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How Employers Can Get Money Back for Breach of a NY Employment Contract

Granted, this doesn't occur very often, but employers do have some recourse against former employees who collect a salary while not living up to their end of the deal.

The employer can sue them and get (at least some of) their money back.

Yes, you read that correctly. The rule in New York is that when an employee breaches the employment contract by refusing to perform, the employer is entitled to recover the difference between the contract wage and what the employer was required to pay to replace the employee, Triangle Waist Co. v Todd, 223 NY 27, 119 NE 85; Valentine Dolls, Inc. v McMillan, 25 Misc2d 551, 202 NYS2d 620. Naturally, this also means that if the employer promptly replaces that disloyal, or non-performing, employee with someone else at a lower salary, it is unlikely the employer can recover any damages. See, e.g., Marcus v Liner, 85 Misc 368, 147 NYS 458 (employer not entitled to recover damages where employee designer is replaced within two weeks by another designer at a lower salary).

"But what about lost profits?" you ask.

Although lost profits are generally not recoverable in simple breach of employment agreement cases, there are some instances, such as when the employee breaches his or her fiduciary duty to the employer, when New York's courts may allow such claims to proceed. See, e.g., E. W. Bruno Co. v Friedberg, 28 AD2d 91, 281 NYS2d 504, aff'd, 23 NY2d 798, 297 NYS2d 302, 244 NE2d 872; see Weinrauch v Kashkin, 64 AD2d 897, 407 NYS2d 885; McRoberts Protective Agency, Inc. v Lansdell Protective Agency, Inc., 61 AD2d 652, 403 NYS2d 511 (i.e., profit plaintiff would have made, not the profits defendant did make).