Severance Pay, Breach of Contract and the Pennsylvania Wage Payment and Collection Law: Offer Letter May Obligate Employer and its Individual Partners to Pay Severance

In Pennsylvania employees are considered employees “at will”; absent a contract stating otherwise, employees may be terminated for any reason or no reason at all unless the underlying reason for the termination is protected by the law, such as unlawful discrimination based on age, race, sex, religion. national origin or disability. Further, without a contract or formal severance plan providing otherwise, when an employee is terminated, there is no entitlement to severance pay. Nevertheless there are instances where an offer letter submitted by the employer before the employee accepts employment may establish contractual terms to which an employer is obligated. In Wieczorek v. Dempsey Partners, LLC, 2013 U.S. Dist. LEXIS 175811, (E. D. Pa. December 16, 2013)(O’Neill, J.), the court considered such a situation where the plaintiff employee filed claims for breach of contract and violation of the Pennsylvania Wage Payment and Collection Law (WPCL).

In Wieczorek, the Plaintiff was hired as Manager of Supply Chain Analytics under the terms of a 2007 employment Offer Letter which provided “(t)his agreement is not an employment contract and does not provide for a guaranteed term of employment or guaranteed compensation. . . In the event of involuntary separation from the company, for any reason other than cause, you will be entitled to severance payments not to exceed six months base salary…” Two years after the employee commenced employment, a new partnership was formed and the partners determined that a condition of employment for all employees was the signing of an agreement with restrictive covenants. The restrictive covenant agreement signed by the Plaintiff provided that it was “the entire understanding among the parties and supersedes all prior agreements among them. No modification, discharge or waiver, in whole or in part, of any of the provisions of this Agreement shall be valued unless in writing and signed by the parties.”

When the Plaintiff employee was subsequently terminated, Defendants alleged that the reason for termination was “for cause.” Plaintiff alleged that defendants falsely terminated him “for cause” to avoid the severance due under his original Offer Letter, claiming breach of contract and violation of the WPCL, and that the individual managing partners were also liable under the WPCL. Defendants filed a Motion for Summary Judgment arguing that Plaintiff employee’s claim for breach of contract under the 2007 Offer Letter failed because the Offer Letter was superseded by the express terms of the 2009 Restrictive Covenant Agreement which contains no severance provision.

Under a choice of law provision, the 2009 Agreement was interpreted under Connecticut law which provides that a merger clause inserted into a written agreement ordinarily is conclusive proof of the parties’ intent to create a completely integrated contract, and a court is forbidden from considering extrinsic evidence unless there was unequal bargaining power between the parties, but exceptions exist (1) to explain an ambiguity; (2) to prove a collateral oral agreement which does not vary the terms of the writing; (3) to add a missing term when a writing indicates on its face that it does not set forth the complete agreement; or (4) to show mistake or fraud. Pennsylvania law follows these same general principles.

In Wieczorek, the court found that the 2007 Offer Letter and 2009 Agreement cover two distinct areas of the parties’ rights and interests. The 2007 Offer Letter defined the plaintiff employee’s economic, terms of employment while the subsequent 2009 Agreement addressed only restrictive covenants such as confidentiality, disclosure and assignments of inventions and improvements, non-solicitation of customers and employee and non-disparagement. Therefore the court found that it cannot be said that Plaintiff’s terms of employment, including severance payments, are dealt with in the 2009 Agreement and nothing in the 2009 Agreement demonstrates any intent to address the matters governed by the 2007 Offer Letter. Thus, the court denied Defendants’ motion for summary judgment and found the 2007 Offer Letter and its term providing for severance pay were not superseded and may be introduced as evidence of the parties’ agreement which clearly and unambiguously indicates that the employee is entitled to severance payments if he is separated without cause. The court also noted that the WPCL may establish individual liability against an agent or officer, where the individual exercises a policy-making function with the employer or takes an active role in the company’s decision-making process. Applying this standard, the court found that the record clearly indicates that the partners were actively involved in decision-making and may be liable under the WPCL.

For more information on breach of employment contracts, severance pay, the Pennsylvania Wage Payment and Collection Law and Abramson Employment Law, see http://www.job-discrimination.com/lawyer-attorney-2122062.html, http://www.job-discrimination.com/lawyer-attorney-2122061.html

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Filed under Breach of Contract, Employee Benefits, Pennsylvania Wage Payment and Collection Law, Severance Pay

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