Thanks to all who came to our Labor & Employment seminar on Thursday. Our biggest crowd yet. In it, we talked about the importance of offer letters.  Marc Herman returns today with a post updating us on a recent Connecticut Supreme Court decision that came out while I was on vacation a while back that makes that point even clearer.  

hermanPicture this: Jill works for you.  You fire her as an at-will employee.  Two weeks later, you receive a letter from Jill claiming that she is owed commission for several sales that she completed prior to her termination.

What should you do?

Let’s look at her offer letter.  That it usually a good starting place.

Blah, blah, blah. . . ah, something about commission.  Let’s see what it says:

Commission is only paid once work has been performed and invoiced to the client.  Upon termination of employment, all commissions cease, except those commissions that have been invoiced to the client.

You look again at Jill’s letter and look-up her recent sales.  You realize that the commission to which she refers relates to sales that had not yet been invoiced to the client when Jill was fired.

You excitedly draft a response to Jill  – “Sorry, Jill – you’re out of luck!” (or words to that effect — your lawyer can probably help with the wording).

Jill sues you.  She argues that you owe her money.  Moreover, she argues that the commission provision is unenforceable as a matter of public policy — “you can’t deprive me of commission that I worked hard for!”

Now what?

Well, in a recent decision, the Connecticut Supreme Court concluded that provisions like the one above may be enforceable — and that employers may not have to pay a commission because of the language used in the offer letter.

In Geysen v. Securitas Security Services USA, Inc. (bearing facts very similar to Jill’s), a former employee argued that such compensation provisions are unenforceable as a matter of public policy and therefore his former employer had violated the law by not paying him commission.

The trial court agreed.

On appeal, the CT Supreme Court issued a thoughtful decision.  It made two main points:

Point One: Parties should have the freedom to make contracts with unfavorable terms.

Point Two:  You cannot draft a contract that simply tries to work-around the law.  They violate public policy — A big no-no.

So what about provisions like the one above?

The easiest answer is that such provisions should pass legal muster.  Sure, it may contain terms that favor the employer, but that’s ok because the parties bargained for it.  Nor is it a work-around the law; the law simply requires that employers pay employees in accordance with any agreement.

After concluding that the provision was enforceable, the Court read it literally: no commission due.  The Plaintiff’s hard work aside, he had previously agreed that no commission would be “due” prior to the client being invoiced.

The Court also agreed with the defendant-employer that the employee’s claim of wrongful discharge (as a matter of public policy) was also without merit.  No violation of public policy and therefore no wrongful discharge.

Note, however: the Court left open the possibility that such practices could amount to a breach of the implied covenant of good faith and fair dealing.  This really concerns the employer’s motive.

For example, an employer’s motive for firing an employee was simply to avoid paying commission, that would be a breach of the implied covenant of good faith.

What’s the lesson here? Agreements with employees are not unenforceable simply because they may seem unfair to the employee.  However, apply caution in drafting agreements that seek to work-around the law.

Freedom of contract is alive and well. . . for now.

Photo Courtesy Library of Congress

On Twitter and Facebook, the concept of “Throwback Thursday” (or #tbt) has become quite popular.  Typically, it’s a picture from long ago that you’ve forgotten.The theory behind why its so popular is that there is still gold to be mined out of older things.

I was thinking about that concept lately when it comes to blogs and employment law. Overall, lawyers tend to write about the latest and greatest development as if it requires a wholesale reinvention of human resources. I’ve tried to provide some context over the years but I’ve also been trying to find a forum to provide additional perspective on certain issues.

So, with that in mind, from time to time, I’ll take a look back at some cases and issues that still have relevance today and give them that modern day “blog” makeover.

The case that immediately comes to mind is Torosyan v.  Boehringer Ingelheim Pharmaceuticals, Inc., which was decided just a few months before I started my career in employment law. It was the case I can remember being discussed in my employment law meetings when I first started work.

Background

According to the court’s decision, back in 1982, the plaintiff came to Connecticut at the defendant’s invitation and expense, for job interviews with five of the defendant’s employees. According to the court:

At several of the interviews, the plaintiff informed the defendant’s employees that he was seeking “long-term” employment, and that he did not want to move his family from California unless the defendant could guarantee him job security. In response, one interviewer told the plaintiff that if the plaintiff did a good job, the defendant would “take care” of him. Another interviewer told the plaintiff that he hoped that the plaintiff would stay forever and that the plaintiff would have the opportunity to examine the company’s employee manual to determine whether it provided the guarantees that he sought. ….

On August 31, 1982, the defendant wrote to the plaintiff, stating that “[t]his letter confirms our offer to you for employment as Biochemist III at an initial salary of $30,000 per year.” Although the letter from the defendant further represented that the defendant would provide the plaintiff with various fringe benefits, it did not state that the plaintiff’s employment would be terminable only for cause. The letter also did not state, however, that it contained all the terms of the plaintiff’s employment contract or that it superseded any prior or subsequent oral representations that might be made to the plaintiff. The plaintiff countersigned the letter without adding anything thereto and returned it to the defendant.

