Oral Modification of Employment Contract Valid, Court Holds
In Cantor v. Boston Children Health Physicians LLP, a Westchester trial court recently held that despite a "no oral modification clause" in an employment contract, the parties' course of conduct - which was at direct odds with what was still contained in the written agreement - effectively modified the contract, increasing the plaintiff's salary from the contractually agreed upon $150,000 to $180,000 per year.
What Happened in Cantor
In this case, the plaintiff doctor claimed that following a change in management, the defendant unilaterally - and wrongfully - reduced her annual salary to $150,000 - which was the amount set forth in her written employment agreement, and they were therefore liable to her in breach of contract for the difference in pay over a 2+ year period.
Predictably, the defendant argued that plaintiff's claim should be denied on several grounds, most pertinent of which were the following:
(1) The employment agreement set forth in writing plaintiff's compensation at $150,000 per year - and that is the only amount ever agreed to in writing between the parties.
(2) In the same vein, the contract contained a provision stating that the Agreement represented the “entire understanding of the parties” (in legalese, a "merger clause") and a no oral modification clause to the effect that “no amendment, modification or alteration of this Agreement shall be binding on any party unless executed in writing by all parties hereto.”
(3) By accepting the (allegedly) reduced pay over a prolonged period of time, plaintiff had effectively waived her right to the additional monies she now complained that she was owed.
Consequently, according to defendant, plaintiff's claim that the parties had orally agreed to a different pay structure should be deemed Dead on Arrival.
What the Court Held
Clearly, as should be evident from the lead-in to this article, the trial Court felt differently, and in holding defendant liable for breach, noted that notwithstanding the "no oral modification" clause set forth in the written agreement, defendant conceded that over a 5 year period, they had, in fact, paid plaintiff at the $180,000 salary rate that plaintiff had stated was the parties' oral agreement.
The Court further stated as follows:
"The written terms of the 2011 Contract were thus changed by the agreement and conduct of Defendant which essentially ratified, on a regular and continuous basis for nearly five years, that modified contract term. Under similar circumstances, courts have not hesitated to uphold an orally modified agreement even in the face of a no oral modification clause when subsequent conduct essentially changed the written terms of the contract.
"For example, in Aiello v. Burns International Security Services Corp., 110 A.D.3d 234 (1st Dept. 2013), the Court held that even though the contact at issue contained a non-waiver clause and a provision stating that it could only be modified in writing, the Court held that it nonetheless could be and was modified by the parties’ actual performance. As the Court stated,
“[T]he law is abundantly clear in New York that where a contract specifically contains a non-waiver clause and a provision stating that it cannot be modified except by a writing, it can, nevertheless, be effectively modified by actual performance and the parties’ course for conduct.”
Candidly, on the specific facts of this case, I love the decision; the Court went out of its way to prevent a lone doctor from being bullied by a new incoming administration that tried to steamroll her and deny what everyone knew was her rightful pay.
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