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Frigon v. DBA Holdings, Inc.

A-1563-03T3 (N.J. Super. App. Div. 2005) (Unpublished)

EMPLOYER-EMPLOYEE; TERMINATION AGREEMENTS—If an employee termination agreement doesn’t state that acceptance of payments would be a treated as full satisfaction of the amounts due under the agreement, the employee is free to contest the manner by which the payments were calculated.

Employees sued their employer for money owed them after they agreed to surrender their phantom stock options in the company in exchange for “an all-cash payout.” The employer contended that its employees “had received the full amount to which they were entitled under” their termination agreements and that they were not entitled to a share “of the tax benefit generated by their agreement to surrender their phantom tax options and sign the termination agreement.” The lower court disagreed with the employer and awarded damages to the employees including a “share in the tax benefit.” The employer appealed, contending that: 1) the record did not support the findings of the lower court; 2) the employees agreed to have an auditor determine “what was due to them;” and 3) “the doctrine of accord and satisfaction” barred the employees’ claims.

The Appellate Division disagreed with the employer’s first contention, thus holding that the record did support the lower court’s conclusions and findings. The Court also disagreed with the employer’s second contention by holding that although the employees signed an agreement nearly fourteen years earlier in which they agreed not to challenge the determinations of the employer’s accountants, there was no evidence that the language of that agreement was “incorporated into the [employees’] termination agreements.” Thus, the Court held that the employees “remained free to challenge the methodology employed by the auditors to compute the final amount due them under the termination agreements.” The Court further held that the employer’s third contention that the employees’ claims were “barred through an accord and satisfaction” was unsupported since the employer “never made clear that acceptance of the payments would be treated as full satisfaction of the amounts due under the Employment Termination Agreements” nor did the employees ever accept the “payments as full satisfaction of the amounts due under the notes or the agreements.”

On the other hand, the Court found that the lower court erroneously awarded the employees pre-judgment interest, holding that “[i]f prejudgment interest is to be excluded in the calculus under R. 4:58-3, it should similarly be excluded from the calculus under R. 4:58-2.” The Court thus found that the employees “were not entitled to invoke the fee-shifting provisions of R. 4:58-2” since “a gap of less than $50,000 did not represent a reasonable discount for purposes of settlement.” Finally, the Court remanded the case for “a recomputation [sic] of the interest to which [the employees were] entitled.”


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