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Title: Hodge and Grapetree Shores, Inc.
Date: June 27, 2002
Arbitrator: Lynn Wagner
Citation: 2004 NAC 130

IN THE MATTER OF:

Willis Hodge,

                        Claimant,

vs.

Grapetree Shores, Inc.,

                        Respondent.

                                                                        /

AWARD OF ARBITRATOR

This arbitration was conducted in accordance with the Salaried Employee Agreement (hereinafter “Agreement”) between Claimant, WILLIS HODGE, and Respondent, GRAPETREE SHORES, INC. d/b/a DIVI CARINA BAY RESORT & CASINO, dated January 14, 2000.  Claimant timely submitted claims against Respondent alleging wrongful discharge and defamation.  The Final Hearing was held in Frederiksted, St. Croix, U.S. Virgin Islands on April 19, 2002.

JURISDICTION

The Arbitrator has jurisdiction to decide Claimant’s claims under the definition of arbitrable issues contained in Section 17 of the Agreement.  Neither party has challenged the Arbitrator’s jurisdiction and, by proceeding on the merits through the Final Hearing, have waived any defenses of lack of jurisdiction.  Section 20 of the Agreement does, however, limit the Arbitrator’s authority to grant relief, as it expressly provides that, “if the Arbitrator finds that disciplinary action was merited, the Arbitrator may not alter or amend the form of disciplinary action imposed by the Company.”

FINDING OF FACT

Claimant was hired by Respondent as the manager of its purchasing and receiving department on January 14, 2000, shortly after it opened its new Divi Carina Bay Resort & Casino on St. Croix, U.S. Virgin Islands (hereinafter “Resort”) at an annual salary of $26,000.  Immediately preceding his employment by Respondent, he operated his own construction materials business for approximately ten years.  Prior to that, he worked several years in various hourly and management positions with much smaller, albeit established, hotels and resorts on St. Croix.

The duties of Claimant’s position included managerial responsibilities , such as ordering products receiving deliveries, maintaining computerized inventory records securing inventory and directing two hourly-paid employees, as well the performance of some physical work, such as unloading trucks and stocking storage shelves.  Because his department was located in a working area of the Resort, he only occasionally had direct contact with guests. However, an incident occurred between Claimant and a guest of the Resort on December 19, 2000.

The Resort had scheduled an employee Christmas Party at its on-premises Conference Center to start at about 6:00pm on December 19, 2000.  As Claimant was leaving his department for the day to go to the Christmas Party, three packages were delivered by Federal Express.  Unaware that a guest had alerted the front desk she was expecting the delivery of a package containing medicine, he signed for the packages and, without reading the outside markings, placed them in the storage room with the intention of delivering them the next morning and proceeded to the party.

The Respondent served alcoholic beverages at the party and Claimant, like other employees in attendance, had several drinks between his arrival and about 7:30p.m., when a co-employee advised him a guest was at the front desk asking whether a package had arrived containing medicine.  Although Claimant was off-duty for the day, he immediately returned to the purchasing and receiving department by golf cart to determine if such a package was there.  He discovered it was one of the packages he had just signed for when he left for the party.

Claimant took the package to the front desk without delay, where the guest, Mrs. Farris, was waiting to sign for it.  Although it had only been fifteen minutes or so since she had come to the front desk and inquired about the package, Mrs. Farris began berating Claimant in a loud voice for inconveniencing her.  When he tried to explain what had happened, she told him what she thought he should have done that would have avoided her need to wait the time it took for him to return from the Christmas Party and bring the package to her.

Claimant, who admitted his judgment may have been effected by the drinks he had just consumed at the Christmas party, responded by asking Mrs. Farris, also in a raised voice, whether she was trying to tell him how to do his job.  Claimant admitted that he exercised poor judgment in responding in this fashion, but attributed it to the several drinks he had at the Christmas Party.

In an effort to avoid further confrontation with Mrs. Farris, Claimant retreated to the other end of the front desk, and, facing in the opposite direction to her, muttered to a bellman, “she is really starting to piss me off.”  Unbeknownst to Claimant, Mrs. Farris was not content to end the confrontation, but had pursued him as he walked away from her and was standing directly behind him when he made his remark to the bellman.  As a result, she overheard the remark, became angrier and asked to speak to the Resort’s General Manager, Mr. Conway.

