On December 27, 2017, the U.S. Court for the Southern District of New York dismissed the case of a former Teva Pharmaceuticals USA, Inc. (“Teva”) employee who was fired, for cause, because he violated Teva’s: (1) Conflict of Interest Policy, Outside Employment Policy, and Electronic Communications Policy.
The terminated employee was an Associate Director of Process Engineering. While employed by Teva, the terminated employee failed to disclose, in writing, an ownership interest in multiple other businesses, including an ownership interest in Suffern Pharmacy (“Suffern”), a retail pharmacy and wholesale supplier of branded drugs.
During a period of time when the terminated employee worked for Teva and simultaneously held an ownership interest in Suffern, Teva purchased roughly $470,000 in branded drugs from Suffern. As a result, Suffern made approximately $50,000 in profit from these transactions.
As the result of a routine audit, Suffern was identified as a supplier in need of further review. Because the terminated employee had an ownership interest in Suffern, the review of Suffern was transferred to Teva’s Office of Business Integrity and an investigation ensued.
The investigation determined that the terminated employee used his Teva email to correspond on behalf of his outside business interests during regular Teva business hours. At the conclusion of the investigation, Teva terminated the employee for cause because, as stated above, he violated Teva’s Conflict of Interest Policy, Outside Employment Policy, and Electronic Communications Policy.
The Court agreed that the employee was terminated for cause. In reaching this conclusion, the Court stated that: “[b]ehavior that constitutes cause for termination is defined by contract, including company policies and procedures even if the employee is at will.” (citation omitted).
The Court found that the employee was in violation of several Teva policies at the time he was fired. Specifically, Teva’s Code of Conduct states:
E]mployees who violate the Code will be held accountable and sanctioned appropriately. This may include termination for employment…Misconduct that may result in discipline includes…violation of the Code.
The Court noted that Teva’s Code of Conduct also incorporates, by reference, other Teva policies. In this regard, Teva’s Code of Conduct states:
In certain cases, this Code of Conduct is supplemented by additional policies that cover specific topics in more detail…[The Code] is not as comprehensive as these supplemental policies and therefore does not supersede them or act as a substitute for reviewing each policy that applies to [an employee’s] specific job.
The other policies that the Court examined were Teva’s Conflict of Interest Policy, Outside Employment Policy, and Electronic Communications Policy.
First the Court found that the employee violated Teva’s Conflict of Interest Policy by failing to disclose to Teva, in writing, his interest in Suffern. Teva’s Conflict of Interest Policy states:
Each employee must be free from any actual or potential conflict of interest and must avoid even the appearance of such a conflict in dealing with other businesses or individuals on behalf of Teva. A conflict of interest may arise in any situation in which an employee’s judgments and loyalties are divided between any business or outside interest that, to any degree, is incompatible with the best interest of Teva…Types of activities and relationships that could potentially affect an employee’s independent judgment may include outside employment relationships…[or] personal investments…For this reason, employees must disclose, in writing and in advance, any potential or actual conflict of interest for resolution…Employees should avoid outside business or consulting activities that would divert their time, interests or talents from Teva business. The employee’s manager must approve, in writing, any outside or consulting activity for a vendor, a supplier of goods or services…or a business that provides services to or related to the healthcare industry.
Second the Court found that the employee violated the Outside Employment Policy an Electronic Communications Policy by using Teva work time and Teva-owned technology to further Suffern’s interest. The Outside Employment Policy states:
It is the policy of Teva that no outside employment or interests interfere with the ability of employees to satisfactorily perform their job duties and meet scheduling demands and other work requirements of Teva…Teva may opt to terminate the employee’s employment if Teva, at its sole discretion, determines that the circumstances of the employee’s violation of the policy renders continued employment inappropriate.
Teva’s Electronic Communication Policy states:
All electronic communication systems and hardware must be used primarily for business purposes. Personal use must remain limited, incidental and in no way affect productivity. The consequences of a violation could include termination of employment.
The terminated employee used his computer and email to conduct business for Suffern and his other businesses. These emails were voluminous and in one month generated 115 emails that related to one Suffern transaction alone.
Having concluded that Teva terminated the employee for cause, the Court found that the terminated employee was not entitled to retroactive payment of a higher salary, a bonus since he was not employed by Teva at the time discretionary bonuses were awarded, or stock options that he failed to exercise before his termination.
See Iqbal v. Teva Pharms. USA, Inc., 2017 US. Dist. LEXIS 212740.