Wednesday, June 27, 2012

Continuation of employment upon the expiration of a contract of employment may not be automatic


Continuation of employment upon the expiration of a contract of employment may not be automatic
Goldman v White Plains Ctr. for Nursing Care, LLC, 11 NY3d 173

Some public employments, typically those involving employment in a position having academic rank at a public college or university [see, for example 4 NYCRR 335.10] or as a school superintendent or an associate school superintendent, [see, for example, Education Law §§1711(3) and 2507(1)], are controlled by employment contracts between the parties.

The issue to be resolved in the Goldman case was whether the expiration of a two-year employment contract gives rise to successive one-year implied “common law” contracts of employment when the employee continues working for the employer without a new agreement in place. In this instance the Court of Appeals concluded that Lorraine Goldman became an at-will employee at the end of the two-year period and did not enjoy any “successive one-year implied contract of employment with White Plains.

Goldman’s initial contract of employment, executed in 1990, provided that the parties would "enter into good faith negotiations . . . with respect to renewal of th[e] Agreement on mutually agreeable terms" no less than nine months before the contract was due to expire.” The agreement could be terminated by the mutual consent of the parties or "[b]y either party giving notice to the other at least six (6) months prior to the end of the Employment Period of its intention not to renew this Agreement." At expiration of the contract or termination of employment, the employer would "be released of any responsibility or obligation hereunder, except for payment of salary and benefits accrued to the effective date of such expiration or termination." Finally, the contract included a provision that stated it was the "entire Agreement and understanding" of the parties and could "not be changed, modified or amended, except by a writing signed by" Goldman and her then employer.

During the course of the two-year term, Goldman and her employer did not discuss renewal of the agreement and neither sent a notice of termination. After the contract expired on March 31, 1992, Goldman continued to serve as the facilities’ administrative director and received annual salary adjustments. However the facilities were purchased by White Plains Center for Nursing Care, LLC and NMC Acquisitions, LLC (White Plains) from Goldman’s initial employer in October 2004. In conjunction with that transaction, White Plains Center executed an assignment and assumption of contracts, which listed Goldman’s 1990 employment contract among the documents provided to the purchasers. Three months later, White Plains Center terminated Goldman's employment.

In deciding Goldman’s breach of contract action, the Appellate Division concluded that the application of an implied contractual arrangement after expiration of the two-year term was inconsistent with the express language of the original employment agreement. The Court of Appeals agreed, holding that “A fundamental tenet of contract law is that agreements are construed in accordance with the intent of the parties and the best evidence of the parties' intent is what they express in their written contract.”

Goldman’s contract provided that in the event the agreement was allowed to expire at the conclusion of the two-year term, her then employer would have no further obligations to her other than compensating her for accrued salary and benefits. Further, said the court, the contract “unambiguously indicate that the parties understood that the employment contract would end at the conclusion of the two-year period unless an extension was agreed upon.”

Rejecting Goldman’s argument that under “common law” she had a one-year implied contract on the same terms as set forth in the original agreement each year that her employment continued after the expiration of the written contract, the Court of Appeals held that “this contention conflicts with the well-established rule that, ‘absent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party.’”

The court then pointed out that Goldman’s argument relies on a common-law rule that recognizes an inference that parties intend to renew an employment agreement for an additional year where the employee continues to work after expiration of an employment contract. In a footnote, the Court of Appeals explained that “The common law created a presumption of a new term of employment of only one year to avoid a statute of frauds problem.”

However, said the court, this common-law presumption — developed in the 19th century before the establishment of the employment-at-will doctrine — can be rebutted by demonstrating that the parties did not intend to allow a contract to renew automatically.

In this instance, said the court, Goldman’s employment became an at-will arrangement upon the expiration of the agreement under the terms of the contract itself on March 31, 1992 and thus White Plains was entitled to summary judgment dismissing the breach of contract claim.

The Court of Appeals then observed that “Parties to future contracts can avoid uncertainty regarding application of the common-law rule simply by specifying that continuation of the employment relationship after the expiration of the contractual period will result in either successive one-year extensions of employment or at-will employment status.”

The full text of the decision is posted on the Internet at:
http://www.courts.state.ny.us/reporter/3dseries/2008/2008_07760.htm


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