I have a secretary who is also an officer/shareholder of our small corporation. She has made banking errors, bookkeeping mistakes, employee time card errors, etc. Every facet of her duties have been less than sub-par. Even though she’s an officer/shareholder can I fire her?
Ann Kiernan replies:
In many small corporations, there are written contracts that specify the rights of shareholders who are also officers and/or employees. For instance, a shareholders’ agreement might specify that employment can be terminated at will, or only for good cause. It does sound like you may well have good cause, based on her performance.
But I strongly urge you to get legal advice before deciding whether to fire her. In many states, corporation statutes include provisions protecting the rights of minority shareholders against oppression by the majority. For instance, in New Jersey, where I practice law, our Supreme Court has found that someone who owns a minority interest in a small corporation commonly does so, not only in the hope of enjoying an increase in the value of the shares, but also for the assurance of employment and a voice in the operation and management of the business. When the majority frustrates a minority shareholder’s “reasonable expectation” of continued employment, courts have found that such action constitutes unlawful oppression.
So, before taking any disciplinary action, please consult a local lawyer who knows both employment law and corporate law in your state.
Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.