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ARTICLES:

Missouri Employment Contracts

With Info About Employment Contract Law, Generally

Review this article, and then see the following articles for more specific info:

Contract cases are my favorite type of litigation. The law is generally more favorable to employees than in discrimination law. The playing field is more equal between employers and employees. More of these cases will get to trial and not be thrown out by the judge. If you can get to trial, you have a chance to win. But if the judge throws it out, it’s over.

After the Introduction section below, I discuss issues involving Oral Contracts, Written Contracts, and possible special Wrongful Termination Rights arising from contract breaches.

By the way, if the “contract” that brought you to this page is a Union Contract, then please see my Labor Law article.

INTRODUCTION

Some Employment Agreements give you opportunities, and some contain traps. Strategizing about how to proceed is often complex. Employees may have special rights, special procedures, and special limitations on their rights, contained in Contracts or Agreements of many and varied types.

If you have a Written Agreement of any sort with your employer, you should probably see a lawyer right away to strategize and to determine the effect, if any, on your rights and procedures. If you have a contract, see a lawyer. A lawyer can help you design a strategy that may capitalize on the rights afforded you in the contract, as well as the rights afforded under the laws. A lawyer can help you avoid making mistakes under the contract as you try to get some justice. The mere existence of a contract could change the strategy you should follow for many possible reasons too complex to attempt to discuss in detail here.

Missouri does not have a law that sets standards for the contents of a proper written employment agreement, so we use the “common law of contracts”. Most contract-related legal issues are judged according to what we call the “common law of contracts”, which refers to the legal doctrines that evolve from all the previous court cases, rather than the legal doctrines specified in written laws and statutes. This means that employment contract litigation is more highly case-by-case than many other areas of law. The unique facts of your case, and the unique language of your contract, must be compared to the existing body of court decisions, to see what a judge is likely to do in your specific case. We can’t fit your facts within specific laws and statutes, because there aren’t very many such laws and statutes regarding employment contracts.

Depending on your contract, and the unique facts of your case, you may or may not be able to take full advantage of the protections and remedies afforded by the laws I discuss here on the Tim’s Missouri Employment Law website. For one example, if you have agreed in your contract to arbitrate any dispute, then you may have agreed to something that may limit your ability to have the court system give you justice (if the arbitration agreement is enforceable, that is). For another example, the contract may have the effect of limiting your ability to collect damages (for highly technical legal reasons), and this may affect the ultimate decision as to whether you have a Worthwhile Case. There are many other considerations, too many to talk about here.

It is wise to see a lawyer for assistance in determining how best to make use of the rights you have, if you have a contract with your employer. In general, most of the Missouri Employee Rights I talk about on this site apply even to people that have written employment agreements and contracts. Often, you can make use of legal rights to your advantage in trying to resolve contract disputes, but this is highly case-by-case, and you’ll be well-advised to see a lawyer to design a strategy for you.

If you have a Non-Compete, Non-Solicitation, or Restrictive Covenant Agreement, then you may be in a very delicate legal position and you should proceed very cautiously, depending on what your goals are. If your goal is freedom from the Restrictive Covenants contained in the Non-Compete Agreement, work with a lawyer on how best to attempt to accomplish that goal (I can’t stress this enough).

Further reading: Please take a look at my article on The Sorry State of Our Employment Protections, where I talk about the lack of regulation of Non-Compete Agreements and Arbitration Agreements, as well as the lack of a Wage Payment and Collection Act in Missouri, and many other topics of potential interest.

 

SUBTOPICS
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Oral contracts

Written contracts, definite duration, damages

Does Missouri have a Wrongful Termination law for some contract breaches?

 

 

Oral Contracts and Oral Agreements of various types

Employment contracts come in all shapes and flavors. Everyone who works has, at least, an oral contract: “Work for me and I’ll pay you $xx.xx per hour.” That’s an oral contract. If you work, and don’t get paid, you have a contract claim even though nothing is in writing.

