Corporate officers can be held liable for interfering with an employee's contract with the company only in very limited circumstances, the South Dakota Supreme Court ruled Wednesday in a case defended by DEHS.
In Gruhlke v. Sioux Empire Federal Credit Union, Inc., a mortgage company did not renew the contract of a senior mortgage underwriter. In addition to suing the employer for wrongful termination, the plaintiff sued the chief operating officer of the mortgage company. She asserted he wrongfully interfered with her contractual relationship by advocating the nonrenewal. The trial court dismissed the claim against the company officer, represented by DEHS litigator Eric Schulte. In a unanimous decision, the Supreme Court affirmed the dismissal and set out rules to govern such claims.
The Court said claims against a corporate officer, director, supervisor, or co-worker for tortious interference with an employee's contract can only be made if that person "acts wholly outside the scope of employment, and ... through improper means or for an improper purpose." It said the first element was necessary because otherwise "'virtually every supervisory decision affecting employment status would be subject to judicial challenge through the Trojan horse of the intentional interference tort.'" Under established South Dakota law, an act generally is within the scope of employment if it is connected either directly or indirectly with the business of the employer and designed to benefit the employer’s business.