On his first day of work, Torosyan received the employee manual. The manual provided that the company could discharge employees for “cause.” Approximately two years later, the company distributed a new employee manual which no longer limited discharges to cause. The new manual included a disclaimer stating that the manual was for instructional purposes only, and also added a section stating that falsification of any company record could result in termination. One year later, Torosyan was fired for submitting a false expense report, and sued claiming breach of contract and defamation.

Continue Reading Throwback Thursday: Why Your Offer Letters and Employee Handbooks Have Disclaimers #tbt

As I take a few days off, here’s a post from WAY back in 2009 about offer letters that you may have missed. With employers doing more hiring in 2013, it takes on added relevance.

 

In my series of the “basics” of various employment laws (see prior installments here,here and here), this week the topic is offer letters. Specifically, at the time of hiring an employee, does Connecticut require any documentation be provided to employees?20

 

The answer is yes.  Perhaps not in the form of an “offer letter” but it must be something resembling it.  Specifically, Conn. Gen. Stat. 31-71f requires that every employer, at the time of hiring, tell employees:

  1. What his or her rate of pay will be;
  2. What hours the employee will be expected to work;
  3. How often the employee will be paid (weekly, bi-weekly, etc.).

Connecticut law also requires that employers “make available” to employees (in writing or through a posted notice) any policies or practices relating to:

  • wages;
  • vacation pay;
  • sick leave;
  • health and welfare benefits;
  • and comparable matters.

The employer must provide notice to the employees if it makes any changes to these policies or practices.

For employers, strongly consider using a standard offer letter for each of your hires.  Also be sure that any such letters confirm that the employee is “at-will”, meaning that the employer can fire the employee at any time for any reason (and the employee can leave anytime for any reason too).

Continuing the summer series of "basics" of various employment laws (see prior installments here, here and here), this week the topic is offer letters. Specifically, at the time of hiring an employee, does Connecticut require any documentation be provided to employees?

The answer is yes.  Perhaps not in the form of an "offer letter" but it must be something resembling it.  Specifically, Conn. Gen. Stat. 31-71f requires that every employer, at the time of hiring, tell employees:

  1. What his or her rate of pay will be;
  2. What hours the employee will be expected to work;
  3. How often the employee will be paid (weekly, bi-weekly, etc.).

Connecticut law also requires that employers "make available" to employees (in writing or through a posted notice) any policies or practices relating to:

  • wages;
  • vacation pay;
  • sick leave;
  • health and welfare benefits;
  • and comparable matters.

The employer must provide notice to the employees if it makes any changes to these policies or practices. 

For employers, strongly consider using a standard offer letter for each of your hires.  Also be sure that any such letters confirm that the employee is "at-will", meaning that the employer can fire the employee at any time for any reason (and the employee can leave anytime for any reason too). 

Suppose you, as a hiring manager, have a discussion with one of your current employees about a job opening within the company at another location. In the course of that discussion, you indicate that you would expect that employee to work in that position for two years before moving on to other possible opportunities. 

After that conversation, you put down the terms of the offer in writing that says nothing about a two-year position, but rather discuss an annual salary etc. In addition, you have an employee handbook states that all employees are employees-at-will, except if there is an an agreement for a specified period of time by the CEO or hiring manager to the employee.

The question that then arises is: Does that conversation create a contract for employment for a two year period?

A recent unpublished Connecticut Superior Court decision suggests no and dismissed the claim at the summary judgment stage.

In Urgo v. Bassett Furniture Direct-NE, LLC, 2008 WL 5255663 (Nov. 25, 2008) (also available at Conn. Bar Association site here), the Court (Judge Edward Domnarski, presiding) held that, in the circumstances, the conversation did not create an actual contract.

The conversation between the parties regarding the length of time that the plaintiff would be expected to manage the store did not create an actual contract commitment for a period of employment. The plaintiff had been employed by the defendant for several years and she had employed at various locations within the defendant’s organization. Considering the conversation in the context of the surrounding circumstances, the plaintiff was attempting to establish how long she would be expected to stay in [the new location] before moving on to other opportunities. The defendant agreed to pay a housing allowance to the plaintiff on a monthly basis. The plaintiff had to sign a one-year lease which she claims is evidence of a one-year contract of employment. The court cannot conclude that his third-party agreement translates into a contractual commitment from the defendant. It is significant that the plaintiff’s testimony indicates that she knew that there were no guarantees regarding the length of her employment. ….

…Although the plaintiff and…the CEO of the defendant, did communicate regarding the plaintiff’s employment those communications do not establish an intention by the defendant to alter her "at will" status. The plaintiff has not satisfied her burden of presenting evidence that the defendant had agreed to some form of contract commitment and that there was a meeting of the minds between the parties.

For employers, this case emphasizes two important points:

  • Employee handbooks (and disclaimers present in them) provide valuable and supportive evidence to courts about the scope of an employment relationship. Even better, having each individual employee sign off on receipt of the handbook or policies provides yet further evidence.
  • Put offers in writing; the clearest way to avoid oral contracts from being created is to make sure that an offer in writing supersedes any prior contracts.  For more on offer letters, you can find more earlier detailed post here.

