L&E/contractual issues with BigLaw associate paycuts? Forum

[RaceJudicata]

Kinda surprised this is even a debate. It’s basic at will employment principles. You can quit whenever you want, they can fire you whenever they want. They can reduce your salary (provided they comply with relevant state laws re notice / paying for completed work). And you can continue working or not - your call.

Exempt vs non exempt doesn’t matter either - as long as they pay minimum wage.

(Not legal advice)

[RedGiant]

At-will folks. All these weird discussions about quasi-contract and wages is moot. Take it or leave it. The firms have pretty airtight offer letter with at-will caveats.

[1styearlateral]

As others have said, at-will.

At my company, anyone who was required to take a pay cut had to sign a new offer letter with the reduced salary indicated. Those who refused were terminated.

Basic contract principles still apply in a salary reduction scenario: offer, acceptance, and consideration. The consideration is not being terminated.

[LaLiLuLeLo]

This thread can be summarized as lawyers and law students being shocked at how shitty worker protections are in the US.

[objctnyrhnr]

As others have said, at-will.

At my company, anyone who was required to take a pay cut had to sign a new offer letter with the reduced salary indicated. Those who refused were terminated.

Basic contract principles still apply in a salary reduction scenario: offer, acceptance, and consideration. The consideration is not being terminated.

This makes some sense. Thx

[trebekismyhero]

This thread can be summarized as lawyers and law students being shocked at how shitty worker protections are in the US.

Pretty much

[objctnyrhnr]

So here’s a more specific description of what I was thinking which prompted the original post:

If I’m making 200k and then I get hired somewhere (albeit at will) with an offer letter that says I’ll make 300k (or even a verbal promise that I will), and I fulfill all my duties for some months then the company says actually we changed our mind— For financial reasons we’ll only pay you 100k, and then I try to get my old job back and I can’t then it seems like...

If the entity always intended to pay me 100k instead of 300k, I think there’s a claim for deceit/fraudulent misrepresentation

If the entity should/could have realized that it’s financial situation was trending quite poorly in a way that would have resulted in the entity only being able to pay 100k at the time they made my offer, i think there’s a claim for negligent misrepresentation

And lastly I think even without those Mens rea elements, you have a claim for promissory estoppel.

Am I missing something specific about employment law here that makes these general tort/quasi-contract principles inapplicable here?

Perhaps most significantly, none of these claims require a full-on contract to have been signed or executed.

[nixy]

I could be wrong, but I’m pretty sure you’re just missing how at-will employment works.

Unless you have a letter that guarantees a certain salary for a certain specified length of time (say you are a quarterback or pitcher joining a team and getting paid whatever astronomical amount for 3 years), they can change your salary when they like. If they paid you one paycheck at the salary you were hired at, hey presto, they’ve fulfilled their obligations. If the economy tanks the following week and they can’t pay you as much any more, oh well too bad, conditions have changed, you can quit. (This is the corollary to the sports analogy - the quarterback/pitcher/whoever likewise commits to a team for a certain period, and can’t bail and go to another one that’s willing to pay more until their contract is up, or unless they break their contract. Lawyers aren’t hired under such contracts.)

Good luck trying to prove what they “always intended to pay you” or that they “should/could have realized” their finances were going to tank (especially when the cause is an unforeseen pandemic), but even so, it doesn’t matter. At will employment says they can change your salary as their finances require. You, in turn, can stop working for them if you don’t like your salary.

[kaiser]

So here’s a more specific description of what I was thinking which prompted the original post:

If I’m making 200k and then I get hired somewhere (albeit at will) with an offer letter that says I’ll make 300k (or even a verbal promise that I will), and I fulfill all my duties for some months then the company says actually we changed our mind— For financial reasons we’ll only pay you 100k, and then I try to get my old job back and I can’t then it seems like...

If the entity always intended to pay me 100k instead of 300k, I think there’s a claim for deceit/fraudulent misrepresentation

If the entity should/could have realized that it’s financial situation was trending quite poorly in a way that would have resulted in the entity only being able to pay 100k at the time they made my offer, i think there’s a claim for negligent misrepresentation

And lastly I think even without those Mens rea elements, you have a claim for promissory estoppel.

Am I missing something specific about employment law here that makes these general tort/quasi-contract principles inapplicable here?

Perhaps most significantly, none of these claims require a full-on contract to have been signed or executed.

No firm would ever make a contractually-enforceable promise that an associate will make X salary in the following year. Firms ALWAYS have the at-will presumption in play, and that would have been clearly noted in various documents you sign when onboarding. And that is going to win the day over any misunderstanding over what is actually being promised to you whether via verbal conversations or otherwise. If you read closely your firm policy manual, or offer letter, you will likely see language saying that nothing should be construed to contravene the at-will presumption.

