Are you dreaming of becoming the next senior executive of your company? Are those dreams based on assurances of more money, seniority and status? If so then read on as this is the story of one employee who recently learned that employment promises must clearly be put into writing, otherwise it is as if they were never made at all.
Thomas McNeely was a “big deal” employee working as a senior executive for a weight loss company, Herbal Magic, when a group of investors came together in a bid to purchase the company. McNeely, a sophisticated business person, was actively involved in the negotiations leading to the acquisition of the company and maintained his interest in becoming its next president and CEO. However, he was reluctant to invest his own money in the deal.
To persuade him to put up his own capital, McNeely was assured by the other investors that he would be a long-term senior employee of the new company and a member of its board of directors. However, this was not put into writing. Instead, McNeely negotiated an employment contract containing an “entire agreement” clause, which is a contractual term prohibiting parties to the contract from relying on any oral promises not written into the contract itself.
After the acquisition, McNeely was named president and CEO, but only for seven months, until he was fired and removed from the board of directors. Since McNeely was unable to withdraw his financial investment in the company, he sued, claiming that the promises made to him constituted an agreement apart from the contract he signed.
At a recent court hearing, the judge concluded that the clause in McNeely’s contract prevented him from relying on any promises or agreements not contained within the contract, despite the fact that the defendant did not deny making those statements. Accordingly, McNeely was out of luck. This decision highlights a critical mistake that too many employees continue to make. They form decisions based on promises that are not reflected in the documents they are later asked to sign. To avoid this scenario, do not blindly sign employment contracts without first having them reviewed and never be reluctant to renegotiate terms.
• Daniel Lublin is an employment lawyer with Whitten & Lublin LLP.