 

You know it’s summer when the most exciting headline in employment law over the last day seems to be the markup of an arbitration fairness bill by a House Judiciary Subcommittee.  Not terribly exciting.  If you’d like more details on that bill, Workplace Horizons has a nice little summary and does it’s typical terrific job on keeping up to date on some federal legislative items.  But it is still a long way off. 

In the meantime, this little lull provides an opportunity to catch up on a series of posts I’ve done on little known employment laws. For some of the previous installments, check out here and here.  

Today’s post addresses offer letters.  For many employers, they are courtesy morgue file typewriterstandard practice, but others seem to ignore them.

Connecticut actually requires something resembling an offer letter to each employee. Specifically, Conn. Gen. Stat. 31-71f requires that every employer, at the time of hiring, advise an employee of three things:

  1. The rate of remuneration (in other words, the salary or rate of pay);
  2. The hours the employee is expected to work;
  3. And the schedule for wage payments (weekly or otherwise).

Notably, that statute also requires that employers "make available" to employees (either in writing or through a posted notice in a lunch room or other accessible location) any policies or practices relating to:

  • wages;
  • vacation pay;
  • sick leave;
  • health and welfare benefits;
  • and comparable matters.

If the employer makes any changes to these policies and practices, the statute requires that the employer provide notice to employees as well.

Thus, offer letters (or something resembling them) are a good business practice, but also the law. Use them as an opportunity to also include language that confirms that the employee is "at-will" meaning that the employer can fire the employee at any time for any reason (and the employee can leave anytime for any reason too). 

Connecticut’s wage payment statutes, with the definition of wages found at Conn. Gen. Stat. 31-71a(3), certainly have left courts room to interpret the statute. After all, the definition of wages is merely: 

compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation.

If an employer does not pay "wages" propecourtesy library of congress "workers" in 1940rly, an employee can bring a civil action to collect such wages (along with attorneys fees, and double damages) under Conn. Gen. Stat. 31-72.

But what happens when an employer does not pay accrued vacation or sign-on bonuses? Is that a failure to pay "wages"?

A recent Connecticut Superior Court case says "no".  In Tamborino v. Velocity Express, 2008 Conn. Super. LEXIS 1527 (June 6, 2008)(Tierney, J.) (registration needed to download), the Superior Court concluded that the definition of wages did not include such items.  Moreover, "wages" does not include post-termination COBRA insurance premiums.  Thus, the employee could not use the "wage" statutes to claim that the employer’s failure to do so violated state law (and entitled him to attorneys fees for pursuing such a claim).

The case also discusses performance bonuses and says that in some cases, such bonuses may be "wages".  In this case, however, the court found that the employer’s failure to pay such a bonus was not made in "bad faith" and declined to award the Plaintiff additional damages for such a failure.

For employers, the case is a reminder of the importance of using clear and plain language in offer letters and employment contracts.  If bonuses are to be contingent on achievement of certain goals, or discretionary, language can be included to that effect.  

As I indicated earlier this week in my post on "fairness", employees will become bitter if they believe that the employer is not living up to the terms of the "deal".  Ensuring that offer letters give employers the flexibility to run their business while also outlining the essential terms of employment can be crucial to avoiding misunderstandings later on. 

Photo courtesy of Library of Congress (Flickr) – Workers in 1940

"You’re hired. No wait, you’re fired."

That’s essentially what happened in the case of Petitte v. DSL.net, a decision recently handed down by the Connecticut Appellate Court.  The Appeals Court rejected Mr. Petitte’s claims that the company should be estopped from firing him.

The background is fairly straight-forward:

  • Mr. Petitte applied for a position as regional sales manager. The Company offered him a position, including an offer letter, after which he resigned from his then-current job. 
  • Upon his first day of work, however, his supervisor told him to go home. 
  • Later that day, the Company informed him that it had changed it mind about hiring him, as a result of information they received while checking his references.
  • Shortly after that, Mr. Petitte filed suit alleging breach of contract, negligent misrepresentation and infliction of emotional distress.
  • DSL.net argued that because Mr. Petitte was an at-will employee, it could terminate him at any time for any reason — even if it occurred before his start date.
  • The trial court concluded that DSL.net was correct and dismissed Petitte’s claims.

On appeal, Mr. Petitte made the novel argument that because he never started work, he never became an employee.  Thus, he argued the employment-at- will doctrine didn’t apply. This was an issue of first impression to the Connecticut Appellate Court.

The Appellate Court held that logic dictates that there is no distinction between the offer of employment and the actual act of employment when the employment relationship is at will. Because of this, the employment-at-will doctrine applies to the entire employment situation, including offers of at-will employment. The court noted that prospective employees should now be on notice of the risks they face when resigning from an existing job to accept employment elsewhere.

For employers in Connecticut, it’s a common sense decision.  But this case shows that even if you are in the "right" at the end, it may be a costly fight to fight.  In addition, offer letters should always note that the offers are contingent upon background checks.  This will ensure that employers have an additional argument if, in the unlikely event, the offer has to be withdrawn.