This is the case even in the situation that you posed as a "fraud" hypothetical. Even if the person onboarding you made some verbal promise to you about how you will get a huge raise to 200k next year, none of that matters. Hell, he could have put it in writing and had you countersign and it would still be meaningless. Because the policy would say that nothing contravenes at-will employment, and no one (maybe aside from the top person in the organization) has the power to alter that arrangement.

[Lamarvelous]

Even if the arguments in here held water (they don’t), nobody of sound mind would actually attempt to litigate this against a biglaw firm (or proudly present it as a “you can’t do that!” when presented with the salary cut). Your salary is presented at an annualized rate; it is not a commitment to pay that over the entire year. And the bonus is a gratuity that may or may not come to pass.

[objctnyrhnr]

I could be wrong, but I’m pretty sure you’re just missing how at-will employment works.

Unless you have a letter that guarantees a certain salary for a certain specified length of time (say you are a quarterback or pitcher joining a team and getting paid whatever astronomical amount for 3 years), they can change your salary when they like. If they paid you one paycheck at the salary you were hired at, hey presto, they’ve fulfilled their obligations. If the economy tanks the following week and they can’t pay you as much any more, oh well too bad, conditions have changed, you can quit. (This is the corollary to the sports analogy - the quarterback/pitcher/whoever likewise commits to a team for a certain period, and can’t bail and go to another one that’s willing to pay more until their contract is up, or unless they break their contract. Lawyers aren’t hired under such contracts.)

Good luck trying to prove what they “always intended to pay you” or that they “should/could have realized” their finances were going to tank (especially when the cause is an unforeseen pandemic), but even so, it doesn’t matter. At will employment says they can change your salary as their finances require. You, in turn, can stop working for them if you don’t like your salary.

Not sure how many misappropriation cases you’ve litigated, but this facet is usually proven through ediscovery (if it can be proven). All it takes is one damning email to get over the preponderance hump. Typically (but now always) you can get past the MTD with just the allegation (eg “knew or should have known at the time making the promise”).

This all being said, the biglaw/pandemic hypo is one of my own making. So yeah I mean I’m not saying you’re wrong at all generally, but insofar as my thought-experiment argument is weak as it pertains to misappropriation claims, it’s not because of the bolded point.

[objctnyrhnr]

Even if the arguments in here held water (they don’t), nobody of sound mind would actually attempt to litigate this against a biglaw firm (or proudly present it as a “you can’t do that!” when presented with the salary cut). Your salary is presented at an annualized rate; it is not a commitment to pay that over the entire year. And the bonus is a gratuity that may or may not come to pass.

This is probably true. Again, was just kind of my own thought experiment from the outset.

I still think there’s a decent chance of getting past the MTD on fraudulent misrepresentation, negligent misrepresentation, and/or promissory estoppel.

Look if I promise you something that induces you to give up something of value in reliance on the promise, and that promise ends up being false, that’s a claim right there (particularly if I knew or could/should have known the promise would end up being false). That’s business torts/promissory estoppel 101, depending on the facts.

Whether it’s viable in an employment context against a firm under these circumstances, of course, is a whole other question.

But that’s why I posed it haha

[nixy]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

[QContinuum]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

[objctnyrhnr]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

To the bolded, thanks for coming to my intellectual rescue. Feel like a number of people on this thread are just repeating what they learned in their employment law classes and are not really in think outside of the box-litigation mode (“At will employment period full stop,” “plight of the American worker,” etc.), which I certainly understand—don’t get me wrong.

And yeah so bringing it back to the more realistic hypo/back to the current circumstances, I think you could probably get past a motion to dismiss. Then if you learn through discovery that the firm was in horrible financial troubles regardless and get a couple internal emails about how they can’t afford to stay at the market rate much longer then I think it’s conceivable that you could make a claim for negligent misrepresentation in spite of the somewhat surprising situation we now face.

And I disagree with nixy as well, from a post or two ago. I get what nixy is saying, but I don’t think it’s certain to carry the day in a promissory estoppel context. I’ve seen some intuitively questionable promissory estoppel claims make it past MSJs.

[nixy]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

To the bolded, thanks for coming to my intellectual rescue. Feel like a number of people on this thread are just repeating what they learned in their employment law classes and are not really in think outside of the box-litigation mode (“At will employment period full stop,” “plight of the American worker,” etc.), which I certainly understand—don’t get me wrong.

And yeah so bringing it back to the more realistic hypo/back to the current circumstances, I think you could probably get past a motion to dismiss. Then if you learn through discovery that the firm was in horrible financial troubles regardless and get a couple internal emails about how they can’t afford to stay at the market rate much longer then I think it’s conceivable that you could make a claim for negligent misrepresentation in spite of the somewhat surprising situation we now face.

And I disagree with nixy as well, from a post or two ago. I get what nixy is saying, but I don’t think it’s certain to carry the day in a promissory estoppel context. I’ve seen some intuitively questionable promissory estoppel claims make it past MSJs.

I don’t think any of this is a realistic hypo though. The L&E lawyers in the thread have made that pretty clear (based on their actual litigation etc experience with, for instance, big law firm employment manuals and such).

