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How a Demotion Can Be Deemed a Breach of Employment Agreement Under NY Law


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1/1/2016
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Consider the following hypothetical scenario: Jim is hired by ABC Stores as Executive VP of Sales and Marketing. His 3-year employment contract states that all managers at ABC's stores are required to coordinate their in-store marketing efforts through him, including securing his approval of all vendors. Six months later, ABC brings in its CFO's son Peter into the company, who has just received his MBA. Within one week of Peter starting his job at ABC, Jim notices that 3 of ABC's 25 store managers failed to forward him their monthly marketing proposals. Two months later, that number increased to 20 out of the 25. And now, he also learns from two of his favored vendors that Peter, whose title is now Senior Vice President, terminated ABC's agreements with them - all without Jim's knowledge, and that he circulated a confidential memorandum - which also bore the CEO and CFO's signatures - directing that all sales and marketing efforts now be run through him, rather than Jim. In the face of this embarrassment and the stripping of all his essential job duties, Jim feels compelled to resign. But he is concerned: the job market is much worse now than when he signed the contract, and if he quits, won't he be automatically forfeiting his right to recover under the employment contract? Fortunately for Jim, under New York law the answer is no. In New York, if an employee is hired to fill a particular position, any material change in (his, her) duties, or a significant reduction in rank may qualify as a breach of the employment contract. On the other hand, and in the interests of full disclosure, resignation is not without risk: although in this particular fact scenario it is unlikely, a jury may ultimately decide that the change in duties that the employee suffered were not in fact "significant," and defeat the employee's breach of contract claim.



Category: Non-Compete & Employment Agreements

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