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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 17, 2018

Plaintiff Was At Will Employee Because His Written Employment Agreement Did Not Have a Definite Term of Service

On January 8, 2018, Justice Platkin of the Albany County Commercial Division issued a decision in Morizio v. Roeder, 2018 NY Slip Op. 50027(U), holding that the plaintiff was an at will employee despite his written employment agreement because the agreement did not contain a definite term of employment, explaining:

To be an effective and valid employment contract, all the essential elements thereof must be shown. These elements consist of the identity of the parties, the terms of employment, which include the commencement date, the duration of the contract and the salary.

Under New York law, the rule is settled that unless a definite period of service is specified in the contract, the hiring is at will and the employer has the right to discharge and the employee to leave at any time. Thus, absent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party. The at-will presumption may be triggered when an employment agreement fails to state a definite period of employment, fix employment of a definite duration, establish a fixed duration or is otherwise indefinite.

Under the alleged Compensation Agreement sued upon by Morizio, there is no period of service defined by reference to a fixed termination date. Rather, ARMI’s purported obligation to employ and compensate Morizio continues until the later of such time that (i) ARMI is managing investment assets that equal or exceed one hundred million dollars ($100,000,000), as determined by an Audit or (ii) the Parties enter into a new compensation agreement.

In Rooney, the Court of Appeals held that a contract to render personal services throughout the career of a professional heavyweight boxer was sufficiently definite to render the at-will doctrine inapplicable: New York’s jurisprudence is supple and realistic, and surely not so rigid as to require that a definite duration can be found only in a determinable calendar date. Thus, although the exact end-date of the boxer’s professional career was not precisely calculable, the boundaries of beginning and end of the employment period are sufficiently ascertainable, particularly where the compensation to be paid under the contract was expressly linked to a percentage of the boxer’s earnings within the professional career measuring rod.

Unlike the agreement in Rooney, in which the obligation to employ and compensate the trainer could last no longer than the professional career of the heavyweight prizefighter — an inherently limited duration — there is no outer bound on ARMI’s alleged obligation to employ and compensate Morizio. Rather, Morizio’s entitlement to employment and compensation under the Compensation Agreement would continue throughout his lifetime, unless and until he decides to relinquish that entitlement by assenting to a new compensation agreement with ARMI.

To be sure, an agreement can establish a fixed duration even if its duration cannot be determined ab initio, as long as the duration is delimited by legally and realistically cognizable boundaries. Thus, if the alleged Compensation Agreement remained in force and effect only until ARMI was managing at least $100 million in assets, as originally drafted, the Court would be inclined to conclude that defendants had failed to demonstrate the indefiniteness of the agreement as a matter of law . The same would be true if the term’s conditional language were written in the disjunctive, and the alleged Compensation Agreement continued only until the first of the two specified conditions was met.

But, in the Court’s view, ARMI’s alleged contractual agreement to employ and compensate Morizio until such time as he agrees to relinquish the benefits of that agreement by choosing to assent to a new compensation agreement creates an employment obligation that is perpetual in nature. For this reason, the Court concludes that the Compensation Agreement lacks the type of legally and realistically cognizable boundaries that are experientially limited and ascertainable by objective benchmarks. In other words, whatever the precise limits of the doctrine enunciated in Rooney, the promise allegedly made to Morizio clearly lies outside of them.

(Internal quotations and citations omitted) (emphasis added).

Doctrines such as the at the will employee rules discussed above and the statute of frauds can make employment contracts more complicated than regular commercial contracts. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding an employment contract.

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