Oral Promise For Employment Severance Pay Is Not Enforceable

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Robert S. Rifkin

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Serving Carmel, IN

  • Serving Carmel, IN

  • Credit cards accepted, Fixed fees available

Partner at firm Rifkin, Blanck & Rubenstein, P.C.

Serving Carmel, IN

Credit cards accepted, Fixed fees available

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In the recent case of Hinkel v Sataria Distribution & Packaging, Inc. 921 NE2d 666 ( Ind. App. 2010 ), the Indiana Court of Appeals held that a former employee could not enforce an alleged oral promise made by his employer to pay him a year’s salary and insurance if his employment was terminated involuntarily.   The court held that the employee’s written contract of employment was a complete statement of the employee’s terms and conditions of employment, and therefore no oral evidence would be permitted to contradict or modify the contract.  For an oral modification to be enforceable after a contract is signed, an employee has to provide the employer with additional  consideration– something more than agreeing to continue working for the employer or agreeing not to voluntarily resign.  There was no such additional consideration here.

The court also rejected the employee’s reliance on the doctrine of promissory estoppel as the basis for recovery.  Promissory estoppel requires the employee to assert and show that the employer made a promise to the employee, that the employee relied on the promise to his harm, and that injustice to the employee can only be avoided by enforcing the promise.  The employee claimed that the employer’s promise of severance induced the employee to give up the security associated with previous jobs.  The court found that the employee was employed had been employed by his current employer for approximately four months at a substantial salary and was given six weeks of severance; accordingly, the employee had not shown " an injury so severe that injustice could only be avoided by enforcement of  the employer’s oral promise.

There was a dissent in the case.  The dissenting judge felt that the employment agreement contained only some of the parties’ agreements and was not intended by them to be a complete statement of all employment terms.  The judge also felt that oral evidence should be allowed to cover or add to employment terms that were omitted or incomplete.

An employee who sued his former employer to recover allegedly promised salary and insurance benefits could not prevail on theories of breach of contract or promissory estoppel.

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