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No contract ‘clawback’ for public employee

A Norfolk city agency cannot collect contract damages against the supervisor of a “no-show” employee for the money the agency paid the absent employee, a Norfolk Circuit Court says.

Virginia contract law does not provide a basis to hold a public employee liable for agency mismanagement, the court said.

The Norfolk Community Services Board filed suit in 2011 to recover money it spent on salary and benefits for an employee who was suspended but who stayed on the payroll for 12 years, allegedly collecting as much as $320,000. The suit named as defendants Jill McGlone, the suspended-with-pay worker and four former agency staffers.

In February, Norfolk Circuit Judge Everett A. Martin said the CSB could sue McGlone for unjust enrichment but could only recover for pay dating from 2008.

On May 23, Martin ruled on a demurrer filed by former agency director George Pratt. The court rejected three grounds for dismissing the contract claim against Pratt: that the contract was too vague to establish a standard to judge Pratt’s actions; the breach had been concealed from Pratt and termination was the exclusive contract remedy.

But Martin said the agency claim for pay collected by McGlone was a demand for consequential damages that was not reasonably foreseeable. It was hard to believe Pratt could have contemplated such liability, as the payments to McGlone “began more than seven years before Pratt signed the first contract at issue,” Martin said.

Private employers may be including “clawback” clauses in employment contracts that let them recoup compensation when an employee causes damage to an employer, but it’s not happening in the public sector, according to Martin.

“If Virginia municipalities wish to make the heads of agencies personally liable for financial mismanagement they should expressly so provide by contract,” and expect to pay higher salaries and find fewer people willing to take the positions, Martin said.

By Deborah Elkins

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