Beware of Broken Promises

September 6, 2012 at 7:36 am Leave a comment

I like to think of the employee handbook as the prenuptial agreement between the employee and employer.  Just  like I’m sure there were people telling Katie Holmes that marrying a guy given to rambling diatribes about the dangers  of pharmaceuticals while he was busy jumping around TV studios might not be the best idea, no one hires an employee thinking it is going to end badly but it is best to plan for the worst.

A  decision by New York’s Court of Appeals, which was highlighted by the Bond, Schoenick, and King law firm, should have your HR director taking a quick look at your employee handbook.  It should also remind you the next time you are recruiting an employee to your credit union to make sure you mean what you say or you could find yourself facing a lawsuit.

No one denies that Daniel Ryan was recruited to join Kellogg  Partners, a broker-dealer firm, in 2003; that his salary was discussed;  that Mr. Ryan was given $175,000 in salary for his new job or that Kellogg’s employee handbook informed Mr. Ryan that he was an at-will employee who could be fired at any  time.  But Mr. Ryan claimed that at the time of his employment he was promised a “guaranteed bonus” of $175,000, making his total compensation $350,000.  Company employees testified that no such offer was made.  Unfortunately for them, a jury of their peers sided with Mr. Ryan who also gets to have them pay for his legal fees since they violated New York’s labor law by not paying him wages owed.

The case has several lessons for HR professionals and anyone involved in the hiring process.

First, this whole lawsuit could have been avoided with a more concisely written employee handbook and better documentation as to when the employee actually received the handbook.  For example, even though the employee handbook included an employee acknowledgement that ” I understand that nothing contained in the Handbook may be construed as creating a promise of future benefits or a binding contract with Kellogg Group LLC for benefits or for any other purpose,” this language was not specific enough to trump oral commitments allegedly made by the employer in order to get Mr. Ryan to join the team.  The company’s hand would have been much stronger had the handbook stated explicitly that oral commitments are unenforceable.

While the general rule is that an oral contract isn’t worth the paper it’s printed on, there are exceptions to this rule and these exceptions can come into play in the employment context.  A binding contract trumps an employer’s prerogatives when dealing with at-will employees any day of the week.  So be careful what you say and make sure that everything is accurately memorialized by giving the employee a letter putting the offer down in writing.

Finally, in this case there was confusion as to when the employee handbook was amended and what it was amended to say.  Listen, as the piles on my desk will attest, there is no that hates process more than I do.  But as I like to say, lawyers are paid to be paranoid and consistently following procedures documenting who signed what, when can go a long way to helping you in the event that the relationship with an employee goes south.

New York credit unions continue their strong growth

A state-by-state analysis of credit union performance released yesterday by NCUA demonstrates New York credit unions continue to make solid gains and that credit unions in general are making steady but uneven progress.  As summarized by the NCUA “States like North Dakota, New Mexico, New York, Iowa, and Washington are among those where federally insured credit unions are showing better-than-average performance across several indicators.  Others, like Nevada, New Jersey, and Hawaii, are still grappling with local economic challenges.”



Entry filed under: General.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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