Verbal Contract Law NY
A company in New York State makes a verbal offer of employment to an individual. Before the individual begins work, the company’s profits plummet or its budget is slashed.
If the company withdraws the oral offer of employment, does the individual have a valid claim against the company for breach of employment contract? To put it another way, are verbal agreements of employment enforceable in New York?
The short answer is that if the oral agreement of employment is for more than one year, it is within the Statute of Frauds and, as a result, is not enforceable. If, instead, the verbal agreement of employment is for a definite duration of one year or less, it is enforceable. And if the oral agreement of employment is not for a fixed duration, it is valid, but the individual’s employment presumptively is at will; that is, once the individual begins work, either the company or the individual may terminate the employment at any time.
New York’s Statute of Frauds, N.Y. Gen. Oblig. Law § 5-701, requires certain types of agreements to be in writing. New York’s Statute of Frauds states in pertinent part:
“Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:
“1. By its terms is not to be performed within one year from the making thereof.”
N.Y. Gen. Oblig. Law § 5-701(a), 5-701(a)(1).
Thus, to be enforceable, a promise or agreement of employment which by its terms cannot be performed within one year must be memorialized in a writing signed by the party to be charged (here, the company). So if the company orally assures the individual of, for example, a five-year term of employment, that assurance, even if proven, is void and unenforceable under New York’s Statute of Frauds.
If the verbal agreement of employment is for a fixed period of not more than one year, the verbal agreement is outside the scope of N.Y. Gen. Oblig. Law § 5-701 and is enforceable. Where such an express agreement of employment for a fixed term exists, the contract “may not lawfully be terminated by the employer prior to the expiration date in the absence of just cause.” Alpern v. Hurwitz, 644 F.2d 943, 945 (2d Cir. 1981). So if, by way of example, the business and the individual verbally agree upon a six-month term of employment, the business, absent just cause, may not lawfully fire the individual before those six months have elapsed.
If the verbal assurance of employment is not for a fixed period of time, the verbal assurance is beyond the reach of N.Y. Gen. Oblig. Law § 5-701 and is valid. However, because there is no agreement establishing a fixed duration, the New York state courts generally will presume that the employment is at will and may be terminated, by either the company or the individual, at any time. To put it another way, if the company’s and the individual’s verbal agreement of employment is not for a definite duration, it is enforceable; but once the individual begins work, the company presumptively may fire him at any time.
However, even if an oral agreement of employment does not refer to “a determinable calendar date” and is not “precisely calculable,” the New York courts will deem the oral agreement to be of definite duration, and thus to be terminable only for just cause, if “the boundaries of beginning and end of the employment period are sufficiently ascertainable.” Rooney v. Tyson, 91 N.Y.2d 685, 692, 697 N.E.2d 571, 674 N.Y.S.2d 616 (N.Y. 1998). For example, in the Rooney case, the New York Court of Appeals held that an oral agreement between a professional boxer and a fight trainer to train the boxer “for as long as the boxer fights professionally” was for a definite duration. The Rooney Court reasoned that the times of commencement and conclusion of the fighter’s professional boxing career “are legally and experientially limited and ascertainable by objective benchmarks.” Rooney, 91 N.Y.2d at 692.
If your company needs assistance or guidance on a labor or employment law issue and your company is located in the New York City area, call Attorney David S. Rich at (212) 209-3972.