## Facts

- Wilfred J. Wakefield worked as a telephone-equipment salesman, initially for Danray, Inc., beginning in 1975.
- A written 1978 “Sales Incentive Plan” governed sales commissions; after Northern Telecom, Inc. (NTI) acquired Danray in 1978, NTI adopted that plan.
- The plan was described as conditioning commission payments on the salesperson being an “active employee” on the payment date.
- On October 26, 1979, NTI discharged Wakefield (age 50) and numerous other employees.
- Wakefield claimed NTI owed him commissions on sales secured before termination and alleged he was fired to avoid paying commissions otherwise due under the plan.
- Wakefield filed age-discrimination complaints administratively, then sued in federal court asserting age discrimination and additional state-law theories; by trial, only the contract-based commission claim went to the jury.
- Wakefield withdrew his age-discrimination claim during trial, but it was not formally dismissed.
- The jury awarded Wakefield $111,079.87 on the contract/commission theory; the district court denied NTI’s post-trial motions, and NTI appealed.

## Issues

1. Whether the jury instructions improperly expanded the implied covenant of good faith and fair dealing into a generalized wrongful-termination theory in an at-will employment setting.
2. Whether the jury should have been instructed to determine whether the 1978 Sales Incentive Plan (including an “active employee on payment date” condition) governed Wakefield’s commission rights at termination.
3. Whether the withdrawn age-discrimination claim should be dismissed with prejudice.

## Decision

- The Second Circuit reversed the contract damages award and remanded for a new trial.
- The court held the jury charge misstated the limited role of the implied covenant in an at-will relationship and risked imposing liability for termination on broader “wrongful discharge” notions rather than on contract-based commission avoidance.
- The court held the jury should have been instructed to decide whether the 1978 Sales Incentive Plan remained in effect and, if so, to apply its terms (including any continued-employment condition) to the commission claim.
- The court directed that the withdrawn age-discrimination claim be dismissed with prejudice.

## Legal Principles

- In at-will employment, an implied covenant of good faith and fair dealing does not generally require “cause” for termination and cannot be used to convert at-will employment into a just-cause regime.
- The implied covenant may support liability where an employer terminates an at-will salesperson for the purpose of preventing payment of commissions that are already earned or virtually certain under the governing commission agreement.
- When commission entitlement depends on the terms of a written incentive plan (including any requirement of continued employment on the payment date), the factfinder must be properly instructed to determine the plan’s applicability and legal effect.
- A claim withdrawn during trial may be dismissed with prejudice where fairness and litigation conduct warrant final disposition.

## Conclusion

The Second Circuit required a new trial because the jury instructions improperly broadened the implied-covenant theory and failed to focus the jury on whether the governing commission plan (and its continued-employment condition) controlled Wakefield’s entitlement to commissions, and it ordered the withdrawn age-discrimination claim dismissed with prejudice.


Wakefield v. N. Telecom, Inc., 769 F.2d 109 (2d Cir. 1985)