Finding Employer’s Disclaimers Inadequate, New York High Court Rules For Employee Alleging Oral Bonus Promise

By: William R. Horwitz

The New York State Court of Appeals recently issued a decision highlighting the importance of including clear disclaimers in employee handbooks.  In Ryan v. Kellogg Partners Institutional Services, Plaintiff Daniel Ryan left an established securities firm to go to work for Defendant Kellogg Partners, a startup venture.  According to Ryan, Kellogg lured him with the oral promise of a $175,000 bonus.  When Kellogg failed to pay the bonus and then terminated his employment, Ryan filed a lawsuit asserting claims for failure to pay wages in violation of New York State Labor Law §§ 190-198 and breach of contract.

At trial, the jury returned a verdict in favor of Ryan.  With interest, attorneys’ fees and costs, the judgment totaled $379,956.65.  The Appellate Division, First Department, affirmed.

On appeal, Kellogg argued that statements in its employment application and employee handbook negated “Ryan’s alleged expectation of or entitlement to a guaranteed or non-discretionary bonus.”  The Court observed that the “Acknowledgments” section of the employment application merely confirmed that, if hired, Ryan would be employed on an at-will basis.  According to the Court, the at-will language was irrelevant because Ryan was not asserting an “alleged right to continued employment, compensation or benefits.”

The signed “Receipt” section of the employee handbook indicated that the handbook did not create “a promise of future benefits or a binding contract … for benefits or any other purpose.”  The Court explained that this language did not undermine Ryan’s claims, because the “handbook [did] not say that oral compensation agreements are unenforceable, or mention bonuses at all.”  Thus, the Court observed, “there are no statements in the handbook that bar Ryan’s recovery on his breach-of-contract and Labor Law claims for compensation alleged to be due and owing him.”  The Court of Appeals affirmed the judgment for Ryan.

At-will language in employment applications and employee handbooks is critical.  However, as the Ryan decision makes clear, employers should also be sure that policies state unequivocally that bonus decisions are left to the employer’s sole discretion.  Policies should also state that promises regarding bonuses and other terms and conditions of employment are valid only if made in a writing and signed by the employer.

How ICE Can Freeze Your Business Operations!

By: Pascal Benyamini

ICE, the U.S. Immigration and Customs Enforcement, was formed in 2003 “as part of the federal government’s response to the 9/11 attacks and its mission is to protect the security of the American people and homeland by vigilantly enforcing the nation’s immigration and customs laws.” With an annual budget of more than $5 billion and more than 19,000 employees in over 400 offices in the U.S. and around the world, ICE is the largest investigative agency in the United States Department of Homeland Security.  ICE may conduct raids or sweeps at a particular place of business. ICE can also send Notices of Inspections to employers to alert them that it will be inspecting their I-9s and hiring records to determine whether or not they are complying with employment eligibility verification laws and regulations.  ICE’s increased focus is on holding employers accountable for their hiring practices and their efforts to ensure a legal workforce.  ICE also seeks to ensure that employers are compliant with I-9 forms and hiring records.

In the event of audits or raids, employers’ non-compliance may result in civil penalties and lay the groundwork for criminal prosecution of employers who have knowingly violated the law.  According to ICE’s Assistant Secretary John Morton, “ICE is focused on finding and penalizing employers who believe they can unfairly get ahead by cultivating illegal workplaces.”  He added that ICE is “increasing criminal and civil enforcement of immigration-related employment laws and imposing smart, tough employer sanctions to even the playing field for employers who play by the rules.”

While the presence of illegal aliens at a business does not necessarily mean the employer is responsible, consulting with legal counsel is paramount to limiting your potential exposure in your hiring practices.