When Mrs. Farris was told Mr. Conway was at the Christmas party, she began walking toward the Conference Center.  At the same time, Claimant began returning to the Conference Center in a golf cart operated by another employee.  When Mrs. Farris noticed the golf cart with Claimant approaching, she started running toward the Conference Center shouting she was not going to allow Claimant to speak to Mr. Conway first and “poison his mind” about the incident.

Mrs. Farris and Claimant arrived at the Conference Center at about the same time.  While crying hysterically, she reported the incident to Mr. Conway, adding that Claimant had followed her in the golf cart.  After calming her, Mr. Conway spoke with Claimant separately about what had happened, after which he told Claimant not to worry about the incident.  At that point, Mr. Conway did not view Claimant’s conduct as warranting discipline, let alone discharge.

The incident would have faded away, except Mrs. Farris had other ideas.  She started using it as a basis for demanding monetary compensation from Respondent.  She even wrote the Vice President at Respondent’s North Carolina headquarters about the incident.  She sent copies of her letter to other executives, including Respondent’s principal shareholder (hereinafter “owner”).  As a result, Respondent eventually paid her a small amount.

After Mrs. Farris complained to the Vice President and copied the owner, Mr. Conway took a different view of the seriousness of the incident.  What he had viewed as nothing to worry about at the Christmas Party became a discharge offense.  Apparently concerned whether the incident with Mrs. Farris was, by itself, sufficient grounds for discharge, Mr. Conway had his managers cite Claimant for three alleged offenses involving his management of the purchasing and receiving department, occurring on the day or two following the incident.  He also had them develop a laundry list of similar performance deficiencies alleged to have occurred over the eleven months preceding the incident.  Although Mr. Conway had not decided earlier to discharge Claimant for these pre-December 19, 2000 offenses for reasons of expediency (he was not sure he could replace Claimant with anyone who could do the job any better), he resurrected them to serve as additional reasons to justify Claimant’s discharge.

There then ensued a confused effort by Respondent’s newly appointed Human Resources Manager, Ms. Rachel, to execute Mr. Conway’s discharge decision.  First, she conducted what she called an “investigation” of the incident, during which she learned from the bellman that Claimant had made the “pissed off” remark, but to him and not to Mrs. Farris, and from the front desk employee that there had been a loud discussion between Claimant and Mrs. Farris, during which he asked whether she was trying to tell him how to do his job.  She spoke with Mrs. Farris for two hours and learned her version of the incident and that she appeared to be emotionally distraught over it.  She did not speak to Claimant because she concluded, based on her “investigation”, that his version or explanation was irrelevant.

Overlooking Respondent’s Open Door Policy, which provides an employee the opportunity to be heard prior to the imposition of discipline, Ms. Rachel and other managers met with Claimant on December 23, 2000 and notified him he was discharged, as a fait accompli, citing a laundry list of incidents of poor performance in managing the purchasing and receiving department.  The final offenses on the list were incidents of such poor performance on December 21, and 22, 2000.  The incident on December 19, 2000 involving Mrs. Farris was listed as only one of the prior offenses.

When Ms. Rachel realized she had not followed the Open Door Policy, she withdrew the discharge and suspended Claimant with pay pending a meeting on December 27, 2000, at which he could present his responses.  That meeting did not occur, as Claimant hand-delivered a lengthy written response to each of the alleged offenses.  He remained on paid suspension while Respondent considered his response.

Notwithstanding the denials or explanations in Claimant’s response letter, Respondent maintained its decision to discharge him.  On or about January 8, 2001, Ms. Rachel mailed Claimant a letter notifying him of that decision by registered mail, return receipt requested.[1]  Rather than citing the final incidents of poor performance upon which she relied on December 23, 2000 as the final offenses for Claimant’s discharge, Ms. Rachel’s letter of January 5, 2001 relied primarily upon the incident involving Mrs. Farris.  For example, it pointedly referenced that Mrs. Farris’ complaint had come to the attention of the owner.  It is reasonable to infer from the content of the letter that her complaint to the Vice President and owner, or their reactions thereto, was the determinative factor in Mr. Conway’s decision to discharge Claimant at that time.

