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Schoenbach v. Durex, Inc.

2005 WL 1276333 (N.J. Super. App. Div. 2005) (Unpublished)

EMPLOYER-EMPLOYEE; TERMINATION AGREEMENTS — An employment severance agreement does not have to be in writing to be enforceable so long as the parties have agreed on the essential terms of the contract.

An employee worked for a company for thirty-five years in various capacities. There was never a written employment agreement. The company began to experience a decrease in business and its officers decided to downsize. The president met with the employee and presented him with three options on a handwritten note. The first two options permitted the employee to continue, but at a lower salary. The third option provided that employment would be terminated and that the company would pay three months salary. The employee told the president that he would think about the options, and he left the meeting with the handwritten note. One week later, he emailed the president and informed him that he was choosing the third option. He also asked if the president would consider enhancing the severance package since he had worked for the company for thirty-five years. The president emailed back, telling the employee that he would consider enhancing the package. However, no agreement was ever reached regarding the enhancement. By this point, the employee had left the company and was waiting to receive his severance package under the third option. The company never paid the employee three months salary, and the employee filed a breach of contract action against the company. He argued that he was entitled to three months salary from the company pursuant to the agreement that had been formed between the parties. In its defense, the company contended that it had no obligation because there was no written agreement. The lower court found that when the president of the company presented the man with the note containing his options, an offer to enter into a contract had been made. It further concluded that the offer was accepted when the employee emailed the president to inform him that he was choosing the third option. It then held that the elements of promissory estoppel were present because the president made a promise when he presented the employee with the three options and the employee reasonably relied on the promise to his detriment. As a result of his reliance, the employee left the company. As a result, the lower court held that there was an enforceable severance agreement. The company appealed the lower court’s determination.

The Appellate Division affirmed the lower court’s ruling. It agreed that an enforceable agreement was reached between the parties when the employee communicated his acceptance of the third option to the company’s president. It rejected the company’s assertion that the agreement had to be in writing in order to be enforceable. The Court further held that when parties agree upon the essential terms of a settlement agreement, the agreement should be enforced notwithstanding the fact that the terms were never reduced to writing because one of the parties later reneges. As a result, the Court concluded that a severance agreement had been formed, and that the employee was entitled to his severance pay.

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