While not advisable, there are occasions when executive employees are hired without a formal employment contract signed by the employer and employee. When a Pennsylvania employee performs work pursuant to the terms of a less formal agreement and is not paid, other written evidence may form the basis of an employment contract, as demonstrated in Miller v. Cerebain Biotech Corp. E. D. Pa. no. 16-3943 (November 8, 2016) (O’Neill, J.), where the court denied the employer’s Motion to Dismiss a Complaint.
In Miller, the plaintiff was hired to be a senior member of the management team to provide public relations, investor relations and corporate growth strategies and was to be an advisor available to the Chief Executive Officer. The parties agreed on compensation in the amount of $140,000 per year, plus $400 per month in on-going expenses as documented in an email. The executive then provided services to the corporation and after the executive was not paid for services provided, litigation was filed asserting claims for (1) breach of contract; (2) violation of the Pennsylvania Wage Payment and Collection Law; and (3) unjust enrichment.
The Pennsylvania Wage Payment and Collection Law (WPCL) provides that every employer shall pay all wages and benefits due to its employees. When an employee is not paid wages due, the WPCL provides a cause of action for the amount due plus an additional 25% of the amount due, attorneys’ fees and costs. One key feature of the WPCL is that it creates personal liability for a corporate officer with operational control of the employer. Thus, if the employer defaults on its wage payment obligations to an employee, a corporate officer may be personally liable directly to the employee for the wages due.
The WPCL only applies to employees, and not contractors; thus, there are occasions in which a dispute arises as to whether a person should be deemed an employee under Pennsylvania law. Pennsylvania courts consider many factors to determine whether an individual is an employee or an independent contractor, including the control of the manner that work is to be done; the terms of any agreement between the parties; the nature of the work or occupation; the skill required for performance; whether the person is engaged in a distinct occupation or business; which party supplies the tools; whether payment is by the time or by the job; whether the work is part of the regular business of the employer; and the right to terminate the employment at any time.
In Miller, the defendants argued that the plaintiff was not an employee but rather an independent contractor, and even if the plaintiff was an employee, there was no valid employment agreement pursuant to which wages were due. The court rejected both arguments and found that the plaintiff sufficiently pled a WPCL claim by asserting that she was hired as a senior member of the management team to provide services relating to public and investor relations as well as corporate growth strategies, and the terms of employment were memorialized in an employment agreement in the form of an email that contained language suggestive of an employer-employee relationship.
The Pennsylvania Supreme Court has stated that the WPCL provides a means of recovering wages that are due pursuant to a contract and the WPCL does not create a right to compensation, rather, it provides a statutory remedy when the employer breaches a contractual obligation to pay earned wages. Thus, litigation under the WPCL may also include an issue as to whether there is a valid employment contract. Many reported Pennsylvania employment law cases provided that a plaintiff may proceed under the WPCL by establishing the formation of an implied oral contract between an employer and an employee. Under Pennsylvania law, an implied contract arises when the parties agree on the obligation to be incurred, but their intention, instead of being expressed in words, is inferred from the relationship between the parties and their conduct in light of the surrounding circumstances. In Miller, the court found that accepting all factual allegations of the complaint as true, the employee at a minimum, sufficiently pled the existence of an implied employment agreement, and while the e-mail reflects the existence of various uncertainties in the agreement, those uncertainties do not negate the existence of an employment agreement for purposes of the WPCL.
In Miller, the court also found that the employee had sufficiently pled a breach of employment contract claim in that the employee alleged that she was hired under an employment agreement to serve as a senior member of management team at a specific salary, the employee provided services pursuant to the agreement, and the employee was not paid for services rendered.
Where there is some uncertainly as to whether a contract exists, a plaintiff is permitted to plead alternative theories of recovery, asserting both breach of contract and unjust enrichment claims. Under Pennsylvania law, a cause of action for unjust enrichment is established when (1) a benefit is conferred on the defendant by the plaintiff; (2) there is appreciation of the benefit by the defendant; and (3) the defendant accepts and retains the benefit under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value.
In Miller, the court permitted the unjust enrichment claim to proceed as the employee established that she conferred a benefit by creating the content for, and managing the development and launch of the corporate website, plans and social media strategy, the employer received the benefit of the work provided, and the employee asserted that the defendants were unjustly enriched because despite repeated promises to pay wages and expenses upon receiving an additional capital infusion, the plaintiff was not paid in full for services provided.
For more information on breach of employment contracts, 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