On or about January 16, 2001, over a week after the decision to discharge Claimant, Respondent’s managers opened the deposit box in which Claimant was required to maintain a “bank” of $500 in petty cash.  Respondent had a work rule, and Claimant had signed an agreement to the effect, that his bank was to be kept in a designated deposit box, which must contain cash and receipts totaling $500 at all times.  The agreement made violation of the rule a discharge offense.  Only $0.37 was found in the deposit box.

Based on such finding, but without seeking an explanation from Claimant, Ms. Rachel concluded he had embezzled $499.63 from the Resort.  She then advised the head of security, Mr. Felix, that Claimant had embezzled $500, provided him a photograph of Claimant and instructed him, if Claimant was found on the premises, security personnel should escort him off with care.  Mr. Felix, in turn, posted the photograph in the security office with a notation that Claimant had embezzled $500 and, if observed on the premises, should be removed with care.  Other employees of the Resort soon became aware of the information on the poster and rumors spread that Claimant had been discharged for embezzling money from the Resort.

When Claimant heard such rumors, he went to the Resort’s security office on January 16, 2001 and asked Mr. Felix for a copy of the posting.  At that time he had not received the notice of discharge mailed to him on January 8, 2001.  Although he denied the request for a copy, Mr. Felix allowed Claimant to read the posting.  After confirming it stated he had embezzled $500, Claimant immediately went to Respondent’s managers, took them to a file cabinet in the purchasing and receiving department and showed them receipts and cash totaling $500, thereby proving he had not embezzled the funds.  Although Respondent had the posting removed, it took no action to notify employees that, contrary to what they may have heard, Claimant had not embezzled any funds.

The next day, January 17, 2001, Claimant received the notice of termination by registered mail.  He was greatly disturbed by his loss of employment, as well as the rumors that he had embezzled funds.  The discharge and rumors of embezzlement caused Claimant embarrassment, as well as anxiety over whether they would impair his ability to find a comparable position on St. Croix.  He did not, however, seek treatment by a health professional and presented no evidence that he suffered emotional distress from the embezzlement rumors, significantly beyond that he would have suffered due to his discharge alone.

Despite numerous efforts to find comparable employment on St. Croix, Claimant found only sporadic, casual employment until recently, when he started to work as an automobile salesperson on a straight commission basis.  The total amount of his interim earnings at the date of the Final Hearing was $1,500.  Since his discharge, Claimant also received around $3,684 in unemployment compensation benefits.

ISSUES

            1.         Whether Respondent discharged Claimant without cause in breach of the Agreement.

            2.         Whether Respondent committed the tort of defamation against Claimant.

            3.         If the answer to either issue is in the affirmative, the appropriate remedy.  

CONCLUSIONS OF LAW
Discharge

The Salaried Employee Agreement provides Respondent may only discharge a salaried employee, such as Claimant, for cause.  Although “cause” is not comprehensively defined, the Agreement gives several examples, such as breach of the Agreement and violation of company policies and work rules.  Since provisions requiring cause, good cause, just cause, etc. for discharge are commonplace in both union and non-union employment contracts, there is no dearth of definitions of such terms in the caselaw.

The Wrongful Discharge Act of the U.S. Virgin Islands (hereinafter “Act”) expressly provides it applies in the absence of a contract of employment.  Thus, it would appear to be inapplicable to this case and that the Arbitrator should determine whether cause existed under the examples set forth in the contract or the commonly understood meaning of that term as defined in employment contract cases.

However, the parties have taken the position in their post-trial briefs that the standards of the Act should apply, apparently being of the view that, since cause is not defined comprehensively in the Agreement, it is appropriate to incorporate the permissible reasons for discharge contained in the Act as the complete definition.  Since both the parties desire to have the case decided in such manner, they have, in effect, amended the Agreement, for purposes of this case, to incorporate by reference the permissible grounds for discharge under the Act into the Agreement’s definition of “cause” for termination.

