Vicki L. Hutchings v. Jobe, Hastings & Associates

IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE

April 12, 2011 Session

VICKI L. HUTCHINGS, v. JOBE, HASTINGS & ASSOCIATES

Appeal from the Chancery Court for Rutherford County

No. 07-1282CV Hon. Robert E. Corlew, III., Chancellor

No. M2010-01583-COA-R3-CV - Filed August 12, 2011

Plaintiff and defendant entered into a contract of employment for a term of three years,

wherein plaintiff would prepare tax returns for defendant tax firm. Defendant terminated

plaintiff's employment before the three year term had expired and plaintiff appealed to this

Court to reverse the Trial Court's finding of breach of contract and award her damages for

the breach. We hold that the evidence does not preponderate against the Trial Court's finding

that the employer had just cause to terminate plaintiff. We affirm the Judgment of the Trial

Court.

Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Affirmed.

H ERSCHEL P ICKENS F RANKS, P.J., delivered the opinion of the Court, in which F RANK. G.

C LEMENT, J R., J., and R ICHARD H. D INKINS, J., joined.

Wm. Kennerly Burger, Murfreesboro, Tennessee, for the appellant, Vicki L. Hutchings.

G. Sumner R. Bouldin, Jr., Murfreesboro, Tennessee, for the appellee, Jobe, Hastings &

Associates.

OPINION

Plaintiff, Vicki L. Hutchings, filed a Complaint for Rescission and Damages against

her former employer Jobe, Hastings & Associates (Jobe, Hastings). Hutchings, a certified

public accountant, sought rescission of the employment contract dated January 11, 2007

between herself and Jobe, Hastings, a certified public accounting firm. Plaintiff alleged that

she had entered into the contract, dismantled her own private CPA practice, and commenced

working with defendant in reliance on certain written and verbal assurances made by the

principals of defendant. The contract provided for a three year term of employment, and she

avers that defendant “unilaterally repudiated the contract terms” and terminated her

employment. Alternatively, plaintiff alleged a claim for willful breach of contract, and that

the parties be restored to their pre-contract status, including assessment of costs and damages

incurred by her reliance on defendant’s false representations.

Jobe, Hastings answered the complaint and filed a counter-claim, and alleged

Hutchings demonstrated early on in her employment that she was unable to perform the

essential functions of her employment quickly and accurately. As a result of her poor

performance, defendant had to “write-down” its billings to its clients that Hutchings serviced

and rehire a former employee to complete the work that Hutchings was unable to perform.

They aver that as a result of this they suffered damages in the form of lost revenue and

additional employee expenses.

At trial, following the testimony of several witnesses, at the conclusion of the proof,

the Trial Court found that Ms. Hutchings had breached the contract she had with Jobe,

Hastings, and stated as follows:

It has been well-established that Tennessee is an at-will employment state, meaning

that the Employer or the Employee may terminate the working relationship at any time

without incurring any liability provided reasonable notice is given. However, the

situation becomes more complex when an Employer and Employee sign an

employment contract for a pre-determined length of time. In that situation, the

Employer must have “cause” to terminate the employment relationship. The

Employer, therefore, has the burden to prove the existence of good cause, otherwise,

the Employer would have breached the contract. In Tennessee, in order to assert

breach of contract, the moving part must prove: (1) the existence of an enforceable

contract, (2) non-performance amounting to the breach of the contract, and (3)

damages which flow from the breach.

. . . . [T]he failure to faithfully perform express or implied duties give the employer

the right to terminate the employment contract for cause, prior to the expiration of its

terms without incurring liability. Further inattention to duty is sufficient cause for

discharge, since it is incumbent upon the employee to reasonably perform to advance

and develop the employer’s business. . . . Sub-performance that compromises the

employer’s interest or impedes the company’s progress will justify the termination for

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cause.

The Chancellor concluded that when applying the foregoing law to the evidence presented,

Hutchings clearly breached her implied duty to perform the duties within the employment

contract as her production and accuracy relative to the tax returns she worked on were

deficient by any standard when compared to her predecessor’s work. The Court said that the

employer had shown that it had sustained damages as a result of her poor performance.

Plaintiff perfected an appeal to this Court and has raised this issue:

Did the preponderance of the evidence support the Trial Court’s finding that

plaintiff/appellant breached an implied term of the contract of employment with

defendant/appellee justifying her termination?

A trial court’s findings of fact in a non-jury trial are reviewed de novo upon the

record. The trial court is afforded a presumption of correctness unless the preponderance of

the evidence is otherwise. Tenn. R. App. P. 13 (d); Wright v. City of Knoxville, 898 S.W.2d

177, 181 (Tenn. 1995). We review credibility determinations made by the trial court with

great deference. Keaton v. Hancock County Bd. of Educ., 119 S.W.3d 218, 223 (Tenn. Ct.

App. 2003). The trial court is in the best position to resolve factual issues that hinge on

credibility and an appellate court will not re-evaluate a trial court’s assessment of a witness’s

credibility absent clear and convincing evidence to the contrary. Hopper v. Moling, No.

