Employment Contract Disputes
Employment contract disputes can involve a broad range of issues, from the ownership of intellectual property (IP) to the employer’s right to terminate the employment relationship. Our firm represents employers nationwide in contract disputes with their executives and other employees.
Facing a dispute with a contracted employee can present various legal and practical challenges, not the least of which is the potential for loss of good will if the dispute becomes public. As a result, when faced with these disputes, employers will often have a vested interest in achieving a favorable outcome discretely and without unnecessary delay.
Of course, in some scenarios, litigation will be unavoidable. If the parties cannot come to terms, or if the employee is not willing to come to the negotiating table, then there may be no choice but to prepare a trial defense. With centuries of combined experience in settlement negotiations and courtroom litigation, our senior attorneys can protect your company regardless of the circumstances at hand.
We Help Employers Enforce Their Contractual Rights and Mitigate Their Liability
Headquartered in Dallas, Texas, Oberheiden P.C. is an employer defense law firm with a network of affiliated local counsel who are available to represent employers in state and federal litigation across the country. All of our attorneys are skilled litigators, and many have decades of legal experience. We also utilize the services of former high-ranking agents with the Federal Bureau of Investigation (FBI) and other agencies, who consult on litigation strategy and conduct fact-finding investigations in order to collect evidence in support of our clients’ defenses.
Meet the team at Oberheiden P.C.
Common Issues in Employment Contract Disputes
Employment contract disputes can involve various issues, and they can vary significantly in terms of their complexity. We work to simply the litigation process for our clients, clarifying the issues through investigations and discovery, formulating cohesive defense strategies, and leveraging the facts and the law to steer disputes toward efficient and favorable resolutions.
We have experience handling all types of employment contract disputes, including those involving:
The Employee’s Responsibilities
A well-written employment contract will clearly define the employee’s responsibilities, and an employer-friendly contract will provide the employer with the right to reasonably modify the employee’s responsibilities as necessary on an ongoing basis. If an employee refuses to perform on the basis that he or she is not contractually required to do so, this can present a challenging situation in which the employer may be forced to assert its rights and potentially seek specific performance.
Payment of Compensation and Benefits
A significant portion of all employment contract disputes relate to the employee’s right to payment of compensation and benefits. If an employee claims that he or she has received less than the full amount provided for in his or her agreement, then the employer will be forced to justify its payment of a lesser amount. Depending on the contract’s terms, there could be various reasons why less than full payment is justified, and in some cases employers could have claims for offsets and other employee liabilities as well.
Vesting of Employee Stock Options
For executives and other employees, stock options will often account for a significant portion of their total compensation. Typically, these stock options are subject to various terms and conditions, and they will only “vest” once those terms and conditions are satisfied. Disputes over whether stock options have vested are common, and employers accused of improperly failing to transfer stock options can potentially face liability for employees’ opportunity costs and other damages.
Ownership of Intellectual Property (IP)
When employees are responsible for creating intellectual property (IP) assets on their employers’ behalf, their employment contracts must clearly specify who owns the IP. Typically, this should be the employer (though there are some exceptions). If an employment contract is not clear regarding IP ownership, or if it is even arguably ambiguous, then an employer that continues to use employee-created IP after terminating the employment relationship could be forced to defend against allegations of infringement.
Termination of the Employment Relationship
Termination disputes arising out of contractual employment relationships can present a variety of different issues. From determining whether the employer was justified in terminating the employee prematurely to calculating damages in the event of a breach, each issue must be carefully and thoroughly assessed in order to determine what liability exposure the employer is facing.
Disputes regarding severance pay are particularly common in matters involving executives and other high-level employees. Oftentimes, disputes will arise as to whether severance pay is owed, similar to disputes regarding the vesting of stock options and other benefits. For employers that are seeking to avoid payment of full severance, it is essential to build a sound defense strategy that is supported by the terms of the parties’ employment contract and applicable state law.
Breaches of confidentiality can present unique challenges in litigation, and prompt legal action will often be required. While employers are often in the position of pursuing legal action to enforce their employees’ confidentiality obligations, they can occasionally find themselves in a defensive posture in confidentiality litigation as well.
Non-Competition and Non-Solicitation Covenants
Similarly, while employers are usually in the position of seeking the enforcement of their contacted employees’ non-competition and non-solicitation obligations, issues with these clauses can arise in the defense context as well. For example, in many cases employers that have been sued by their employees will be able to assert violations of contractual non-competition and non-solicitation obligations as a means of establishing leverage for negotiating mutually-agreeable settlements.
Occasionally, employees – particularly executives – will negotiate indemnification clauses into their employment agreements. Typically, these clauses provide protection for the employee in the event that the employee get sued in connection with his or her employment. If an employee of your company seeks indemnification (i.e. in the event that a former employer sues the employee for breach of confidentiality), then your company may need to either challenge the applicability of the indemnification clause or the validity of the underlying third-party allegations.
Issues with the Employment Contract Itself
In addition to substantive disputes, employers will often be forced to defend against challenges to the enforceability of their employment contracts. Common issues in this area include:
- Unconscionability of the Employment Contract – In some states, employees can challenge the enforceability of their employment contracts based on the law of unconscionability. If an agreement is so overwhelmingly one-sided as to be entirely unfair to the other party, then it may be deemed unconscionable, and therefore legally unenforceable, in certain jurisdictions.
- Governing Law – Disputes will also often arise regarding the governing law provisions contained in employment contracts. This is particularly common in situations in which the employee does not reside in the state whose law is specified to govern.
- Mandatory Alternative Dispute Resolution (ADR) – Employees may also attempt to challenge the enforceability of provisions that require the use of mediation or arbitration. Here, too, laws vary significantly from state to state, with some jurisdictions providing employees broad grounds to challenge the enforceability of mutually-agreed mandatory ADR clauses.
What Should Companies Do When Faced with Employment Contract Disputes?
If one of your company’s executives or other employees has filed a claim under or in relation to his or her employment contract, what are your next steps?
First, you need to engage experienced defense counsel. Direct communications with the employee should be terminated, and all decisions regarding responsive action need to be made based on the advice of legal counsel. Depending on the nature of the dispute, it may be necessary to conduct an investigation as well, and investigating promptly (before the employee potentially has the opportunity to destroy relevant files or delete relevant data) could be essential.
Next, working with your company’s defense counsel, you will need to decide how you want to approach the dispute. Is it in your company’s interests to settle, or are the employee’s claims clearly misguided? Should you invoke mandatory ADR; and, if so, what are the potential limitations and risks involved? What is your company’s potential exposure in the dispute, and how should this inform your company’s defense strategy?
These questions do not have simple answers, and there is not a one-size-fits-all approach that works for employment contract litigation. This is not just true across companies, but across individual contract disputes as well. Ultimately, employers need to decide on the most-appropriate course of action based on the advice of their defense counsel; and, once they decide, they must work closely with their defense counsel to execute a strategy focused on achieving a positive and cost-effective resolution.
Speak with an Employer Defense Lawyer at Oberheiden P.C. Today
Our firm represents employers of all sizes in employment contract disputes nationwide. If you need to engage defense counsel to protect your company, our attorneys and litigation consultants can begin work immediately to steer the dispute toward a favorable result. For more information about our employer defense practice, or to discuss your employment contract dispute with one of our senior attorneys in confidence, give us a call at 888-680-1745 or contact us online today.