Breach of Executive Employment AgreementCalin Yablonski2021-09-23T22:36:59+00:00
Though New York is an “at-will” employment state, meaning that in general a company can fire a senior executive or other employee at any time and without any justification, highly skilled and influential professionals often negotiate employment agreements that protect them from arbitrary termination.
What is a Breach of an Employment Agreement in New York?
Once an employment contract is signed, a breach of the terms in the contract by either party can be grounds for a lawsuit. However, despite the existence of a legal and enforceable contract, employers sometimes terminate an executive’s employment before the end of the term, and in violation of the employment agreement, refuse to pay the severance and other benefits that are promised if a termination occurs prior to the end of the term. At this point, an experienced breach of employment agreement lawyer may be needed to enforce the executive’s legal rights under the employment agreement.
What are the terms of the Employment Agreement?
An employment contract contains the terms that are agreed upon between the parties. Contract terms can vary widely depending on the industry and are often specific to an individual position, but in general include provisions that address the following:
Compensation and benefits;
Job title and responsibilities;
Non-disclosure agreements, typically regarding employer trade secrets, client lists, and other sensitive or confidential information of the employer;
Non-compete clauses that may limit future employment options following termination;
Grounds and process for the termination of employment; and/or
Severance pay and benefits upon termination.
What is an “evergreen” renewal clause?
Senior executives, management personnel and highly-skilled and respected professionals typically have the leverage to demand favorable employment contracts that provide for a specific term of employment, with automatic annual renewals unless the employer provides notice of nonrenewal well in advance of the end of the contract term. This type of provision is called an “evergreen” term.
What other terms are considered in evaluating the employment relationship?
In evaluating the legal obligations of an employer, in addition to the employment agreement, courts may consider other terms that govern the business relationship, such as promises or restrictions contained within the company employee handbook, or oral agreements made between the executive and the employer.
Aspects of the employment relationship that are not addressed in the contract may be resolved according to applicable federal or state law. For example, in the absence of a specified term of employment, New York state at-will employment laws apply. The result is that, unless the termination is based on discrimination or a hostile work environment because of a protected characteristic, or retaliation for opposing discrimination or acting as a whistleblower, there is generally no protection from termination. A breach of contract lawyer understands the complexities of the law and can help you to determine if you have been wrongfully terminated.
Do executives receive severance pay if their employment is terminated without “cause?”
While employers typically retain the right to fire an executive under an employment agreement, even if no misconduct has been committed to warrant a termination, under such circumstances the employment agreement usually mandates the payment of severance that is equivalent to the executive’s compensation for a specified period of time (such as one year or through the remainder of the term of the contract or other agreed upon time period).
What is a termination for “cause?”
Though employment agreements typically provide for a severance payment if the executive is terminated without “cause” before the end of the contract term, no severance is usually payable if the employer terminates the executive’s employment for “cause.” In essence, the definition of “cause” lays out the situations where no severance will be payable by the employer if the executive’s employment is terminated before the end of the contract term. “Cause” is usually defined to include the conviction of a crime, acts of dishonesty, engaging in fraud or other willful misconduct, and a failure or refusal to follow the lawful instructions of the board of directors or a senior officer. However, often employers draft employment contracts that define “cause” ambiguously or loosely so that an accusation of “cause” ends up being subjective and may be used as a justification for terminating an executive’s employment without payment of the severance called for in the agreement.
What is a “notice and opportunity to cure” provision?
Employment agreements typically provide for notice from the employer of a “cause” incident or other material breach of the agreement by the executive, along with a detailed description of the alleged misconduct committed by the executive so that they have an opportunity to cure the complained of conduct within a certain time period – where curable (some misconduct is so severe that there are no fixing things). Generally, if a “notice and opportunity to cure” provision is included within the employment agreement, an employer cannot fire the executive without first addressing this “condition precedent.” A failure by the employer to provide the requisite notice and opportunity to cure the alleged misconduct before firing the executive can result in a material breach of the agreement.
What is a “wrongful termination” of an executive with an employment agreement?
Termination clauses may allow an employer to fire an executive only for the specific reasons that are laid out within the contract. In this situation, if the employer terminates an executive’s employment but fails to disclose the grounds for the termination, or provides a reason other than what the contract specifically allows for, the termination may be wrongful on the basis of a breach of contract.
In addition to requiring the employer to lay out the grounds for the termination, the contract may stipulate how the employee may be discharged from their position. For example, the agreement may require that the employer provide prior written notice of termination by mail or other means that are set forth in the employment agreement. Under these standard provisions, if an employee is fired verbally or with no prior notice, the employer may be liable for breach of contract.
How to Prove a Breach of Employment Contract Case in New York
In New York, an employee seeking to enforce an employment contract must prove (1) the existence of an employment contract, (2) that the employee materially performed their obligations, (3) that the employer failed to perform its obligations, and (4) that damages resulted from the employer’s failure to perform. The remedy is usually to receive the lost wages and other compensation that would have been received under the contract had it not been breached by the employer.
Can I Sue for Breach of Contract After Termination?
Employment agreements are subject to New York contract law, which can be complex. It can be advantageous for an executive to review the agreement and the circumstances with an experienced breach of contract attorney to determine what protections may be available. For example, upon termination, an attorney should review the employment agreement as well as the events leading to the dismissal to determine whether the termination fell outside the reasons allowed by the contract or whether a severance payment is owed. If so, depending on the individual circumstances, an employee may have grounds to sue for breach of contract.
Employees who have been terminated in violation of the terms of their employment agreements can often hold their former employers liable for damages that arise as a result of the breach. The damages are typically tied to the severance payment requirements under the agreement, or to the executive’s compensation multiplied by the number of months or years remaining in their contract term.
Claudia Pollak, Esq. is an experienced employment lawyer based in Westchester County, New York. She advises on executive employment contracts and offers aggressive representation for employees who have suffered harm as a result of an employer’s contract breach. Contact her today at 914-LAW-9111 (914-529-9111) for a confidential consultation about your case.