Termination for Cause Insufficient to Deny Employee Compensation Already Earned

Hammer v. Hair Systems, Inc., 2009 WL 1868820 (App. Div., June 18, 2009) – The plaintiff sued for, inter alia, breach of contract when his employer failed to adhere to the deferred compensation provision of his five-year consulting agreement. The agreement provided that during the first year of employment, the plaintiff would defer $125,000 of salary for his five-year contract while the employer strengthened its cash position. After one year, however, the plaintiff was terminated for engaging in inappropriate behavior in violation of company policy. Rejecting the argument that the plaintiff’s misconduct nullified its obligation to pay the deferred compensation, the court held that a company cannot withhold compensation already earned by the employee.

Note: This article was published in the July 2009 issue of the New Jersey eAuthority.