Shareholder Oppression V. Employment-at-Will in the Close Corporation: The Investment Model Solution

66 Pages Posted: 24 Oct 1999 Last revised: 24 Aug 2010

See all articles by Douglas K. Moll

Douglas K. Moll

University of Houston Law Center

Date Written: August 23, 2010

Abstract

When the employment of a close corporation shareholder is terminated, the possibility of legal redress depends upon two seemingly inconsistent doctrines. On the one hand, the shareholder oppression doctrine of corporate law protects the "reasonable expectations" of a close corporation shareholder, including the expectation of continued employment. On the other hand, the at-will doctrine of employment law conveys the general rule that there is no legal protection of employment in the close corporation and in various other settings. Whereas the shareholder oppression doctrine often grants relief to a discharged close corporation worker, the employment-at-will doctrine rarely allows a recovery.

Despite this apparent conflict, Professor Douglas Moll argues that numerous courts have awarded relief from termination under the shareholder oppression doctrine without any mention of the employment-at-will rule. Professor Moll asserts that these courts give no satisfactory justification for the displacement of a relevant employment law principle, and they utterly fail to explain why the employer's traditional discretion to terminate employment for any reason should be constrained in the close corporation setting.

In response to these judicial shortcomings, Professor Moll introduces and develops the investment model of oppression--a model that reconciles the doctrines of shareholder oppression and employment-at-will in a manner that both protects close corporation employment and respects the legitimate sphere of operation of the at-will rule. Under the investment model, shareholder oppression is viewed as a doctrine that protects the fair value of a close corporation shareholder's investment. As Professor Moll argues, the fair value of that investment often (although not always) includes employment in the particular close corporation. Thus, when a job and its benefits are proven to be part of a close corporation shareholder's investment, Professor Moll concludes that they can be protected by the shareholder oppression doctrine without running afoul of the at-will rule.

Professor Moll's proposed investment model of oppression explains seemingly inconsistent judicial opinions and sheds light upon the amorphous doctrine of shareholder oppression. Moreover, the model provides a coherent framework for courts evaluating close corporation employment discharges and for shareholders seeking to make informed business and investment decisions.

Keywords: corporation, oppression, close corporation, closely held, shareholder oppression, fiduciary duty, employment, at-will, employment at will

Suggested Citation

Moll, Douglas, Shareholder Oppression V. Employment-at-Will in the Close Corporation: The Investment Model Solution (August 23, 2010). University of Illinois Law Review, Vol. 1999, No. 2, pp. 517-581, 1999, Available at SSRN: https://ssrn.com/abstract=188748

Douglas Moll (Contact Author)

University of Houston Law Center ( email )

100 Law Center
Bldg. TU2
Houston, TX 77204-6060
United States
713-743-2172 (Phone)
713-743-2238 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
361
Abstract Views
2,540
rank
92,073
PlumX Metrics