Plus, if the employer is covered by the minimum wage laws, and doesn’t pay you, he might be subject to a lawsuit under the minimum wage laws to collect at least the minimum wage, including attorney fees. That’s why employers often pay you the minimum wage in a pay dispute, and then withhold the balance. Those employers know that they must pay the minimum wage or else they could get sued under the minimum wage law.

It is quite common for people to call me and talk about their oral bonus and commission agreements. Their employers are determining the bonus and commission, and nothing is in writing about how the employer will decide the amount to pay. These people call me because they feel they are being shorted. People remember that the employer told them how the bonus and commission plans work, but since the plans are not written down anywhere, the employer might decide to dispute the employee’s memory – particularly if the employee makes a big score and would be entitled to a huge bonus or commission. Hence, we have to prove the terms of an oral contract regarding bonus and commissions.

By the way, in Missouri commissioned sales reps have special rights when there is a commission dispute, which I discuss in an article. See Commissions.

Depending on the case, it could be easy or hard to prove the terms of an oral agreement. It’s very helpful if the employer does things the same way for several people. The employer’s practices are useful in proving what the oral agreement most likely was. The employment  manual and handouts  are useful. Your own testimony is useful. There’s nothing inherently wrong with you testifying to what you think the agreement was. The employer will testify to his understanding. Other evidence will be introduced, other witnesses will testify, and the fact-finder (jury or judge) will decide whom to believe.

Disputes about pay arising from oral employment agreements often end up in Small Claims Court, unless there are issues involving the Minimum Wage, or unpaid Overtime or Unpaid Final Wages. See my article on Wage Disputes for more information.

So oral agreements are real contracts. You can enforce them if you can prove what the oral terms most likely were. But oral agreements typically do not contain attorney fee provisions, so each party will have to bear it’s own attorney fees no matter who wins. For practical purposes, that means the amount of money at stake would have to be significant to justify the expenses of suing. Since we are in Missouri, the statutes do not provide you much assistance. Missouri lacks a Wage Payment and Collection Act that would let you get your attorney fees if you win. So there is no dis-incentive for the employer to cheat you. The employer knows that in most cases you will either forget about it or you’ll just go to small claims court, and that he has nothing to fear from the government or lawyers, most of the time.

Special problems with oral agreements

  • Promised length of employment: An oral agreement to employ you for periods longer than one year is usually unenforceable in court, because of a special legal doctrine called the “statute of frauds.” Certain types of agreements are required to be in writing, such as contracts to acquire an interest in real estate, contracts for longer than one year, and some others. But there are other legal doctrines that lawyers know about, such as promissory estoppel and detrimental reliance, that could be used to render an agreement enforceable even if the statute of frauds might say the agreement is usually unenforceable.
  • Low amount of money at stake: In a typical oral agreement dispute, there is not much money at stake and no statute exists that will allow damages or attorney fees. Most of these types of cases end up in small claims court.
  • Impending bankruptcy: Employers usually pay their obligations, unless they have run out of money (temporarily or permanently). If the employer is near bankruptcy, you can sue all you want but you might have trouble collecting a judgment. Your claim might end up in the bankruptcy court along with the other people to whom the employer owes money. That’s not a particularly attractive scenario if you are trying to attract a lawyer to perform contingency fee legal work.

Written Employment Agreements

Written contracts are not necessarily any better for you than oral contracts. It all depends on what the written contract says. The typical written contract is useful simply because the terms of your original oral understanding are now reasonably clear because someone wrote them down. (Before you had a written agreement you first made an oral agreement about the material terms of the employment).

The real value in written employment contracts is when the contract contains a “definite duration of employment,” such as one year. Most of the time, written contracts that seem to contain a long definite duration of employment also contain escape clauses such as “30 day notice” provisions. Such escape provisions water down the value of the “definite duration” because the escape provisions would seem to permit the employer to argue that the contract is really a 30-day contract, not a one-year contract. It is my opinion that the law is unsettled on this point in Missouri, as to the ultimate legal effect of the escape clause when the contract contains a definite duration longer than the escape clause. When I negotiate contracts of a definite duration, I avoid such escape clauses unless the clients specifically want them.