W2004-02410-COA-R3-CV, 2005 WL 2077650.

The trial court’s conclusions of law are reviewed under a purely de novo standard with

no presumption of correctness. Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn. 2005), Union

Carbide Corp. v. Huddleston 854 S.W.2d 87, 91 (Tenn. 1993).

Hutchings contends that the Trial Court erred in holding that under her contract of

employment, she was to reach a certain level in the preparation of tax returns, and in support

of this contention she points to the contract of employment between the parties, which

provides no probationary period or specific objective performance criteria but does provide

for a three year term of employment. She argues that the employment contract should be

enforced as it is written and that defendant had no grounds under the contract to discharge

her for cause. The Trial Court, however, held that in addition to the terms of the written

employment contract, the parties had entered into an implied contract regarding both

competency and production and that Ms. Hutchings had thus breached the contract of

employment.

In this jurisdiction an employer can terminate an employee for cause where a contract

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between the parties provides for a term of employment. The Supreme Court held in Nelson

Trabue, Inc. v. Professional Management Company, etc., 589 S.W.2d 661 (Tenn.1979), that

an employer could discharge for cause a person employed by a contract for a term of one

year. In that case the Supreme Court restated the well settled general rules with regard to

contracts of employment, noting that generally a contract of employment for an indefinite

term is a contract at will and may be terminated by either party, whereas a contract for a

definite term may not be terminated before the end of the term except for cause or by mutual

agreement. However, an employer has the right to discharge an employee at any time for

just cause. Nelson Trabue at 663. In the event that an employer discharges an employee

before the contracted for term of employment is over, the employer must justify the dismissal

by showing a breach on the part of the employee of some express or implied provision of the

contract of service. Id.

In Biggs v. Reinsman Equestrian Products, Inc., 169 S.W.3d 218 (Tenn. Ct. App.

2004), this Court discussed the law applicable to the termination of an employee for cause

who is employed under an employment contract that contains a specific term as follows:

Whether good cause exists to terminate an employment contract is a determination

made on a case-by-case basis, and exists where the discharge is ‘objectively

reasonable.’ Video Catalog Channel, Inc., v. Blackwelder, 1997 WL 581120 (Tenn.

Ct. App.). When cause is required for discharging an employee, the employer has the

burden of proving the existence of good cause. Phillips v. Morrill Electric, Inc., 1999

WL 771511 (Tenn. Ct. App.)

The failure to faithfully perform express or implied duties gives the employer the right

to terminate the employment contract for cause, prior to the expiration of its terms

without incurring liability. Jackson v. The Texas Company, 10 Tenn. App. 235 (Tenn.

Ct. App. 1929).

Inattention to duty is sufficient cause for discharge, since it is incumbent upon the

employee to reasonably perform to advance and develop the employer's business.

Wyatt v. Brown, 42 S.W. 478, 481 (Tenn. Ch. App.1897). In general, any act which

tends to injure the employer's business, interests, or reputation will justify termination

of an employment agreement, and actual loss need not be proven. Curtis v. Reeves,

736 S.W.2d 108, 112 (Tenn. Ct. App.1987) . . . .

The standard does not require an element of intent to show just cause. Sub-

performance that compromises the employer's interest or impedes the company's

progress will justify the termination for cause. See Booth v. Fred's Inc., 2003 WL

21998410; Wyatt v. Brown, 42 S.W. 478 (Tenn. Ch. App. 1897).

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Biggs at 221 - 222.

The issue of whether good cause to terminate appellant's employment existed is

determined by an evaluation of whether the discharge was objectively reasonable. As the

contract provides no specific details as to the duties required of Ms. Hutchings, a

determination of whether there was an implied agreement as to the duties she was to perform

is required to be determined. Under the reasoning in Biggs, inattention to duty is sufficient

cause for discharge as is under-performance of duties that compromises the employer's

interests.

The Trial Court held that the facts showed that there was an implied agreement as to

Ms. Hutchings’ duties and the performance expected of her. The Trial Court found that the

Jobe, Hastings advertisement that Ms. Hutchings responded to made it clear that the firm was

seeking an accountant with a minimum of five years of experience with complex entity and

individual tax returns. The Court also found that Ms. Hutchings held herself out as such an

experienced and seasoned CPA who could do the job as advertised. The Court noted that

although there was some dispute as to the number of tax returns Ms. Hutchings was told she

would be responsible for, her performance was considerably below all expectations in terms

of both production and accuracy. The Court said that Ms. Hutchings performance was

deficient by any standard when compared to Ms. Johnson’s production as tax manager the

year before. The Court stated that there was testimony from five witnesses who testified

regarding Ms. Hutchings’ slow return of work and her high rate of errors. The Court noted

that none of these witnesses expected such poor work product from a person with Ms.

Hutchings professed experience and background, but they testified that they would expect

such errors from a novice tax preparer.

