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THE EMPLOYMENT CONTRACT MUST BE READ AS A WHOLE; THE PROVISION RELIED ON BY THE EMPLOYER TO AVOID PAYING DEFENDANT’S EARNED SALARY UPON TERMINATION APPLIED ONLY TO THOSE CURRENTLY EMPLOYED (ALLOWING PAYMENT TO BE DEFERRED WHEN AVAILABLE FUNDS ARE INSUFFICIENT); A DIFFERENT PROVISION REQUIRING PAYMENT IN CASH APPLIED TO TERMINATED EMPLOYEES (FIRST DEPT).

The First Department, reversing Supreme Court, determined the employment contract between Drone and defendant obligated Drone to pay defendant the salary which remained unpaid upon defendant’s termination. Drone unsuccessfully argued the provision of the contract which allowed cash payment of salaries to be deferred when there were insufficient funds applied only to persons who were employed, not to persons whose employment was terminated:

Drone claimed in opposition that it did not have to pay defendant his salary in cash, but had the option to pay defendant his wages in (worthless and unmarketable) Drone stock, relying on paragraph 3 in the employment agreement, governing compensation during the “employment period,” which states, “the Company may elect to . . . defer any cash payment until it has sufficient funds to do so.” Drone, however, ignores paragraph 5(b) of the employment agreement, applicable post-termination, which states that “[i]n the event that [defendant’s] employment with the Company is terminated . . . the Company shall pay or grant [defendant] any earned but unpaid salary, bonus, and Options through [defendant’s] final date of employment with the Company, and the Company shall have no further obligations to [defendant]” … . Read as a whole, the employment agreement makes clear that while payment of defendant’s salary could be deferred for lack of funds while he remained in Drone’s employ, “all earned but unpaid salary” was payable to defendant, unconditionally, upon termination of employment … . The finality of its language reflects an intent that the parties promptly settle up affairs within a reasonable time … . Drone USA, Inc. v Antonelos, 2022 NY Slip Op 05129, First Dept 9-6-22

Practice Point: Contracts must be read as a whole. Here the provision relied upon by the employer to avoid paying a former employee’s salary applied only to current employees (allowing payment to be deferred when there are insufficient funds available.) Another provision requiring payment to terminated employees was the operative provision.

 

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