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Afrand v. Fountain Technologies, Inc.

A-5251-97T3 (N.J. Super. App. Div. 1999) (Unpublished)

EMPLOYER-EMPLOYEE; EMPLOYMENT AGREEMENTS—An integration clause in an employment agreement does not bar parol evidence of compensation terms where the agreement is silent as to compensation.

In discussions preliminary to employment, a salesperson insisted on a commission arrangement at least equal to the level of that of the employee’s prior job. The employer assured the candidate that its commission plan was better than the candidate’s then current plan and offered a position to the candidate representing that the salary, commission rate, and health benefits would be more generous then those the employee had been receiving. A written offer of employment was made promising a position at a given semi-monthly rate with a promise that a commission plan would be effective after six months of continuous service. On the first day of employment, the salesperson signed a document entitled “Employment Agreement.” The agreement was completely silent on the subject of compensation. It recited that “[t]his Agreement constitutes the entire agreement between the parties in respect to the subject matter hereof and may not be amended, supplemented, discharged or otherwise modified, except by a written instrument signed by all of the parties hereto.” Throughout the course of employment, the salesperson received the salary specified in the offer letter together with several salary increases and bonuses, but no commissions. The salesperson asserted that whenever the question of promised commissions was raised, the employer always put off the question with a promise that they would be forthcoming. After more than two years, without having received any commissions, the salesperson was let go because of “market conditions.” The salesperson filed suit seeking the unpaid commissions under a breach of contract theory, later amending the complaint to add a count for fraudulent inducement. The employer contended that it had never made an enforceable promise to pay commissions. Its argument was based upon the Employment Agreement being the full and complete agreement between the parties, even though it made no mention of commissions. The employer insisted that a right to commission could not be read into the agreement without modifying or supplementing it contrary to its own terms. The Appellate Division was prepared to agree with that proposition if the agreement had been executed by the employer (which it had not) and if it was construable as the entire, complete, and unambiguous agreement between the parties. To the contrary, the Court found that even though the Employment Agreement was silent on the matter, it could not be construed that the parties intended that the salesperson would work without compensation. Thus, according to the Court, not only was the Employment Agreement not the last word as to compensation – it was “not even the first word, it was no word.” Extrinsic evidence is admissible when, as in this case, it is apparent that something has been left out of the writing. To the extent that the integration language was enforceable, it dealt only with the subject matter of the agreement, and the salesperson’s compensation was not the subject matter of the agreement.

With respect to the offer letter, the employer claimed, and the lower court agreed, that the letter could not constitute a binding obligation because it failed to state the rate of commission, and thus the promise was unenforceable. The Appellate Division disagreed. To it, the nature of the consideration – that is, a commission plan – was definitively provided for. In a prior case, the New Jersey Supreme Court explained “where the nature of the consideration is sufficiently expressed, the amount of the consideration (i.e., the rate) may be shown by parol evidence.” Consequently, the Appellate Division was persuaded that the salesperson had the right to proceed and to demonstrate to a finder of fact “that a quantifiable rate of commission was intended by both parties to be a component of plaintiff’s compensation package.”

The Court also considered the salesperson’s claim of fraudulent inducement, “the gravamen of which is, essentially, the factual basis underlying his promissory estoppel theory with the added allegation that defendant never intended to keep its promise.” The Court saw no reason why this claim would not be viable. Therefore, the Appellate Division reversed the lower court’s finding of summary judgment against the salesperson and allowed the salesperson to attempt to prove a case.


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