In the post-hearing briefs, the parties also agreed that only three of the reasons for which discharge is permitted under the Act are potentially applicable to this case:  (1) insolent or offensive conduct toward a customer that injures the employer’s business; (2) performing work assignments in a negligent manner; and (3) incompetence or inefficiency impairing the employee’s usefulness to the employer.

As a preliminary matter, the Arbitrator finds Respondent’s decision to terminate Claimant’s employment was due to the incident of December 19, 2000 with Mrs. Farris and not for the other alleged offenses relied upon by Respondent’s managers on December 23, 2000.  Based on Mr. Conway’s reversal of position after Mrs. Farris complained to the Vice President and owner, and the change in the emphasis of the incident from a prior offense on December 23, 2000 to the triggering event in Ms. Rachel’s discharge letter of January 5, 2001, the Arbitrator finds Claimant would not have been discharged at that time, but for such incident and Mrs. Farris’ complaint to the Vice President and owner.[2]

The question as to whether Claimant was discharged for cause, therefore, is whether, based on the weight of the evidence presented at the hearing, the incident of December 19, 2000 qualifies as one of the three permissible reasons for discharge contained in the Act, which the parties agree are potentially applicable.

In view of the evidence presented at the Final Hearing, such question must be determined entirely on the Claimant’s testimony describing the incident of December 19, 2000 involving Mrs. Farris.  Respondent produced no witnesses with personal knowledge of what occurred between Mrs. Farris and Claimant in the vicinity of the front desk nor on the way to the Conference Center.  Hearsay, although admissible in arbitration, cannot trump first-hand testimony.  Fortunately, this evidentiary shortfall by Respondent is of little significance, as it does not take serious the issue with Claimant’s basic testimony about such matters.

The first of the three permissible reasons for discharge under the Act raises the issue of whether Claimant’s behavior in the vicinity of the front desk and while returning to the Conference Center the evening of December 19, 2000 was insolent or offensive conduct toward Mrs. Farris, a guest of the Resort.  This question has three subparts, which involve whether Claimant was insolent or offensive toward Mrs. Farris (1) when he asked her in a raised voice whether she was telling him how to do his job; (2) when he retreated to the other end of the front desk and muttered to the bellman that Mrs. Farris was starting to piss him off; or (3) when he returned to the Conference Center in the golf cart at the same time Mrs. Farris was walking there to complain to Mr. Conway.

Whether Claimant’s question to Mrs. Farris of whether she was trying to tell him how to do his job was insolent or offensive conduct toward her should be determined by a two-pronged test:  (1) whether it was viewed in such a manner by Mrs. Farris, subjectively; and (2) whether a reasonable person would view it as such.  Even from Claimant’s description of the incident, it is reasonable to infer that Mrs. Farris subjectively felt his question, asked in a raised voice, was offensive, if not insolent.  The Arbitrator also finds a reasonable person would view Claimant’s question as, at least, offensive conduct toward Mrs. Farris.

However, the Arbitrator finds Claimant would not have asked Mrs. Farris the question had Respondent not invited him to consume alcoholic beverages at its on-premises Christmas Party.  Claimant testified that he was influenced by the consumption of two alcoholic drinks he had consumed at the Christmas Party in asking the question to Mrs. Farris.  When Respondent served such beverages to Claimant and other employees, it was reasonably foreseeable that one or more of them might be called back to duty in an emergency or other urgent situation.  Thus, Respondent must bear responsibility for any adverse consequences due to the impairment of the judgment of any such employees resulting from the alcohol it served them.  Under such circumstances, the Arbitrator concludes Respondent is estopped by its conduct from discharging Claimant for asking Mrs. Farris whether she was trying to tell him how to do his job.

