The Termination of a Shareholder/Employee Without Cause Could Constitute Minority Oppression
As I stated in my previous posts, in New Jersey, the seminal case as to what constitutes minority oppression is Brenner v. Berkowitz, 134 N.J. 488 (1993). In that case, the NJ Supreme Court applied the “reasonable expectations of a shareholder” test to determine what constitutes minority oppression.
The termination of an employee could constitute minority oppression. A North Dakota case applying the same test used by New Jersey Courts, namely, “reasonable expectation of a shareholder” test found that a shareholder/employee should not be terminated without cause. The Court in Pedro v. Pedro, 489 N.W.2d 798, 802 (App. North Dakota. 1992) reasoned “in addition to an ownership interest, the reasonable expectation of such a shareholder are a job, salary, a significant place in management and economic security for his family.” The Pedro Court went on to hold, “in a closely held corporation the nature of the employment may create a reasonable expectation by the employee-owner that his employment is not terminable at will.” Id. at 802.
In other words, if a shareholder has the reasonable expectation to enjoy a job, that shareholder should not be terminated without cause.
Scott Unger is a Shareholder in Stark & Stark's Lawrenceville, New Jersey office concentrating in Shareholder & Partner Dispute Litigation. For questions, or additional information, please contact Mr. Unger.
