Written Terms of Employment Contracts Flashcards
Job Security Terms
A. Job Security Terms: involve interpretation issues and often exist in dynamic relationships that change over time, so can become difficult.
Cases for Job Security Terms
Speer
Spacesaver
Speer
Plaintiff was hired as a manager of hotel, promised stock option but couldn’t agree on terms of stock option. Plaintiff did not sign contract but started working and then he left (not fired, but claimed constructive discharge). Plaintiff’s conduct is inconsistent with his assertion that the oral agreement was intended to be immediately binding. Plaintiff refused to sign the written draft and clearly demonstrated his intent not to be immediately bound, so no contract arose between the parties.
Court held no stock option reached because they never agreed on the amount,
No written K becasue Speer never signed it
no constructive discharge (no reasonable person wouldstay) because no understanding that his directs couldn’t be fired and it wasnt intolerable to stay.
IV. An oral agreement may not be a binding contract if significant terms are unresolved and the parties contemplated consummation by written agreement.
Spacesaver
P terminated from family biz; written agreement had typical for-cause provisions; lifetime agreement was interpreted by the court to be indefinite term “just cause” agreement. clause was detailed and had a long list of factors determining cause.
court held that the written agreement wasn’t enough to support lifetime employment (need
add’| consideration). (Back to Hanson).
The Role of Extrinsic Evidence
- Role of extrinsic evidence – three types:
- To interpret terms. PER APPLIES
- For prior or contemporaneous understandings that add terms. PER APPLIES
- For subsequent understandings. PER does NOT APPLY
B. Parole evidence only for interpreting ambiguous terms
C. PER bars extrinsic evidence of prior or contemporaneous understandings.
o If completely integrated -> all evidence is barred except to interpret ambiguous terms
o If partially integrated -> allowed to supplement but NOT contradict.
case for Extrinsic Evidence
Hinkel:
Court rejects claim that Hinkel was owed severance pursuant to oral promise.
A. Writing was completely integrated, contained all compensation terms, so extrinsic evidence of oral promise in regards to severance would not be allowed.
o Court said it naturally would have been included had they wanted it to be a term in agreement.
B. Dissent said partially integrated and severance does not contradict with written terms.
if there’s a subsequent promise, its a mod requiring add’l consideration.
Defining “Just Cause” to Terminate
- Parties can define the “cause” for termination, but if not, there are 3 issues:
(1) Objective good faith/reasonable decision making or actual cause? - (2) Poor performance/material breach vs. legitimate biz reasons?
- (3) Who bears burdens?
Spectrum - definite-term contracts tend to be the strictest (then indefinite-term/continuous
contracts, then, lastly, implied-in-fact contracts).
o When the contract defines “cause,” then the question becomes one of interpretation -> does the conduct at issue meet the definition the parties adopted in their agreement?
Cases for Just Cause
Benson
Uintah
Benson
Contract defines 3 conditions as exception to payout term (contract defines cause), if met then the 8-year salary does not have to be paid. Court was unwilling to broadly encompass testing positive for drug use within the meaning of the term “dishonesty” that was listed a one of the cause terms -> record is unclear as to whether the employer dismissed him because of drug use or because he lied about his drug use.
* If “just cause” is undefined -> it will be filled in by other legal principles.
* But the parties can define what constitutes “cause” for themselves -> so the parties can give “cause” as narrow a definition as they like.
**Planning implications here we need to take exceptional care when drafting “cause” provisions. One may want to include a catch-all. In this case, the employer might have created the mess by listing the reason for termination as something that was not listed in the “cause” terms.
Benson
Contract defines 3 conditions as exception to payout term (contract defines cause), if met then the 8-year salary does not have to be paid. Court was unwilling to broadly encompass testing positive for drug use within the meaning of the term “dishonesty” that was listed a one of the cause terms -> record is unclear as to whether the employer dismissed him because of drug use or because he lied about his drug use.
* If “just cause” is undefined -> it will be filled in by other legal principles.
* But the parties can define what constitutes “cause” for themselves -> so the parties can give “cause” as narrow a definition as they like.
**Planning implications here we need to take exceptional care when drafting “cause” provisions. One may want to include a catch-all. In this case, the employer might have created the mess by listing the reason for termination as something that was not listed in the “cause” terms.
Uintah
Written contract that provides 90 days written notice for just cause termination but “cause” itself is NOT defined
o What does just cause mean?
* Hardy argues just cause means only terminated for poor performance (essentially material breach) or substantial change in economics of organization
* Court disagreed and adopted a Pugh/Guz objective good-faith type of cause. (employers have most leeway to determine if they have cause)
* Court went on to say employer has burden to show they have good cause. (This is different than what was done in Pugh)
Summary of “Cause”
- Parties can define cause in contract*
- If not defined…..3 major issues to look at:
1) Is actual cause required? Or is it enough that employer reasonably believed they had enough?
2) Do legitimate business reasons justify “cause” (economic downturn)? Or simply employee performance (like material breach)?
3) Who bears the burden? Does employee bear burden to show absence of “cause” or employer must demonstrate “cause”?
Parties can define the “cause” for termination, but if not, there are 3 issues:
(1) Objective good faith/reasonable decision making or actual cause?
(2) Poor performance/material breach vs. legitimate biz reasons?
(3) Who bears burdens?
**Spectrum definite-term contracts tend to be the strictest (then indefinite-term/continuous
contracts, then, lastly, implied-in-fact contracts).
As a result we have a spectrum when parties have NOT DEFINED CAUSE:
Spectrum –
**Definite term contracts **– implied just-cause term – strictest where employer bears burden to show actual cause (not business reasons) but must be employee reasons.
Indefinite/continuous for cause contracts – next strictest form of cause. Actual cause must be shown, defendant bears burden, but economic downturn will be sufficient.
Implied in fact – least cause protection objective good faith standard and burden is on employee.
Compensation Terms after Termination
. If the relationship is at-will, what if termination results in loss of arguably EARNED INCOME?
* Earned salary or wages typically protected by state wage payment laws so we do not see many disputes along those lines. Rather: Disputes therefore typically involved delayed incentive pay (commissions, bonuses, etc)
* These tend to be breach of contract claims based on written terms of the CGFFD covenant of good faith and fair dealing (bad faith denial of earned compensation).
Cases for Compensation
Hess
Weiss
Geysen
Hess
Employee was an attorney who would earn compensation once settlement was reached in case. Employee was terminated and cases later settled in significant income to firm. Employees claims breach of contract for money she should have been paid for cases.
a. Language in contract is unclear when fees were “generated” (at time of work or at time of settlement) so Court remands for trial
b. Court also said Hess entitled to settlement fees during 30-day notice period.
