New York Employment Lawyer Blog

Employment contracts have limited use, are often meaningless and can damage moral. Here is a quote from the Signals v. Noise blog in which the people at 37 Signals question the need for employment agreements:

"The [employment] contract is about five pages. It outlines some basic responsibilities we have to the employee and the employee has to the company. Starting salary, an overview of benefits, vacation time, confidentiality, and general expectations on both sides. But that’s really only a paragraph or two. Everything else is legal-cover-your-ass-speak. Like most contracts, it’s basically a big “I don’t trust you and you don’t trust me” document. What a terrible way to welcome someone to the team."

The guys at 37 Signals make a good point. What bother with an employment agreement anyway. What benefit does an employment agreement provide to the company or the employee? Typically, not much. Here is why.

First, all employees are presumed to be at-will. All at-will employees can be fired at any time and for any reason. At-will employees have virtually no rights. But, it is a two way street and at-will employees are free to quit any time and for any reason. Basically, the at-will doctrine is a lot like dating. You can break up and leave at any time and for any reason with no strings attached. You just pack your bags and go. Easy, but the downside is the lack of commitment.

Most employment contracts do not change the at-will doctrine and simply confirm that the at-will doctrine controls. So why bother with an employment contract if it does not change the fundamentals? In many cases, there is no need for an employment agreement. However, an employment agreement is useful in the follow situations:

1. Remove the At-Will Doctrine.
The parties want to remove themselves from the employment at-will doctrine. You can alter the employment at-will doctrine easily. All you need to do is provide that the employment is not at-will and instead is for a set time period and define the circumstances that provide cause to end the employment relationship.

2. Set Out Complicated Compensation Terms
An employment agreement is useful if the parties wish to add benefits such as stock options, bonuses, equity in the company, commissions or any other creative or complex compensation terms.

3. Non-Competition or Non-Solicitation
An employment agreement is necessary to add a non-competition or non-solicitation provision.

4. Provide a Set Severance Agreement
Typically, high level executives require employment agreements to set out, among other things, a set severance payment plan.

Employee rights are slowly expanding and includes strong legal protection against work place retaliation. The New York City Administrative Code is powerful and outlaws almost any kind of retaliation. Also, the United States Supreme Court has issued several good opinions supporting retaliation laws.

Retaliation occurs whenever an employee is punished for reporting illegal work place conduct such as discrimination, sexual harassment or certain health and safety violations. The anti-retaliation laws also protect other employees who may not have reported the illegal conduct, but who serve as witnesses or support the employee who reported the misconduct.

The United States Supreme Court has made it clear that workers must be protected from retaliation. The Court recognizes that retaliation cannot be tolerated. Otherwise, the anti-discrimination and harassment laws will have little effect if workers can be punished for reporting discrimination or harassment. Employees will not report workplace violations if they are not protected.

In a recent decision, the United States Court stated that "fear of retaliation is the leading reason why people stay silent instead of voicing their concerns about bias and discrimination." In it's most recent decision, Crawford v. Metropolitan Government of Nashville, the Court again held in favor of an employee who had been fired shortly after she told company investigators that her boss had sexually harassed her. For more on this case or to get a full version of the Court's decision, see The Employment Law Memo.

Here is the single greatest myth in today's workplace:

"I am not entitled to overtime pay because I am a salaried employee."

Employees across the nation are being duped by the millions. People who are legally entitled to overtime pay for their extra work are being ripped off. Salaried employees are entitled to overtime pay. The fact that a person is paid a salary is irrelevant.

Under the overtime pay laws, each employee is presumed to be entitled to overtime pay. Certain kinds of employees are exempt from the overtime pay laws. Typically, these three kinds of employees are exempt from overtime pay:

- Professional employees such as doctors, lawyers and other over-educated pinheads
- Executive employees such as managers or top level company officials
- Administrators who handle key company operations

Those are the three major categories of exempt employees. There are other specific exemptions that apply to certain trades such as truck drivers, certain computer workers or student nurses. Here is a table of overtime exempt jobs in California. But other than those listed as exempt, the law assumes that employees are entitled to overtime pay.

The fact that an employee is paid a salary is generally irrelevant. But, a myth has been created in the American workforce and most people who are paid a salary believe that they are not entitled to overtime pay. This misunderstanding saves corporations millions and cheats American workers out of their pay. It is wage theft - stealing money that is earned and owed to the workers who put in the hours.

In a major set back to banks and finance companies, the U.S. Department of Labor recently held that mortgage and loan officers are entitled to overtime pay. This reverses a long standing policy that mortgage loan officers were exempt from overtime pay under the administrative employee exemption of the Fair Labor Standards Act. But on March 24, 2010, the U.S. Department of Labor reversed course and held that loan officers are not exempt from overtime pay.

This is great news for loan officers around the country. For years, loan officers had a tougher time bringing overtime pay cases because they were often considered exempt from the overtime pay rules. But courts lately have been finding that employees who are deemed "production" workers no longer qualify for the administrative exemption.

The Department of Labor found that loan officers in reality are mere production workers who help sell loans. The Department found that loan officers do not manage the business or otherwise qualify for the administrative exemption.