Court of Appeals Sustains Jury Enforcement of Financial Services Employee's Oral Contract for "Guaranteed Bonus"
In Ryan v. Kellogg Partners Institutional Services, No. 37 (3/27/2012), the New York Court of Appeals affirmed a decision of the First Department, Appellate Division which affirmed a jury verdict that enforced an oral assurance given by a financial services managing partner to a new employee recruited from a competitor. Plaintiff Ryan, who had been earning approximately $270,000.00 in salary and bonus, was convinced to leave his position and join Defendant Kellogg, a financial industry start-up. Ryan told Kellogg that if he left his current employer he would be leaving his earned bonus (of $175,000) on the table; in response, Kellogg's managing partner assured him "this would not be a problem." Kellogg asked Ryan if he would be willing to split the bonus payment over two years to which Ryan agreed. Shortly after their initial conversation, Ryan signed an employment application with an "employment-at-will" clause and Kellogg claims that it distributed an employment manual with a similar "employment-at-will" provision. Later, when the time for the bonus payment became due, Kellogg asked Ryan if he would agree to accept a bonus payment deferred into the following year. According to the Court, "Ryan replied that he 'wasn't very happy about it,' but would 'take one for the team' and take the guarantee for the 2004 year instead of 2003." Ryan claims to have discussed the bonus situation "many times" with the managing partner and the compliance department, during which he was told to "relax," Kellogg was "going to get [to] the bonuses soon." Unfortunately, "soon" never came for Ryan, who was discharged allegedly for insubordination and disparagement of Kellogg. Ryan refused to sign the Uniform Termination Form U-5 and ended up suing Kellogg for failure to pay wages in violation of Labor Law §§ 190-198 and for breach of contract. The Supreme Court sent the case to a jury which found the oral assurances of a guaranteed bonus were made, that the bonus was not "discretionary," that the employment-at-will reservations were irrelevant to compensation promised to Ryan before he signed the application, and that Ryan was entitled to attorneys' fees under the Labor Law. The jury, however, did not find that Kellogg's refusal to pay the bonus was willful, depriving Ryan of liquidated damages under the Labor Law. The Court, affirming the Appellate Division and lower court, rejected Kellogg's argument that the oral compensation agreement was barred by the statute of frauds included in the General Obligations Law. Further, it distinguished other long-standing New York precedent enforcing employment-at-will provisions to bar an employee's recovery on breach-of-contract claims, zeroing in on the inartfully drafted clauses Kellogg relied on in this case, which lacked any language retaining the employer's discretion over bonus compensation.