Claimant’s comment muttered to the bellman after he withdrew from the confrontation with Mrs. Farris should be judged by the same test.  Again, it is reasonable to infer that the comment was subjectively offensive to Mrs. Farris when she overheard it.  On the other hand, the comment was not made to her, but to the bellman.  To be a ground for discharge under the Act, the offensive conduct must be toward the guest.  There is no evidence Claimant made the comment with knowledge Mrs. Farris was within hearing distance or with the intention that she overhear it.  Mrs. Farris followed behind him after he attempted to break off the confrontation and, as a result, placed herself in proximity to overhear the remark directed to the bellman only.  Under the circumstances, the Arbitrator finds that a reasonable person would not view Claimant’s statement to the bellman was directed toward Mrs. Farris.

The evidence concerning Claimant’s return to the Conference Center in the golf cart while Mrs. Farris was walking there to complain to Mr. Conway does not support a reasonable inference he was following, chasing, threatening, harassing or trying to intimidate her.  It was natural Claimant would return to the Christmas Party in the same manner as he had come from it – by golf cart.  Although Mrs. Farris was crying and appeared very upset when she reached Mr. Conway, the evidence suggests her anxiety was not due to fear for her personal well-being, but to anxiety that Claimant might reach Mr. Conway first and “poison his mind” with his version of the incident.  The Arbitrator concludes a reasonable person would not view Claimant’s return to the Christmas Party in the golf cart as insolent or offensive conduct toward Mrs. Farris.

The second of the three permissible reasons for discharge under the Act raises the question of whether Claimant performed his duties related to the incident negligently when he made the remark to the bellman, which was overheard by Mrs. Farris.  The Arbitrator concludes that he acted with reasonable care in retreating from the confrontation with Mrs. Farris and, under such circumstances, could not reasonably have anticipated Mrs. Farris would not also end the confrontation, but, instead, follow behind him and be positioned to overhear his muttered remark.

Finally, the third of the three permissible reasons for discharge under the Act raises the question of whether Claimant was so incompetent or inefficient in connection with the incident that it impaired his continued usefulness to Respondent in his position as manager of purchasing and receiving.  Nothing concerning the incident, standing alone, raises any reasonable question of Claimant’s overall competency or efficiency in performing the regular duties of his position.  For the reasons discussed above, the Arbitrator has concluded Claimant’s level of performance in managing purchasing and receiving should not be considered in this case in determining whether his discharge was for cause.

In view of the foregoing, the Arbitrator concludes Respondent did not have cause to discharge Claimant.

Defamation

It cannot be gainsaid that Respondent published a false and defamatory statement when Ms. Rachel reported to the head of security, Mr. Felix, that Claimant had embezzled $500, and when Mr. Felix republished said statement by posting a photograph of Claimant in the security office with accompanying text that repeated the accusation.

Although there is no direct evidence of actual economic loss by Claimant as a result of the defamatory statement, the general rule, as provided in the Restatement (Second) of Torts, is that an accusation of dishonest, immoral or criminal conduct is defamatory per se, meaning that harm to the victim’s reputation is presumed from the very nature of the accusation.  For defamation per se, the victim may recover compensatory damages, and upon a proper showing, punitive damages, without proof of actual economic loss.

Since there can be no doubt the accusation was false and defamatory per se, Respondent’s liability for defamation turns solely on whether:  (1) Ms. Rachel’s publication and Mr. Felix’s republication of the statement were protected by the conditional privilege to publish information reasonably necessary to protect one’s business interest; and (2) if so, whether that conditional privilege was abused.  Id.  Since the privilege is conditional, it is lost if abused by the publisher of the statement.  Id.

Because the Arbitrator concludes that Ms. Rachel’s publication and Mr. Felix’s republication of the accusation of embezzlement were within the ambit of such conditional privilege, the determinative issue as to Respondent’s liability is whether her conduct and that of Mr. Felix in publishing and republishing the accusation constituted an abuse of the privilege.  Under ordinary circumstances, the Arbitrator would find they abused the privilege by recklessly concluding Claimant had embezzled the $500 missing from the deposit box without first contacting him for an explanation, and by recklessly posting the accusation without reasonable safeguards to prevent it from being republished beyond those employees in the Resort’s security department.

