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Understanding and Enforcing Employment Agreement

Understanding and Enforcing Employment Agreement

Employment agreements are an essential contract for any business. They specify the roles, responsibilities, and duties of key employees, and help ensure honest performance in those areas. Many breach of contract cases arise from the failure of a party to honor the terms of an employment agreement. An ongoing case in Manhattan Supreme Court illustrates just one type of dispute that can arise from the enforcement of employment agreements.

Fusion Brands America, Inc. v. Pieper-Vogt

The dispute here is between a business and its former chief executive officer. The plaintiff is a corporation that markets beauty products to retailers. The defendant served as the plaintiff's CEO from 2009 until 2011. Pursuant to an employment agreement, the defendant agreed to “devote all of her working time, attention, and ability to the business of the company, truly and faithfully serve the company, and use her best efforts to promote the interests of the company.” The agreement also required the defendant to refrain from taking a similar position with a competing firm for at least six months in the event she resigned from her position with the company.

The defendant eventually quit because, she alleged, the plaintiff's chairman (and sole shareholder) failed to provide sufficient operating capital for the business. The plaintiff argued the defendant mismanaged company assets, wasted money, and failed to capitalize on potential business opportunities. The plaintiff also claimed the defendant breached her employment agreement by simultaneously working for another company, violating the agreement’s clause that she devote all her time to the plaintiff’s business.

That second company was founded by the defendant's husband. It also markets beauty products. After the defendant's husband passed away in July 2010—about a year into the defendant's relationship with the plaintiff—the defendant was named executor of his estate. In that capacity, she said, she appointed officers to manage her late husband's business. The plaintiff argued that the defendant assumed executive titles with the second company and made key decisions regarding its business.

A Manhattan Supreme Court judge agreed with the plaintiff. In a decision dated August 14 of this year, the judge denied the defendant's motion for summary judgment on the plaintiff's breach of contract claim. (The judge did dismiss several other claims that he deemed redundant.) The judge said the defendant's arguments were “clever and facile,” but did not undermine the plaintiff's evidence demonstrating she actively ran a second business. The defendant could not hide behind her status as the executor of her husband's estate while serving as the plaintiff's CEO.

The judge’s ruling only concerns the defendant’s motion for summary judgment, and is not a final judgment on the merits of the case. Still, the facts of the case provide a good example of how a court may interpret an employment agreement's terms. If you find yourself in a similar situation—either as the employer or the employee—and you need the assistance of a qualified New York business litigation attorney, contact our office right away.

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