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When an employee, especially an executive, high-ranking manager, or physician starts a new job, they often enter into a contract with their employer. These types of agreements can address the employee’s responsibilities, the length of employment, and protections against termination. An employment contract can also include the compensation terms — in addition to a salary, an employee may be offered bonuses, commissions, benefits, and reimbursement for expenses.
When an employment contract is signed by both the employer and employee, it becomes legally binding on both parties. Unfortunately, not all employers abide by their contractual obligations or keep the promises they make. If your employer failed to adhere to the terms of your agreement and breached the employment contract, you might have grounds to pursue a legal claim.
A contract is breached when one party fails to abide by the terms of the agreement. Specifically, a breach of employment contract can arise when an employer fails to perform its promise under one of the contractual provisions, violates one or more of the terms, or repudiates the contract. There are several types of employment contract breaches, including the following:
Notably, an agreement does not always need to be in writing to bring a claim for a breach of contract. Both written and oral employment contracts are enforceable under Pennsylvania law. An employment contract will be recognized if three elements are satisfied: 1) the parties had the intent to be bound by the terms of the agreement; 2) the terms in the contract are sufficiently definite; and 3) there was consideration to support the contract.
Pennsylvania is an at-will employment state. This means an employer or employee may terminate the employment relationship for any reason, as long as it isn’t discriminatory or otherwise unlawful. However, if a contract specifies the employment will last for a certain duration, an employee may be eligible to recover their damages if they were terminated prior to the end date without good cause.
There are a number of other instances in which a breach of contract claim may still be asserted, depending on the terms agreed upon between the employee and employer. For example, an employer may be liable for a breach of contract if they failed to pay the compensation or wages stated in the contract. An employer might also be held accountable if they denied an employee certain benefits to which they were entitled under the contractual terms, such as health insurance or life insurance.
In order to prevail in a claim for breach of employment contract, an employee must be able to demonstrate (a) a binding agreement, and (b) the employer failed to comply with the terms. They must also prove damages due to the employer’s failure to uphold the agreement. Generally, there are two types of remedies an employee can request for the harm they experienced as a result of a breach of employment contract — legal remedies and equitable remedies.
The legal remedies awarded in a breach of employment contract claim generally consist of compensatory damages (also known as “actual damages”) for the financial loss suffered by an employee because of the breach — such as lost earnings or benefits. An employee may also be entitled to recover expectation damages for the pay they expected to receive, had the contract been honored by the employer. Liquidated damages and attorneys’ fees can be awarded if they are provided for in the contract itself.
In contrast, remedies that are equitable in nature are not monetary. Rather, they are actions ordered by the court. Equitable remedies for breach of employment contract may include contract reformation, specific performance of the terms, or rescission.
Importantly, if the breach of contract claim arose from an employee’s termination, a court would expect the employee to mitigate their damages by seeking other employment.
It isn’t always necessary to litigate a breach of employment contract in the courtroom. In some cases, these matters can be resolved effectively and efficiently using an alternative dispute resolution method such as mediation or arbitration. In fact, many employment contracts specify the procedures that must be followed to resolve a dispute.
The mediation process can be utilized to resolve a wide variety of employment contract disputes privately, efficiently, and cost effectively. During mediation, the employer and employee are able to openly discuss their side of the story. A neutral third party helps to guide the parties toward a settlement agreement.
Similarly, arbitration can sometimes be faster and less expensive than litigation. Arbitration is an informal process used to resolve disputes without a judge or jury. However, it is conducted like a mini-trial. Both sides have the opportunity to present evidence and bring in witnesses that may be helpful to their case.
While it’s always best to attempt settlement outside the courtroom, some employers may not be willing to negotiate. If either party refuses to cooperate or a fair outcome cannot be reached, litigation may be the only option. When a breach of contract is litigated, it goes through the formal discovery process and proceeds to trial. But it’s important to understand that even if a lawsuit has been filed and the case is on the court’s docket, a resolution can be reached at any time through successful negotiation.
If you had a contract with your employer and they didn’t fulfill their end of the bargain, you may be able to take legal action and recover your monetary damages. Located in Pittsburgh, Stember Cohn & Davidson-Welling LLC represents professionals, executives, and employees in all industries for breach of employment contract claims in Pennsylvania. Call (412) 338-1445 or contact us to schedule a complimentary consultation.
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