Breach of Employment Contracts

Generally speaking, an employee who is employed in the Commonwealth of Pennsylvania is considered to be an at-will employee, which means that an employee serves at the will of the employer and that the employment relationship may be terminated by either party at any time, for any reason or for no reason. An employee may rebut the presumption of at will employment by establishing one of the following: (1) an agreement for a definite duration; (2) an agreement specifying that the employee will be terminated for just cause only; (3) sufficient additional consideration; or (4) an applicable recognized public policy consideration.

The most common exception to the at-will employment doctrine is when employees and employers enter into employment contracts. Relevant terms of an employment contract include the job title and responsibilities; length of employment (i.e., does the contract include employment for a specific period of time); and compensation terms such as salary, bonus, commissions, the grant of stock options, other employment benefits and expense reimbursements. An employment contract also usually address what happens at the end of the employment relationship in terms of how the contract can be terminated; the amount of severance pay, if any; and restrictions on future employment (i.e., restrictive covenant or non-compete agreements).

Under Pennsylvania law, an employment agreement will be recognized where both parties manifest a clear intent to be bound by its terms, the terms are sufficiently definite to be enforced, and the agreement is supported by consideration. To meet the requirements of being supported by adequate consideration an employment contract must be supported by consideration which can be as simple an employer promising to employ an employee and the employee agreeing to work for the employer. In this regard, a specific length of time is an essential element of any contract of employment and some courts have ruled that a promise of employment without a specific end date is unenforceable. Likewise, a promise of employment until a specific date is sufficiently definite in nature to constitute employment for a specific term.

If an employee and an employer enter into an employment contract and there is a breach of the material terms of the employment contract, then an employee has a cause of action for breach of contract. Under Pennsylvania law, an employee asserting a claim for a breach of an oral or express written contract must prove the following four elements to state a claim: (1) the existence of a valid and binding employment contract, including the essential terms; (2) the employee has complied with the contract by performing the employee’s own obligations; (3) the employer’s breach of a duty imposed by the contract; and (4) the employee has sustained damages as a result of the breach. In a breach of employment contract case, the measure of damages is the wages which were to be paid less any amount actually earned or which might have been earned through the exercise of reasonable diligence in seeking other similar employment and all other monetary damages resulting from the breach of contract, however, damages for emotional distress cannot be awarded.