Employers who intend to modify the terms of a pre-existing employment
agreement, particularly one containing a non-competition provision, would be
well advised to obtain the written agreement of the employee to the new terms.
The recent Massachusetts case of Lantor, Inc. v. Ellis makes it clear
that employers can no longer assume that if an employee continues to work,
following a unilateral change in the employee's agreement, he or she has agreed
to the change made by the employer.
It is common practice for many employers to require senior management and
other key employees to sign employment agreements which include non-competition
provisions. From time to time, employers may seek to amend these agreements,
unilaterally, to reflect changes in bonus plans, the scope of the employee's
duties, sales area, etc. The view shared by many employers has been that if an
employee continues to work for an employer after the employer unilaterally
modifies the terms of his employment agreement, the employee is deemed to have
consented to the modifications. However, that view has been called into question
recently by the Massachusetts Superior Court's ruling in the Lantor
case.
The facts in Lantor are not unusual. Mr. Ellis signed an employment
agreement which provided for a base salary, plus a bonus. The agreement also
prohibited Ellis from going to work for a competitor. Lantor, Inc later placed a
cap on Ellis' bonus. He continued to work for the company for several years,
then left Lantor to take a job with a competitor. Lantor sued Ellis and his new
employer to enforce the non-competition provisions of the original
agreement.
The Court held that the mere fact Mr. Ellis continued to work for Lantor did
not, in and of itself, constitute a waiver of the breach or an agreement on Mr.
Ellis' part to the modification made by Lantor to his employment agreement.
It is too early to tell whether the Lantor case is an isolated decision
limited to the particular facts, or whether it signals a shift in the historic
view of the law in this area in Massachusetts, and perhaps in other states. At a
minimum it suggests that employers who intend to modify the terms of a
pre-existing employment agreements should obtain a written agreement from the
employee to be bound by the new terms.
The Employment Law Update is intended to keep readers current on
matters affecting employment law issues, and is not intended to be legal advice.
Should you have any questions regarding the issues discussed above, please feel
free to contact the Eckert Seamans lawyer who typically handles your legal
affairs, or William F. Miller at 617/342-6863).
