Case provides lessons for employees targeted with lawsuits by former employers

An employment agreement is an important part of any job. In addition to covering key information like salary, work responsibilities, and benefits the contract should also provide information on the process for termination of employment. These provisions are often complicated, but they become even more complex for higher level employees like executives. This is because agreements for executives and high-ranking officers within the organization often include additional provisions like non-disclosure, non-compete, nonsolicitation, and exclusivity.

The provisions should benefit both parties, but it is not uncommon for an employer to use them to lash out against a former employee.

In a recent example, an unscrupulous employer attempted to use the employment contract to strike out against a former executive. The employer, credit card processing company Banctek, hired on a new vice president of business development, Ryan Kosarek. Less than a year after he accepted the position, Banctek began changing the employment agreement terms. First, they cut his salary in half from $200,000 to $100,000 and later shifted to compensation purely through commissions. Banctek then fired Kosarek and did not provide severance or compensation for unused paid time off.

Banctek attempted to move on and start a new professional life. His former employer then initiated a lawsuit claiming he was in violation of the exclusivity and nonsolicitation provisions of the employment contract.

What options are available for an employee facing allegations of breach of contract?

It depends on the situation. In this case, the former employee was able to counter with his own lawsuit, claiming the company was in breach of contract when it failed to provide his full salary, severance, and compensation for unused paid vacation time.

What was the court’s ruling?

We were able to help build a successful case and the trial court ruled in favor of the employee. The court found Banctek fired Kosarek without cause and that the former employee was not in violation of the exclusivity provision. Bancteck appealed the decision and argued Kosarek was fired due to negligence. The appellate court did not agree, stating the employer failed to provide evidence to show the former employee was negligent in his position.

The former employer also appealed the trial court’s damages award. The trial court found the employer owed the former employee $30,000: $7,700 for unused, paid vacation time and approximately $23,000 for six weeks of severance. The former employer argued that this calculation was wrongly based on the $200,000 salary and the court should instead base the calculation on the adjusted $100,000 salary. However, the employer was not allowed to bring this argument to appeal because they did not make the argument in the lower court. Since the only argument presented in lower court was whether severance was allowed at all, not the amount, they could not raise a new issue at appeal.

What should I learn from this case?

This case provides three important lessons for employees:

1. Review employment contracts. The contract at issue was vague in some areas, like the position description and termination procedure. A clearly negotiated contract can help reduce the risk of these types of issues.
2. Get your argument right the first time. The employer in this case provides a good example of what not to do when they tried to make new arguments after they lost in the initial trial. Make sure the case you present in the trial court covers all issues because it is unlikely you can bring it up later.
3. Be prepared to fight. Employees are wise to know that they have options when an unscrupulous employer tries to lash out. This case provides an example of how it is possible to fight back.

The key takeaway from this case: those who find themselves in similar situations have options.