In Employment Termination Context, "Cause" Means Something

What does "cause" mean?  In McManus v. Richards, an orthodontist was buying into a practice group, but four years into the buy-in contract, when she had paid for a 45% interest and was nearing equal partner status with the other orthodontist, she was fired for "cause."  The two doctors had apparently fallen out and the one buying in informed the other of her intent to dissociate from the practice, so she was fired preemptively.  She showed up to the office one morning, and the locks had been changed, computer passwords changed, and she was excluded access to patient records.

As we often see with such ownership buy-in arrangements, there was a buy-in contract, but no separate employment contract.  The buy-in contract identified party rights to dissociate, voluntarily or in event of "cause," but "cause" was not defined.  The existing practice owner argued that in this case the word "cause" was merely as defined by the dictionary - any reason whatsoever the previous owner chose to terminate would suffice; it did not require any finding of wrongdoing.

The appellate court disagreed, reasoning that the contract must be read and interpreted as a whole.  The court noted that in the employment context, "cause" is defined as "some substantial shortcoming, recognized by law and public opinion as a good reason for termination."  The court noted that an employer must have more than a subjective reason to discharge an employee for "cause," and that in this case, in which the contract at issue was not merely an employment contract, but an agreement for buy-in to ownership interest in a limited liability company and practice, the standard for what is "cause" would be even higher than in the regular employment context. The court referenced section 35-45(6) of the Illinois Limited Liability Company Act as a "guide" for what type of conduct might be considered "cause" in this context.  The court then remanded the case to the trial court to further consider this issue (the trial court had granted summary judgment to the senior owner).

Anyone with a written employment agreement should carefully review what it says would constitute "cause" for termination. Similarly if you are buying into a professional practice, or if you are the senior partner or owner allowing another professional to buy into your practice, do not overlook this provision, to carefully define what conduct if any would be just reason to call off the deal.