Here’s a warning for supervisors and managers. When transferring an employee to another position, make sure you don’t make promises that create an employment contract. Such promises, under New York state contract law, don’t necessarily have to be in writing. Fortunately, they do have to be specific.
Recent case: John, an at-will employee, worked for Bank of America for many years, selling high-yield investment products. He moved to fixed income products and did well, earning commissions of over $1.6 million his last year in that department.
Then he was asked to transfer back to his old position. He agreed, but got his supervisor to promise that “his compensation would not suffer from the transfer,” and that he would retain some accounts so his pay would “hopefully grow.”
Within a few months, his performance fell and he was ranked as the worst performer in his department. Specifically, his sales fell by 7% while his co-workers averaged increased sales of 20%. Bank of America then underwent a reduction in force and terminated John.
John sued, alleging that his supervisor’s assurances created an oral contract for continued employment.
Fortunately for the employer, the court said the vague promise wasn’t enough to create an oral contract under New York contract law. The agreed upon terms in this case were not definite enough. (Delaney v. Bank of America, et al., No. 13-184, 2nd Cir., 2014)
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