The difficulty in reaching such a conclusion here is the publication and republication would not have occurred in the absence of Claimant’s violation of the work rule and written agreement requiring him to maintain his bank in the deposit box at all times.  But for Claimant’s own commission of a discharge offense by violating such rule and breach of such agreement, Respondent’s managers would not have had the occasion to act recklessly in concluding he had embezzled the funds or in posting the accusation without adequate safeguards.  Under such circumstances, the Arbitrator concludes Claimant is estopped by his own misconduct to maintain that Respondent abused the conditional privilege in such manner.  Therefore, Respondent is not liable to Claimant for defamation.

In view of the foregoing, the Arbitrator concludes Claimant cannot recover against Respondent on his defamation claim.

REMEDY

The remedy for discharge of an employee without cause in violation of an employment agreement ordinarily is restatement and backpay, or, when reinstatement is not feasible, backpay plus reasonable front pay.  An arbitrator may depart from such ordinary remedies when mitigating circumstances exist and fashion a more appropriate, or equitable, remedy when necessary to due justice.

Based on the facts in this case, the Arbitrator concludes imposition of the ordinary remedies of reinstatement or monetary recovery of loss of earnings would be inappropriate.  It would be inequitable to require Respondent to reinstate, or pay backpay or front pay, to Claimant in view of his violation of the work rule and agreement requiring him to keep his bank in the deposit box.  Claimant read and signed an agreement containing the work rule that he must always keep $500 bank in the deposit box and clearly providing violation of such rule would result in his discharge.  Yet, Claimant knowingly violated the rule and agreement by placing his bank in an unlocked file cabinet.  Claimant could have been discharged for such violation alone had Respondent amended or supplemented its discharge notice.

Under such circumstances, it would be unjust to award Claimant reinstatement or monetary damages, as such relief, in effect, would allow him to commit a discharge offense and return to work and/or be paid money damages.  Under such circumstances, the Arbitrator concludes an appropriate remedy is an award to Claimant of nominal damages in the amount of $100 and an order that Respondent purge its records of all references relating to Claimant being discharged and of the incident involving Mrs. Farris, and it not to make any reference to either in responding to inquiries regarding his employment.

CONCLUSIONS

Respondent terminated Claimant’s employment without cause in breach of the Agreement.  However, because he knowingly violated Respondent’s work rule requiring his bank be kept in the deposit box at all times would, standing alone, have been cause for discharge, the Arbitrator concludes it would be inequitable to compel Respondent to reinstate Claimant or pay him monetary damages.

The Arbitrator further concludes the appropriate remedy, under such circumstances, is to award Claimant $100 as nominal damages for Respondent’s breach of the Agreement and to order Respondent to purge its records of any reference to Claimant being discharged and the incident involving Mrs. Farris, and not to make any reference related to either in responding to inquiries regarding his employment.

AWARD

            1.         Claimant’s claim he was discharged without cause in breach of the Salaried Employment Agreement is hereby granted.  Respondent shall pay Claimant nominal damages in the amount of $100, purge its files of all references related to Claimant being discharged and the incident of December 19, 2000 involving Mrs. Farris, and not make any reference to either in responding to any inquiries regarding his employment.

            2.         Claimant’s claim for defamation is hereby DENIED.

            3.         Respondent shall pay the full amount of the Arbitrator’s fees and expenses.  Otherwise, each party shall bear its own attorney fees and costs.

            ENTERED THIS 27th day of June, 2002.

                                                            
LYNN E. WAGNER, ESQ.
Arbitrator


[1] Although Ms. Rachel’s letter is dated January 5, 2001, the Personnel Action Notification which she signed approving Claimant’s discharge was not signed until January 8, 2001.

[2] If the triggering incident for Claimant’s discharge had been in the nature of the proverbial “straw that broke the camel’s back”, involving an additional incident of poor management of the purchasing and receiving department, as was Respondent’s position on December 23, 2000, the Arbitrator would have determined whether cause existed based on the totality of such incidents.  However, since the triggering event relied upon by Respondent in its January 5, 2001 notice of discharge was of an entirely different nature, involving interaction with a guest after unexpectedly having to return from a Christmas Party after consuming alcoholic beverages provided by Respondent, the Arbitrator concludes the discharge should be judged on that event alone.

 

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