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What if I am Fired After Suing for Shareholder Oppression?
Monday, July 31, 2023

If you are a minority shareholder in a New Jersey corporation (or member of an LLC), and you work for the company, it is important to know that filing, or threatening to file, business divorce litigation may not be without cost. I warn clients continually that, if you work for a business and you sue that business and/or the majority owner, you just might find your employment terminated.

Many clients tell me they have been advised that if they file suit, the company “can’t fire them.” This is simply incorrect. While it may be true that the company cannot fire you without potential consequences for doing so, you must understand how initiating litigation is likely to play out so you can fully comprehend what you may be getting yourself into.

Many clients expect, or at least assume, that the court will intercede and reinstate their employment. While that could conceivably happen, it is rare and certainly cannot be counted on - at least not until the end of the case.

Some clients can survive being terminated, especially if they are suing under the oppressed minority shareholder statute for a buyout. They may be fairly confident that if they can financially survive the litigation, an ample “payday” awaits by way of a buyout. Other clients, though, will have a real problem surviving an entire litigation with no income – especially with legal bills mounting.

While termination of employment could seriously impact a minority shareholder plaintiff, it may be a dangerous move for the majority to use. Courts often (but not always) will consider a termination of a shareholder/employee to be an act of oppression in-and-of itself. A termination that was precipitated by either filing suit or threatening to do so is even more likely to be seen as oppression, as it could be perceived as retaliation. When representing companies and majority owners, I often inform them that if they terminate the employee, they may be handing the employee/shareholder an oppression claim where they didn’t really have one to start with. In advising minority owners, I often inform them that although termination may put them in a financial bind temporarily, it might be the best thing for their lawsuit.

Understanding your rights in this area is critical to devising an effective strategy as you proceed to address the concerns you have with your business partners. Some clients will be much more hesitant to file suit, while others feel they simply have no choice. But all your decisions should be made with full knowledge of the risks you face.

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