WRONGFUL TERMINATION & TORTIOUS INTERFERENCE WITH BUSINESS RELATIONS
Throughout this series we will detail some of the common methods that majority
shareholders use to destroy a minority shareholder's value in the
company and what rights a minority shareholder has when this happens.
In this post we address wrongful termination and a majority shareholder's
tortious interference with a minority shareholder's business relations.
The most common method the majority shareholders utilize to reduce the
minority shareholder's interest in the company is to terminate the
minority shareholder as an employee. Majority shareholders try to remove
a minority shareholder in an effort to take a company for themselves by
unilaterally "firing" the minority shareholder from the company.
Barring entry to the place of business, changing the locks, and preventing
minority shareholders from retrieving their personal belongings are common
methods employed by majority shareholders. Any employee without an employment
contract, no matter how much value he or she owns in the company, is not
guaranteed employment, but is rather an at-will employee at the command
of the board.
As an at-will employee, the employee normally cannot challenge a decision
by the board to terminate his or her employment. Shareholder employees of closely held corporations are especially at risk
from wrongful termination because in a closely held corporation the value
of owning the company is in the running and management of the company
just as much as the actual ownership. Without an employment interest in
the company, a minority shareholder has no say in the way the company
is managed, no compensation for his or her services, and is not entitled
to other employment benefits. This severely reduces the value of any minority
ownership of shares. However, there are some safeguards in place to prevent
In the case of a shareholder who is also an officer of the company, there
are usually several requirements in place for terminating the employment
of an officer in the company bylaws, even if the employment of that officer
is at-will. Failure to abide by these bylaw requirements will create a
cause of action for a wrongful termination claim. Common requirements
usually include a majority vote from the board of directors and written
notice of a board of directors meetings. Additionally, notice of meetings
usually has its own time and notice requirements, including directions
for proper mailing, certain amount of days' notice before the meeting,
and stating the purpose of the meeting (employee termination) in the notice.
Georgia law requires that these bylaw rules be followed for proper officer
or director termination. Failure to follow these rules can create a claim for a terminated shareholder
to recover his or her entire salary from the date of the wrongful termination.
Wrongful termination may also give rise to a claim for tortious interference
with another's business relations. In terms of a closely held corporation,
the law in Georgia allows for tortious interference to be found when an
employee minority shareholder is fired by a majority shareholder who does
not have an absolute right to do so. This is a result of the fact that Georgia courts have found employment,
even if at-will, to be a property right. Thus, any individual that interferes
with this right may be sued for tortious interference. Depending on the action taken, any unilateral termination of the minority
shareholder's employment by the majority shareholder without following
the correct procedures of the corporation may result in the majority shareholder
(but not the corporation itself) being personally liable for damages. This can happen when the employee is an at-will employee with no employment
contract, or even as an employee under contract with the company.
In order for a minority shareholder to bring a successful claim against
a majority shareholder for tortious interference, he or she must prove
that (1) there was improper conduct by the majority shareholder without
privilege, (2) performed purposefully, (3) that induced the company not
to enter into or continue a business relationship, and (4) the minority
shareholder suffered some financial injury. Many majority shareholders in small companies both will not take the time
to follow proper corporate procedure or forget to do so, and will attempt
to fire minority shareholders outright, so these requirements are sometimes
easily met. Also be on the watch for slanderous and libelous claims by
the majority shareholder to business partners or other shareholders. Be
aware of your rights to a claim of tortious interference against the majority
shareholder in case this situation occurs. Frequently knowing your rights
as a minority shareholder is half the battle. Keep informed of the privileges
of an employee and involved with the inner workings of your company to
avoid problems like the ones above. Wrongful termination is just the first
step in a minority shareholder squeeze-out that sets the stage for withholding
of dividends and tax burdens, the subject of the next post in this series.
 F. Hodge O'Neal & Robert B. Thompson, Oppression of Minority Shareholders
and LLC Members, § 3:6 (rev. 2nd ed. 2004).
 O.C.G.A § 14-2-808.
Troy v. Interfinancial Inc., 171 Ga. App. 763, 320 S.E.2d 872 (1984).
 "The fact that employment is at will and that the employer is free
from liability for discharging an employee does not carry with it immunity
to a third person who, without justification, causes the discharge of
the employee. Thus, the rule has been stated that where a third person
induces an employer to discharge an employee, under a contract terminable
at will, but under which the employment would continue indefinitely, in
accordance with the desire of the employer, except for such interference,
and where the only motive actuating the third person is a desire to injure
the employee a cause of action arises in favor of the employee against
such third person."
Ott v. Gandy, 66 Ga. App. 684, 19 S.E.2d 180, 182 (1942).
Georgia Power Co. v. Busbin, 242 Ga. 612, 614, 250 S.E.2d 442, 444 (1978);
Am. Standard, Inc. v. Jessee, 150 Ga. App. 663, 664, 258 S.E.2d 240 (1979).
Campbell v. Carroll, 121 Ga. App. 497, 498-99, 174 S.E.2d 375, 377-78 (1970).
Hayes v. Irwin, 541 F. Supp. 397 (N.D. Ga. 1982).