New York Employment Lawyer Blog

In Kleinman v. Blue Ridge Foods, LLC (July 7, 2011), the Kings County Supreme Court granted an employee's motion for summary judgment on his breach of contract claims against his former employer.

In this case, pursuant to the terms of an employment agreement, Defendants hired Plaintiff as their Chief Executive Officer for a term of three (3) years. If Defendants wanted to discharge Plaintiff earlier, a prior written notice must be delivered to Plaintiff either personally or by mail. In addition, in the event Plaintiff's early discharge was without "cause," Plaintiff would be entitled to additional benefits, including a severance payment equal to twelve (12) months' salary.

After only four (4) months, with no prior written notice, Defendants abruptly discharged Plaintiff's employment. His discharge was communicated to him both verbally and in writing on that day.

Plaintiff then sued, asserting that, in accordance with his employment contract, since his discharge was without "cause," he was owed the severance and additional benefits.

While Defendants basically conceded that they failed to meet any of the "for cause" discharge provisions provided for in the agreement, they instead contended that Plaintiff could not recover the compensation he sought because the employment contract was unenforceable. Defendants claimed that Plaintiff defrauded them by misstating his work experience and "was in completely over his head and was at no time able to perform the job for which he was hired." They argued that the employment contract was thus void and unenforceable because they were induced to enter into it by Plaintiff's fraudulent misrepresentations as to his title and experience at his prior employment.

However, the court held that Defendants failed to establish a justifiable reliance on the purported misrepresentations, and noted a crucial factor was that Defendants failed to adequately verify Plaintiff's experience even though the means to do so were at their disposal.

The court thus ruled that Defendants terminated Plaintiff without "cause," as that term is defined in his employment contract. Further, the court found that Defendants breached the employment contract, as they failed to provide Plaintiff with the contractual notice and cure period. Therefore, the court held that Plaintiff was entitled to his actual damages, interest, attorney's fees, and costs under Section 198 and other provisions of Labor Law article 6, and the statutory liquidated damages under Labor Law § 198.

If you believe that your former employer has breached an employment agreement with you, it's always smart to immediately consult with a New York employment agreement attorney to preserve your legal rights.

Last week I wrote about the many whistleblower protections contained in The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Act"). The same Act also contains new requirements with respect to executive compensation paid by public companies. I will discuss many of those new requirements below. Please keep in mind that this list is not meant to be exhaustive and it is therefore recommended that you speak to an executive compensation attorney to fully understand the law.

Shareholder Vote on Executive Compensation (Say on Pay)

The Act requires that, at least once every three years, public companies solicit a non-binding shareholder vote to approve the compensation of their named executive officers. In addition, at least once every six years, shareholders must be able to vote on whether the "say on pay" shareholder vote will occur every one, two, or three years. The first "say on pay" approvals (including the separate vote on the frequency of "say on pay" voting) are required beginning with shareholder annual meetings occurring on or after January 21, 2011.

Shareholder Vote on "Golden Parachutes"

The Act also includes a requirement for a non-binding shareholder vote of "golden parachute" compensation (payments to named executive officers upon a change of control), unless the compensation was previously subjected to a regular "say on pay" vote. Any condition upon which the payment of such compensation is based must also be disclosed.

Disclosure of Executive Compensation

In addition, the Act requires the SEC to amend its rules to modify the executive compensation disclosure requirements to include "pay versus performance" and "internal pay disparity" disclosures. The Act requires disclosure of the relationship between executive compensation actually paid and the company's financial performance, taking into account any change in the value of the company. In other words, companies will be required to include in its annual proxy statement a clear description of compensation paid to its executives and how the compensation relates to the issuer's financial performance.

Independence of Compensation Committees

The Act requires the SEC to issue rules requiring national securities exchanges to mandate that each member of a company's Compensation Committee be independent. In determining a director's independence, companies will be required to consider relevant factors, including: (i) the source of a director's compensation, including any consulting, advisory or other compensatory fee paid by the company to the director, and (ii) whether the director is affiliated with the company or any of its subsidiaries or affiliates.

Recovery of Erroneously Awarded Compensation (Clawback)

Lastly, the Act requires the SEC to issue rules mandating that companies establish a policy to recover (clawback) incentive compensation from current or former executive officers in cases following a restatement of financial results. If a company files a restatement that discloses a material noncompliance with any financial reporting requirement, the clawback applies to incentive compensation that was based on the erroneous financial statements and was paid during the three-year period preceding the date the restatement is required.