When Do Employment Contracts End?

Most employees work for their employers on an "at-will" basis, meaning the employer can dismiss the employee at any time without needing to state a reason. There are, of course, numerous government-mandated exceptions to at-will employment. For example, an employee cannot be fired based on gender or race. And then there are cases where the employer and employee sign an employment contract, specifying terms and conditions that both parties must honor.

When there is ambiguity regarding the terms of an employment contract, litigation may follow. Here is a recent example from an ongoing breach of contract case. The plaintiff here is an employer suing a former employee.

The plaintiff originally signed a two-year contract to employ the defendant. The defendant had already worked as an at-will employee for the plaintiff for nearly a decade. The employment contract was supposed to run until January 1, 2013. At that point, the agreement would automatically be renewed for two more years unless either the plaintiff or defendant gave notice to the other party. The plaintiff and defendant subsequently extended the ending date of the contract in writing, until March 27, 2013.

In February 2013, the defendant sent the plaintiff an email stating he did not wish to extend the employment contract beyond March 2013, but rather he wanted to continue working for the plaintiff on an at-will basis. The plaintiff said this was not acceptable, and terminated the defendant's employment "effective immediately." In April 2013, the defendant formed his own competing company, and took with him several more of the plaintiffs' employees.

As is often the case with employment contracts, there were restrictive covenants in the defendant's agreement that provided he could not directly compete against the plaintiff for two years after the end of his employment. The plaintiff therefore sued the defendant to enforce these provisions of the contract.

Manhattan Supreme Court dismissed the complaint, holding the plaintiff terminated the defendant "without cause," thereby absolving the defendant of any obligation under the restrictive covenant. The Appellate Division, First Department,reversed, however, saying there were still disputed questions of fact that needed resolving.

The Second Department said it was still unclear just what happened between the defendant's February 2013 email to the plaintiff and the time he actually left the company in April. Although the plaintiff said he would fire the defendant immediately if he did not renew his contract by March 4, he actually continued to work there for several more weeks. Did that mean the parties extended the original employment contract again? Or did it mean the defendant spent those weeks working without a contract as an at-will employee? The appeals court could not answer these questions based on the available record.

Employment disputes often rely on such murky factual waters. It may not always be clear just when a particular relationship began or ended. Sorting out these questions often require the assistance of an experienced New York business attorney. If you need any advice on this or any other contract matter, pleasecontact our office right away.