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A Freely Terminable Employment Contract May Stil

A Freely Terminable Employment Contract May Stil

In Tini v. AllianceBERNSTEIN the Appellate Division of the Supreme Court of NY, first department denied a motion by the defendant to dismiss the complaint brought by plaintiff Jay Tini for breach of an employment contract. The case provides a great look at one commonly used type of employment contract – the ‘at-will’ contract.

Many states, including New York, allow for ‘at-will’ employment. This form of employment allows either the employee or the employer to terminate the employment at any time and for any reason. It is perhaps a reflection of the disparity in bargaining power between the typical employer and the typical employee, as among other things, at-will employment allows the employer to fire the employee for no reason, or even a mistaken or bad reason (subject to certain statutory protections such as a ban on racial discrimination) with no legal consequence.

However, as this case illustrates, at-will employment does not allow the employer to unilaterally modify or breach a valid employment contract.

Background of the Case

The plaintiff was an employee of the defendant partnership (AllianceBERNSTEIN LP or “ABLP.”) The two parties signed an employment contract when the plaintiff began working for the partnership that stated in relevant part that ABLP may terminate Tini at any time and for any reason – amounting to the ‘at-will’ type of relationship discussed above. However the contract additionally contained paragraph three: stating that Mr. Tini would give ABLP 60 days notice if he ever intended to terminate his employment. Paragraph three also stated that he would continue to be an employee for this time period, continue to receive salary, and continue to receive benefits. ABLP was allowed to “discontinue his duties and bar him from the premises” but in that case he would still retain his status as an employee.

As the events played out, Mr. Tini gave ABLP 60 days notice. ABLP then reduced this ‘notice period’ to 30 days, meaning that they only continued to pay him for 30 days after he gave his notice. As a result, Mr. Tini filed a lawsuit alleging breach of contract and seeking the remainder of his salary as well as benefits for the remainder of the 60 day period that had been shortened by ABLP.

Analysis

The court here agreed with the lower court’s finding that nothing in the contract permitted the defendant to reduce this notice period. They further agreed that the lower court was correct when it said that paragraph three provided a benefit to the defendant: Mr. Tini could be barred from the premises, but he would still be subject to employee obligations such as loyalty and noncompetition. This is a very fundamental form of contract analysis – analyzing each party’s rights and obligations under the deal. A party never, according to standard rules of interpretation, gives up something for nothing. So here the fundamental question is what did Mr. Tini exchange for his 60 day obligation to act as a loyal employee after giving notice? His salary and benefits.

The court very correctly focused on the unilateral modification of the agreement by the defendant. A contract may generally be modified by the consent of both parties, however here one party acted alone. So we have a situation in which one party unilaterally changed the agreement to the detriment of the other party – in other words a classic breach of contract scenario!

This case illustrates why employers should act very carefully when dealing with contractual relationships and refrain from taking unilateral action without consulting with counsel experienced in these matters. Please do not hesitate to contact our office for a consultation.

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