Damages for breach of an employment
contract of a definite duration

The contract itself may contain several provisions that modify the general rule, and that greatly alter the available damages if either party breaches a contract of a definite duration. Assuming that the contract does not alter the general rule, the general rule can be thought of as follows:

  • If the Company fires the Employee without good cause before the end of the definite duration, the Employee can sue for the contract price (the balance of the payments due), minus any amounts earned in replacement employment during the rest of the contract period. The amounts earned in replacement employment are required to be deducted from damages under the doctrine called “mitigation of damages”.
  • If the Employee quits without good cause before the end of the definite duration, the employer can, in theory, sue the employee to recover the cost of acquiring and training a replacement for the remainder of the contract period. When the employee quits during the contract period, it’s possible that the law of Constructive Discharge will play a big role in the case. It’s possible to quit and still collect the remainder of the contracted payments, but be careful. See a lawyer before you quit, please. Read my articles on Quitting and Constructive Discharge and then call lawyers.

When an employee thinks about the potential damages that an employer could win from him under the general rule, an employee should see that legal advice and careful contract drafting are important in protecting him if the relationship goes sour with the new employer.

Moreover, employees should be able to readily see that if they want to quit their job, they might benefit from legal advice before they quit or give notice.

Generally speaking, it’s a good idea to have a lawyer look over any contract that the employer has drafted. If you want to preserve your bargaining position, it’s best to have a lawyer look over the first draft, before you tell the employer about the problems that you see. It’s best strategy in my opinion to respond to the first draft with a comprehensive list of all of the problems you (and your lawyer) have with the first draft.

It’s generally poor strategy to omit the lawyer from reviewing the first draft. A lot of people do just that. They receive the employer’s first draft, and they do not see a lawyer. Instead, they see some problems and point those out to the employer. Then the employer has his lawyer prepare a second draft (which costs the employer in legal fees). It’s at this point, as the process is nearing a conclusion and a second draft has been written, that some employees finally come to a lawyer.

Then the lawyer tells the employee about all of these other things that are troublesome about the contract, things that the employee missed in the first draft. If the troublesome things are major, then we have a big problem. It’s more awkward now to try to get the employer to create a third draft if that is necessary. As a consequence, some people find that they have to live with bad contract provisions, or else they find that the employer will not pay to have a third draft written, and the employee has to pay for it if he wants a third draft.

Does Missouri have a wrongful termination
law for some contract breaches?

There is a special law, the meaning of which has not been worked out by the courts yet, that seems to permit employees to get special damages if they had a contract for a definite period of time and were fired without good cause.

Here’s the text of the law, from the Missouri Government website:

Action by employees for breach of employment contract:
290.130. Any such servant or employee whose employment is for a definite period of time, and who is discharged without cause before the expiration of such time, may, in addition to the penalty prescribed by this law, have an action against any such employer for any damages he may have sustained by reason of such wrongful discharge, and such action may be joined with an action for unpaid wages and penalty.

See the law for yourself: RSMo 290.130.

Just what does that law mean? We don’t really have good guidance from the courts, in my opinion. Very few reported cases make any reference to this law. One case refers to RSMo 290.130 (briefly and in passing) as a type of wrongful termination law. I don’t know why so few claims appear to have been made under this law. It seems to me that people could claim at least compensatory damages under it. In ordinary contract cases, you can’t get compensatory damages; you can only get the balance of the contract payments. Every time I have had opportunity to make use of this law, the cases have gotten resolved, and so I have not yet had to ask the court system to make a definitive ruling on the meaning of RSMo 290.130. But I’ll get my chance one day.

Article written by | Tim Willoughby


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Timslaw.com Missouri Employment Law

Maintained by Attorney Phil Willoughby
Founded by Tim Willoughby, Esq. (1959-2013)

Phil is a Missouri employment lawyer who is licensed to practice in Kansas and Missouri, and primarily takes cases in Saint Louis and Kansas City. He is a member of the Missouri Bar Association and Kansas Bar Association. Additionally, he has practiced in the United States Federal Courts of Missouri in St. Louis and Kansas City. He has also practiced in the Kansas Federal District Court in Kansas City, Kansas.

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