Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DVt: Employer/Employee Relationship Not Covered by Vermont Consumer Protection Statute, (May 31, 2013)

By Jody Coultas, J.D.

AADCO Medical, Inc. could not amend its counterclaim filed against a former employee to include a Vermont Consumer Fraud Act (CFA) claim because the statute did not cover the employer-employee relationship at issue, the federal district court in Rutland, Vermont has held (Nashef v. AADCO Medical, Inc., May 28, 2013, Reiss, C.).

After AADCO fired the employee for numerous deficiencies in performance, the employee filed suit against the company. AADCO counterclaimed that the employee breached the employment contract by failing to perform certain duties and committed an actionable abuse of process by filing suit against the company. The company also sought to add the CFA counterclaim based on the employee allegedly misrepresenting his experience level.

At the outset, the court noted that the Vermont courts have not settled whether the heightened pleading standard of Federal Rule of Civil Procedure 9(b) applied to CFA claims. However, based on previous rulings, it seemed unlikely that the legislature intended to require the heightened standard. Nothing in the legislative history, plain language, or case law supports applying Rule 9(b) to CFA claims.

There was no basis to extend the CFA to cover the type of employment dispute in this case, according to the court. It was unsettled as to whether the CFA applies to unfair or deceptive acts committed during the formation of an employment contract. The CFA covers consumers that are injured during the course of contracting for goods or services. An employment relationship generally does not involve consumers or sellers. Employers already may remedy misrepresentations made by employees by terminating that employee. The court did not see the need to extend the CFA to protect the relationship. Such a ruling would erase the distinction between employees and independent contractors, who do sell their services to employers. Absent a ruling by the Vermont legislature, the court found it to be unlikely that the Vermont Supreme Court would extend the CFA to include the relationship between employees and employers.

The case is No. 5:12-cv-243.

Attorneys: Robert D. Mabey (Ellis Boxer & Blake) for Charles Nashef. Kerin E. Stackpole (Paul Frank Collins PC) for AADCO Medical, Inc.

Companies: AADCO Medical, Inc.

Cases: StateUnfairTradePractices VermontNews