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When employee is at-will, you’re free to change compensation going forward

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in Employment Law,Human Resources

Here’s an important note in this rocky economy: Employers are free to change many of the terms and conditions of employment for at-will employees, including changing their compensation.

Recent case: Berkeley Scott took a job with Harris Interactive as a high-level manager. He signed an agreement that set his compensation at $220,000 per year, but which also clearly specified that he was employed on an at-will basis. The agreement said either party could end the relationship at any time, for any legal reason.

Scott apparently didn’t perform as well as expected because he was soon called into a meeting where he learned he would be paid just $150,000 going forward and would have reduced duties.

He kept working for a few days past the date the change took effect and then quit.

Then Scott sued, alleging he was entitled to severance pay, plus his old salary for the days he worked until he quit. He essentially argued that the company breached the employment agreement by changing the terms.

The court disagreed. It reasoned that if the employment was at-will and could be terminated for any legal reason, then the job could also be restructured and so could the pay structure.

Because Scott worked a few days under the new terms, he accepted them and couldn’t claim severance or other termination benefits. (Scott v. Harris Interactive, No. 10-CV-5005, SD NY, 2012)

Final note: Include an at-will clause in your offer letters, any employment contracts and in your employee handbook.

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