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Designer Todd Oldham's lawsuit against retail giant Old Navy has been reinstated by the 2nd Circuit Court of Appeals. Previously, the Old Navy lawsuit had been tossed out by the district court.
Oldham had originally demanded $75 million in royalties and damages. The lawsuit arose out of Old Navy's failure to launch a Todd Oldham-branded line of clothing in 2008. He has now lowered his claim to $20 million.
Oldham was fired about 2 days after he filed the original suit for the lost royalties, according to the court decision. He then added a claim of wrongful termination to the complaint.
Originally, the district court had ruled that the firing of Oldham was not wrongful termination. Oldham would not have been able to perform his functions to "motivate, inspire, coach and share vision, insight and passion with Old Navy's creative team," according to Judge Chin.
But, the 2nd Circuit court disagreed with Judge Chin on this point. They said that since Oldham's suit was filed under seal, he would have had no problems executing his duties. Also, during his tenure at Old Navy, he had received nothing but glowing reviews for his work, according to the court's opinion.
So, what did Old Navy do wrong? Why are they now open to up to $20 million in damages for firing Oldham? Most employees are "at will" employees and can be fired for whatever reason. However, employers need to be careful not to breach the employment contract when they fire an employee, and not to fire an employee for illegal reasons.
In Old Navy's case, the agreement with Oldham and his design company L-7 was that Old Navy was supposed to give Oldham notice of a breach of the agreement - and 30 days to "cure" the breach. Even if Old Navy believed that Oldham had violated their agreement by filing suit against them, they should have given him notice and 30 days to fix the situation.
The Todd Oldham lawsuit will likely be a lesson for Old Navy. Lawsuits by ex-employees can be costly, so avoiding them by not wrongfully terminating their contract would be for the best.