Standard of Proof for Rebuttal of Presumption of At-Will Employment
Babb v. Geisinger Clinic, 2019 WL 5265300 (Pa. Super. 2019) (unreported), allocatur granted Aug. 17, 2020, appeal docket 48 MAP 2020
The Pennsylvania Supreme Court granted allocatur in this case to consider whether the lower court correctly applied a preponderance of the evidence standard of proof, as opposed to the clear and direct evidence standard of proof, to the rebuttal of the presumption of at-will employment.
Superior Court outlined the background of this highly contested employment dispute between Terrence E. Babb, M.D. and Geisinger Clinic (“Geisinger”) as follows:
In June 1995, Geisinger offered, and Dr. Babb accepted, employment as a staff physician for their OB/GYN Clinic in State College. Dr. Babb commenced his employment on September 1, 1995. At around the same time, Dr. Oliver was also hired as a staff physician for the OB/GYN Clinic. In July 1996, Geisinger hired Dr. Chmielewski as a third staff physician at the Clinic. Over time, the working relationship between Dr. Babb and his two colleagues deteriorated. Dr. Babb made professional complaints against Dr. Chmielewski. Subsequently, Dr. Oliver, Dr. Chmielewski and others made professional complaints against Dr. Babb. Pursuant to a routine annual performance review process, Dr. Babb was recommended for reappointment. However, the discord and additional targeted performance reviews culminated in Geisinger’s decision to terminate Dr. Babb’s employment.
To that end, on or about May 16, 1997, Dr. Charles Maxin, Senior Vice President for Clinical Operations, and Dr. David Wolfe, Medical Director for Geisinger Medical Group, met with Dr. Babb and requested his resignation. Dr. Babb refused to resign and he was fired that same day. The termination was confirmed by letter dated May 19, 1997.
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During his employment with Geisinger, Dr. Babb enjoyed clinical privileges with [Centre Community Hospital (CCH) ]. Upon his termination by Geisinger, those privileges were withdrawn because Dr. Babb no longer had malpractice insurance coverage. Dr. Babb subsequently obtained employment in Clearfield County.
On May 1, 1998, Dr. Babb initiated the instant action in the Court of Common Pleas of Centre County by filing a writ of summons against Geisinger, Dr. Oliver, and Dr. Chmielewski (Geisinger Defendants). [ ] On November 4, 1999, Dr. Babb filed a complaint in United States District Court for the Middle District of Pennsylvania against Geisinger, CCH, and others, alleging, inter alia, discrimination, antitrust violations, breach of contract, civil conspiracy to deny privileges, and interference with contract.
Slip op. at 2-3. Over the course of 20 years, the parties litigated in federal and state courts. Ultimately, the federal court claims and most of the state court claims were dismissed and only the state claim based on wrongful termination of Dr. Babb’s employment contract survived. At trial before the Court of Common Pleas of Centre County, both parties presented evidence as to whether Dr. Babb was an at-will employee. Specifically, the court summarized the following facts relating to Dr. Babb’s employment contract:
Before being hired by Geisinger, Dr. Babb practiced medicine for seven years and was board-certified in obstetrics/gynecology (OB/GYN) as well as family medicine. On May 11, 1995, Geisinger sent an offer letter to Dr. Babb for the position of OB/GYN associate. On June 8, 1995, Dr. Maxin issued a revised offer incorporating changes Dr. Babb requested, including that his proposal that his annual base salary of $210,000 would “be guaranteed for two years,” instead of one year. Revised Offer, 6/8/95, at 1. The revised offer stated that Dr. Babb would be eligible for incentive payments based on the excess of 47.5% of net receipts of his billings over his base salary. The revised offer outlined other benefits, including but not limited to, the payment of Dr. Babb’s malpractice insurance, a yearly $3,500 allowance for continuing education and certification requirements, and a $30,000 loan forgivable over four years.7 Dr. Babb’s start date was set at September 1, 1995.
The revised offer required Dr. Babb to sign the Practice Agreement, which outlined a two-year non-compete agreement. The Practice Agreement also indicated that “[p]rior to any termination initiated by Geisinger for or without cause, however, [Dr. Babb] shall be afforded an opportunity for a review of the underlying circumstances therefore, pursuant to Geisinger’s published guidelines governing such reviews, as amended an in effect from time to time.” Practice Agreement, at 1. The revised offer stated that the Practice Agreement “along with the Employee Benefits Summary, the Professional Staff Handbook and this letter form the basis of the agreement between you and Geisinger.” Revised Offer, 6/8/95, at 1. Dr. Babb testified that he would not have accepted Geisinger’s offer for employment if Geisinger could terminate him without providing any review, given his restrictive covenant. N.T. 3/5/18, at 125-27, 175-176.
Slip op. at 15. In holding that Geisinger was not entitled to JNOV on this basis of the issue of at-will employment, the trial court concluded:
Whether [Dr. Babb] is at-will employee was an issue at trial and the Jury heard substantial evidence regarding [Dr. Babb’s] employment, the negotiations leading up to his employment, and his treatment during his employment. [Dr. Babb] presented evidence that his employment was renewed on a two-year basis, he was provided specific wages during those periods, and he had a contract in the form of his Employment Agreement combined with additional documents provided by [Geisinger]. There was sufficient evidence to find [Dr. Babb] had rebutted the at-will presumption.
Slip op. at 27-28. Following trial, the jury found in favor of Dr. Babb on his breach of contract claim and awarded $5.5 million in damages. Geisinger appealed to Superior Court arguing, inter alia, that the trial court erred when it failed to find Babb was an at-will employee where he failed to rebut the presumption by establishing any exception.
On appeal, Superior Court noted that Pennsylvania’s presumption of at-will employment can be rebutted if a party establishes “one of the following factors: (1) an agreement for a definite duration; (2) an agreement specifying that the employee will be discharged for just cause only; (3) sufficient additional consideration; or (4) an applicable recognized public policy exception.” Slip op. at 24. However, Superior Court emphasized that although the parties dispute whether Dr. Babb could rebut the presumption of at-will employment based on these factors, the court could “not overlook evidence of the intent of the contracting parties,” which is “generally a jury question,” explaining that “Pennsylvania courts have traditionally followed the flexible approach, recognizing that the paramount concern is the intention of the parties.” Id. at 27. After reviewing the evidence presented at trial, Superior Court held that:
Based on the surrounding circumstances in which the parties renewed Dr. Babb’s employment for a new two-year term and agreed to abide by the Practice Agreement which provided that a physician was entitled to a review before termination procedures were initiated, it was reasonable for the jury to infer that parties intended that Dr. Babb’s employment was not at-will.
Id. at 30.
The Pennsylvania Supreme Court granted allocatur, limited to the following issue:
Whether the Superior Court and trial court erroneously permitted the presumption of at-will employment to be rebutted by a mere preponderance of the evidence, as opposed to by clear and direct evidence, in conflict with established precedent?