The Trial Court concluded that “with all of the testimony and proof presented . . . it

is evident that plaintiff had an implied duty to perform at the level in which she represented

to the defendant. She breached that implied duty by failing to perform her job in an efficient

and adequate manner, which is evidenced by her low level of returns performed and the high

rate of errors. The defendant was damaged by the breach of duty when it expended further

money to hire another CPA to pick up the remaining cases not being handled and the time

and resources wasted by having to correct so many errors within the returns."

From our review of the evidentiary record, we conclude that the evidence does not

preponderate against the Trial Court’s findings of fact. Tenn. R. App. P. 13(d).

Defendant offered evidence that it is a certified public accounting firm and that the

title of tax manager signifies that a person has a higher level of tax preparation and expertise

than others in the firm, and when their previous tax manager resigned, they sought to fill that

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position and advertised as follows:

TAX MANAGER

MURFREESBORO CPA firm seeking Tax Manager. Qualified candidate should

have an active CPA license and 5 - 7 years’ experience utilizing strong technical

expertise with complex entity and individual tax returns. References required. Salary

commensurate with experience. Benefits available . . . .

Following this advertisement, Ms. Hutchings was interviewed by Mr. Jobe and Ms.

Hastings, and Linda Moore, the office administrator, was also present. Jobe and Hastings

testified that they showed Ms. Hutchings a document that reflected that the prior manager

had assigned and prepared 246 tax returns for the 2006 tax season. Jobe and Hastings

recalled that they were explicit that the position of manager required a similar output from

Ms. Johnson's replacement, and Jobe testified that he told Hutchings that she was expected

to work similar hours to which Johnson had worked and testified that given a similar work

schedule to Ms. Johnson and plaintiff's qualifications, that he had every reason to believe she

was capable of attaining the production goal they set for her. Further, Jobe testified that Ms.

Hutchings told them unequivocally that she was confident she could meet that goal.

Mr. Jobe refuted much of Hutchings’ testimony. He stated the problems with her

efficiency and accuracy presented very soon after she started work in January 2007. He

testified that her work was extremely slow and that the work she did complete was replete

with errors. Those errors required additional partner and staff time to correct the returns

prepared by her. As an example, he testified that she spent up to ten times as much time on

a return for a particular client as Ms. Johnson had spent the previous year. Another example

was she spent so much time on another return that the client complained and Jobe provided

the work for free by writing off $2,800.00 from the client’s bill.

Another witness, Susan Vandiver, a CPA and the audit manager at Jobe, Hastings,

testified that she reviewed thirteen returns that Ms. Hutchings had prepared, and nine of them

had errors. She explained that the errors were of the type you would expect a tax preparer

with one or two years experience to make but she would not have expected someone with

Ms. Hutchings experience to have such a high rate of errors.

Mr. Jobe testified that he reviewed returns prepared by Ms. Hutchings. He testified

that near the end of the tax season he started to run a tally of returns prepared by her that he

reviewed and signed off on fifteen of her returns. Of the fifteen returns, thirteen had errors

that were such that the returns had to be redone before they could be filed, and he observed

that this was an error rate of 87%. He then summarized the issues presented by Ms.

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Hutchings: “We had several problems with Vicki. There were errors that were of a nature

that we felt like with her experience they shouldn’t be there, there were excess production

time in returns. There were low production in number of returns. So we have three separate

problems.” He demonstrated how significant these problems were by stating that during the

2007 tax season, Ms. Hutchings prepared sixty-six tax returns and reviewed just over forty

returns. In contrast, during the same season, but only from mid-March to April 15, Ms.

Johnson, who was working part time, exceeded Ms. Hutchings’ output by producing sixty-

eight returns.

Ms. Hutchings in her defense, claimed that she had not been given any warning that

her work was not up to standard until April 24, 2007 when she was terminated. However,

Ms. Hastings, on cross examination, was asked why plaintiff was not provided a written

statement telling her she would be terminated if she did not improve her performance. She

replied:

Mr. Jobe had met with her. Our management team had met with her. She was

provided information on a weekly basis. She had received review notes from several

of us. And it should have been apparent to her that she was not performing

adequately. I think she also said she had even suggested maybe taking less money.

So I don’t know that there was anything else that we either should have done or

needed to have done - - - to make the situation more bearable. Sixty-six returns

versus 246 returns is pretty - - that’s pretty apparent with or without a memo, Mr.

Burger.

Finally, we note that Ms. Hutchings, own testimony contradicts her assertion that she

had no notice that her work was unsatisfactory as she conceded that she offered to take a pay

cut because she knew she was not meeting the production expectations of Jobe, Hastings’s

partners.

In sum, the evidence presented does not preponderate against the Trial Court's

findings of fact and the Trial Court’s application of those facts to the law was not in error.

The Judgment of the Trial Court that Ms. Hutchings’ breached the employment contract is

affirmed, and the remaining findings in the judgment were not appealed and have not been

considered.

The Judgment of the Trial Court is affirmed and the cause remanded, with the cost of

the appeal taxed to Vicki L. Hutchings.

_________________________________

HERSCHEL PICKENS FRANKS, P.J.

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