Can an employee sue for four months severence?

Question

We recently terminated an employee 8 months into a one year contract who was also contracted the year before. According to the contract, we can terminate without cause by giving two weeks severence, which we did to avoid the hassle of just cause. He is now threatening legal action saying he is owed payment for the remaining four months.

Where it gets tricky and the bulk of his case is that during his first contract he was paid out his entire salary over the first 8 months as by then he had commissions built up to sustain himself over the summer. This pay schedule was kept for the first few weeks of his new contract before we realized the inherent flaw that he could quit and leave with four months free pay. While the remaining four months on his contract are mostly down time with little to do, he is still expected to be in the office. In truth, due to the overages at the start of the year he has already received an extra $800 over what he worked.

Does he have a case?

Answer 1

This going to be an interesting case! What state are you in?

I see two issues:

1. Did parol evidence (the way you paid in year one) modify the contract? I would want to see the boilerplate in the contract about modifications and your state's parol evidence law.

2. Similarly, did the way you paid him at the beginning of year 2 set an entitlement to be paid that way throughout the year under your state's wage and hour laws?

If I had to choose a side based on what you have said, I think the employer has the stronger case.

This will be an interesting case. Please let us know what happens.

Answer 2

NO, It comes down to the terms of the Contract.

If you can terminate the employee for no cause then you can end the contract at that point. You are not breaking the contract it has expired. All you had to do was to pay him the two weeks severance pay that he was owed in the original contract. Since you paid him that severance 2 weeks severance pay you have fulfilled your end of the contract and it is complete, done, finished.

He has no case at all. You could have fired him at any point and as long as you provided that 2 weeks severance pay then he hasn't got a legal foot to stand upon.

If he continues to threaten to sue then you should threaten to file a counter suit since he was paid for work that he did not do, therefore that pay should have come out of his severance package. As I understand it you paid him upfront and you have paid him for longer than he has worked. If that is true then he is the one who owes you money.

I don't know the terms of the contract exactly, but if he contracted to work for the entire period then despite being paid up front he is obligated to fulfill the contract and would have had to work those extra four months. If he had an escape clause that says that he could quit at any time then he is immune to that requirement to continue working.

He didn't quit though you fired him. You completed your end of the contract so you are under no obligation to pay him more than his severance package. Since you paid him for more than the few weeks he worked at your company you should have taken that out of his severance package. You didn't do that to avoid problems so he should be happy with the money that he has. He has already gotten more money out of you than he was entitled to.

Lets say you promised to pay him $12 k for 1 years work. That would be $230.77 for each week (assuming 52 weeks in a year. So $12,000/52 = $230.77) But, you decided to pay him more upfront. Your pay period was 52 weeks – 4 months (or 16 weeks) = 36.
So if you paid him $12,000 for the total time he would have been paid $333.33 per week.
If he worked for you for 6 weeks then he would have been paid $2,000. However he didn’t work long enough to earn that $2,000. Instead he should only have been paid $1384.62. This means you over paid him $2,000-$1384.62 = $615.38. You need to use the $230.77 per week figure because you contracted to pay him for an entire year. So he owes you $615.38. You gave him a 2-week severance package and probably used the $333.33 figure (which was his weekly salary including the extra 4 months of no pay). That would be $666.66, however you should have used the $230.77 figure thus paying him 2 X $230.77 = $461.54 therefore in this example you paid your contractor $205.12 extra, beyond the severance package. Therefore you paid over paid him $820.5.

Now realistically I would just be happy with the money you paid him since he can argue that his weekly pay was actually the $333.33 figure. If you did this then you paid him a fair amount. If he threatens to take you to court then tell him that you will want the extra money back and threaten to counter sue.

The contract is always king, and if you fulfilled your end of the contract then it is completed and no further debt is owed. The amount you paid him was not only fair, but since he failed to work for the period agreed on in the contract you can claim that he was overpaid.

If you are having trouble with the figures then contact me via my avatar and give me some actual figures and I can try to explain it better to you.
To sum it all up in 2 words: Contract Fulfilled. You don’t owe the man a single dime!

Answer 3

You need to read the contract and terms for payment, a choice by your firm to pay him out of accordance with the agreed contract that was accepted by the employee does not mean that you must pay he in accordance with revised terms that not in writing - i.e. a new contract.

Answer 4

Surely you co has a legal dept, or, at least an attorney on retainer. He should take a look at it, for if you're wrong it could cost you dearly, not only in setlement but also in legal fees. .