SDNY Judge Holds That Express Language In Offer Letter Precludes Bonus Claims
While in New York all employees are at-will absent contractual language to the contrary, an employer may (intentionally or unintentionally) create a “contract” with an employee governing certain terms of employment (such as bonus compensation) without destroying the at-will nature of employment. Properly drafted and agreed upon, such a contract can preclude employees from later claiming they were made oral promises regarding compensation and benefits at the time of hire (or later on) which are different than the terms reflected in the contract. In Broyles v. J.P. Morgan Chase & Co., 2010 U.S. Dist. LEXIS 21861 (S.D.N.Y. Mar. 8, 2010), United States District Judge William Pauley rejected an employee’s attempt to do just that, finding that the letter of employment the Plaintiff had received and signed at the time of hiring: (1) was an enforceable contract, and (2) it contained “the entire understanding of the parties with respect to the terms and conditions of the offer of employment.” Id. at * 7.
When the Plaintiff was subsequently terminated, he brought suit claiming he had been orally promised a bonus for the year prior to the year in which he was terminated. However, the letter of employment at issue provided that any bonuses were discretionary and would not be paid if the employee quit or was terminated. The Court held that this clear language governing bonuses contained in the offer letter, coupled with an integration clause, precluded the employee’s claims that he was verbally promised a bonus. The court found that the offer letter was an enforceable written agreement which precluded any oral agreements or quasi-contractual claims by the employee. Finally, since the bonus was never “awarded” to the employee, he had no “vested” interest in it, and therefore could not pursue a claim for the unpaid bonus under the New York Labor Law.
It is difficult for employers to ensure that no statements regarding compensation are made by managers, co-workers or human resources during the hiring process. Recruiters or other interviewers can unwittingly make oral promises or use poorly tailored language regarding the terms and conditions of employment. To prevent such statements from causing issues down the road, employers should consider utilizing a well drafted employment letter, such as the one in Broyles, or a well drafted incentive compensation plan with an integration clause, in order to easily dispose of these claims if and when they do arise.
