Adventures in employment agreements

by Walter Olson on July 10, 2014

The town of Stratford, Connecticut entered an employment agreement with its director of human resources, stating that his employment would be entirely at-will and further providing:

Based upon the annual performance evaluation, and at the [m]ayor’s sole discretion and recommendation, the base salary may be increased on July 1 of each fiscal year, subject to the approval of the [council], which by Charter fixes the salaries of all mayoral appointees.

Subsequently, the town council voted to reduce the manager’s salary, and the dispute went to litigation. Both a trial court and a Connecticut appeals court agreed with the manager’s argument that even though the document prescribed an at-will relationship, by specifying that the base salary “may be increased” it was implicitly promising that it would never be decreased. [Daniel Schwartz; Adams on Contract Drafting]

{ 9 comments }

1 John Fembup 07.10.14 at 8:16 am

“The town of Stratford, Connecticut entered an employment agreement with its director of human resources, stating that his employment would be entirely at-will”

OK, if the employment is “entirely at will” then fire the guy and advertise his job at the lesser wage. If he applies, hire him back if you wish. If not, hire another manager.

2 Walter Olson 07.10.14 at 8:55 am

For reasons of this sort the background assumption is that the terms of an at-will employment relation can be changed going forward at any point. If either side can end the relation at will, then either side can declare that it will continue the relation only on a change of terms, in which case the relation either ends or re-forms under the new terms.

3 Boblipton 07.10.14 at 1:18 pm

Yeah, but Walter, the plain interpretation of “increase” involves more, not less. You may argue that this is a matter of failing to say “Mother, may I?”, but what this indicates to me is that the Town Council was deciding on the details of a contract they hadn’t bothered to read. All they had to do was to reword the resolution slightly and it would have been fine.

Were I a citizen of Stratford I would be p**sed at the Director of Human Resources, but I’d be more severely hacked off at the Council for not doing their job.

Bob

4 gitarcarver 07.10.14 at 2:11 pm

While I understand the argument that at will employment can be changed at any time going forward, if that is the case, then why have a contract that is more than a single line:

“(enter name here) is an at will employee.”

That’s it. That’s all you need.

Have the two parties sign and move on.

That way neither the employer nor the employee has any obligations or expectations of anything. If either party doesn’t like what is happening, they can walk out the door or shut the door.

In short, the idea that an “at will employment contract” has no responsibility for either part to fulfill or maintain the contract makes the contract useless or less than useless.

5 gasman 07.10.14 at 4:08 pm

Git,
Still needs to be some contract.
My at-will contract allows me to assume that: 1) I don’t have to show up tomorrow, and 2) my employer can deactivate my badge access tomorrow.

And until one of us invokes the at-will clause, then we have reasonably established expectations of what each party provides to the other.

6 JLD 07.10.14 at 4:38 pm

Two important facts that are missing from the article:
1. The employment contract required Stratford, prior to terminating employee, to (1) give employee 60 days notice, or (2) give no notice, but provide employee 60 days severance pay and benefits. Stratford did neither, until six months after the city council voted on the salary reduction.
2. After the city council vote, the employee sent an e-mail to the mayor stating he (employee) intended to remain on the job under the terms of the original agreement. Although its not apparent in the appellate court’s opinion, my guess is that the mayor ignored the e-mail.

When you add in these two facts, the court’s decision is more palatable. This was not a true at-will contract, as that term is commonly used. Stratford failed to follow the contractual provisions for terminating the employee. Stratford should have followed the advice of commenter John Fembup.

7 HFB 07.10.14 at 7:05 pm

It seems that they were only stating how increases to the salary were to be handled. Not that increases were guaranteed nor that a decrease would not happen-just that increases required special handling (when, what and who). Ya know, it also doesn’t state that the salary should not double so maybe he should demand that it does…

However, I do agree that they should have followed the severence part of the At Will-and, it is an At Will, just with a severence provision-and that back pay/forward pay should have been given.

Do we need a penalty? Do we need to do more than force the town to honor the contract and pay some penalties and lawyers fees? Reasonable (HA!) lawyers fees seem appropriate. Not sure where the math leads us in comparison to what actually was paid and I’m to lazy to find out.

Bottom line is that they should be able to sever the relationship immediatley (following the severence part of the contract) and then offer it at the new lower salary. It just means that they would be out more money but would never have to hire this man again….riiiight!

8 Crabtree 07.11.14 at 9:10 am

The problem with an unlimited ability to reduce pay to whatever level they want is that it pretty much also gives them the ability to avoid any kind of severance requirements. “Well, we aren’t going to fire you, because that’s a pain, but we ARE going to reduce your salary to minimum wage. You don’t like it? Nothing is stopping you from quitting.”

9 HFB 07.13.14 at 1:40 pm

Crabtree,

How does it avoid the severence requirements?

In this case, AFAIK, there was an agreement to pay a certain amount and severence requirements should the COMPANY decide to change. I don’t know what, if any, requirements were placed on the employee if they decided to quit-prolly nothin’. They decided to drop pay which should mean that they should have let him go according to the severence agreement or, offer it to him first via a sever/rehire all in one step at their choice. It seems to be an agreement to pay a certain amount and that there are special requirements to raise the wage and/or sever the relationship. Someone at the city was unaware of the “contract” and failed to follow the severence requirements that should have kicked in were they to want to make changes to the pay.

I work in an At Will state. I was given an offer letter when I first started that mentioned starting pay. That’s it. No mention of severence or other obligations from EITHER of us. Just starting pay. I have been given raises over the years and have been given neww letters stating what they are going to pay. I did not have to re-sign anything and it’s really just a one-way agreement for what they are going to pay me. If they decidd that they are paying me too much, they could decide to let me go or offer the job to me at the new lower pay on first refusal. I don’t know how it would hold up in court but it seems really straight forward.

Someone mentioned that they should have had a one sentence agreement for the At Will. I think they should have had none but both parties decided it was best for stability or whatever. The salary can’t decrease under the AGREEMENT, but not once they sever the relationship.

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