sullivan's behavior and activities would cause it substantial damage.

The court determined that after investigating Sullivan and finding him to be untrustworthy, the company made what it viewed to be a legitimate business decision by firing him.

“The fact that not every Continental Construction employee complained about Sullivan failed to undermine the validity of Continental Construction's conclusion that Sullivan's continued employment could threaten its future viability in Montana,” the court wrote. “Similarly, the fact that Sullivan apparently treated some employees well does not challenge the validity of the complaints made by other Continental Construction employees.”

Use of Hearsay Statements Not Problematic
Sullivan argued that the company acted arbitrarily and capriciously by terminating him based partly on hearsay statements from employees in the form of the interviewers' notes. But the court added that no legal authority indicates that a private business may not use such statements in making a termination decision for business reasons. In addition, the court said, requiring Continental Construction's managers in Florida to do in-person interviews with every Montana employee during the Sullivan investigation would have been “impractical.”

Next, Sullivan challenged the district court's use of the interviewers' notes in making its summary judgment ruling. The company admitted that this evidence would have been inadmissible hearsay if it were meant to prove the truth of the allegations of Sullivan's bad behavior.

The supreme court agreed with the company that the evidence was instead intended to explain the choice to terminate Sullivan. The supreme court then found that under the WDEA, the district court did not need to conduct independent factfinding to gauge the truth of the allegations against him.

Firing Found Not to Run Afoul of Handbook
Sullivan also claimed that Continental Construction violated the WDEA by terminating him without a prior written warning. He said the company's employee handbook required two such warnings before he could be fired.

However, the court found no guarantee of two warnings in the handbook. It then found that Sullivan's status as a manager and his numerous violations of the handbook gave Continental Construction “more leeway” in deciding whether to issue him warnings or to fire him immediately.

Finally, Sullivan contended that the handbook required the company to provide him with a “fair” and “thorough” hearing before firing him. But the court found that the handbook used the terms “fair” and “through” in guiding the company's treatment of employee complaints about work problems, and not with respect to employee discipline.

Justices Mike McGrath, Michael E. Wheat, Laurie McKinnon, and Beth Baker joined in the opinion.

Todd Shea in Bozeman, Mont., represented Sullivan. Edmond E. Koester of Coleman, Yovanovich & Koester in Naples, Fla., and Dennis P. Clarke of Smith, Walsh, Clarke & Gregoire in Great Falls, Mont., represented Continental Construction.

ByElliott T. Dube


Text of the opinion is available at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/sullivan(1).pdf.

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