[objctnyrhnr]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

To the bolded, thanks for coming to my intellectual rescue. Feel like a number of people on this thread are just repeating what they learned in their employment law classes and are not really in think outside of the box-litigation mode (“At will employment period full stop,” “plight of the American worker,” etc.), which I certainly understand—don’t get me wrong.

And yeah so bringing it back to the more realistic hypo/back to the current circumstances, I think you could probably get past a motion to dismiss. Then if you learn through discovery that the firm was in horrible financial troubles regardless and get a couple internal emails about how they can’t afford to stay at the market rate much longer then I think it’s conceivable that you could make a claim for negligent misrepresentation in spite of the somewhat surprising situation we now face.

And I disagree with nixy as well, from a post or two ago. I get what nixy is saying, but I don’t think it’s certain to carry the day in a promissory estoppel context. I’ve seen some intuitively questionable promissory estoppel claims make it past MSJs.

I don’t think any of this is a realistic hypo though. The L&E lawyers in the thread have made that pretty clear (based on their actual litigation etc experience with, for instance, big law firm employment manuals and such).

Well it’s definitely a realistic hypo because it’s literally happening. Whether anybody would have the cajones to bring the claims is another question (and if that’s what you meant, I guess I agree).

And I may be wrong of course, but I’d venture a guess that not one of the people shooting down my ideas, about misrepresentation or promissory estoppel, as facially ridiculous, are real life mid/senior level biglaw litigators (as I am, though admittedly I’ve not come across this type of thing). Otherwise their responses would be a bit more nuanced or at least hedge a bit, I would think.

[ksm6969]

, then one place says he’s at will but says they’ll pay him 200k per year in exchange for x y and z (to make it easy let’s quantify them as hours billed), and he ends all of the other processes and takes the job, then hits his hours by month 10. Then by month 11, the place says actually we changed our mind for financial reasons were gonna decrease your salary

If this were the case, he would get the bonus as that is money he already earned by completing his hours. Stuff like this comes up with sales commissions/bonuses quite a bit— it is interpreted as an offer that is accepted by completion of X, and as soon as person completed X there is now a contract. The point is that no big law firm is likely to have been so sloppy in writing an offer letter to say “if you do x, you will get bonus y” Without some disclaimers.

[kaiser]

The bonus question is an issue that comes up often. If an employer sets out specific, defined criteria, and you unequivocally meet those criteria (along with any others conditions precedent), then it would be very difficult to justify withholding the bonus. Many employers will include disclaimers saying that the bonus program is discretionary and contingent on company performance, but such a disclaimer may still not be enough if the criteria are specific and have been met (at least in a state like NY).

Employers generally have some more leeway when the criteria are a bit more mushy and open-ended (ex. bonus will be based on an assessment of personal performance, subject to the financial performance of the company). And employers can usually set up additional conditions precedent to vesting, so long as they are communicated in advance. For example, most firms don't pay out bonuses until February of the next year, and require you to still be employed at that time if you want the bonus payout. If you leave the firm in January, you don't get your bonus for the prior year, regardless of whether you hit the requisite hours.

All of the above is dependent on state law, and obviously should not be taken as legal advice if you get stiffed on your bonus.

[Chrysogonus]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

To the bolded, thanks for coming to my intellectual rescue. Feel like a number of people on this thread are just repeating what they learned in their employment law classes and are not really in think outside of the box-litigation mode (“At will employment period full stop,” “plight of the American worker,” etc.), which I certainly understand—don’t get me wrong.

And yeah so bringing it back to the more realistic hypo/back to the current circumstances, I think you could probably get past a motion to dismiss. Then if you learn through discovery that the firm was in horrible financial troubles regardless and get a couple internal emails about how they can’t afford to stay at the market rate much longer then I think it’s conceivable that you could make a claim for negligent misrepresentation in spite of the somewhat surprising situation we now face.

And I disagree with nixy as well, from a post or two ago. I get what nixy is saying, but I don’t think it’s certain to carry the day in a promissory estoppel context. I’ve seen some intuitively questionable promissory estoppel claims make it past MSJs.

I don’t think any of this is a realistic hypo though. The L&E lawyers in the thread have made that pretty clear (based on their actual litigation etc experience with, for instance, big law firm employment manuals and such).

Well it’s definitely a realistic hypo because it’s literally happening. Whether anybody would have the cajones to bring the claims is another question (and if that’s what you meant, I guess I agree).

And I may be wrong of course, but I’d venture a guess that not one of the people shooting down my ideas, about misrepresentation or promissory estoppel, as facially ridiculous, are real life mid/senior level biglaw litigators (as I am, though admittedly I’ve not come across this type of thing). Otherwise their responses would be a bit more nuanced or at least hedge a bit, I would think.

The only offer letter in this thread did not actually have a starting salary.

Show us something else and we can talk your wildly unlikely theory of a case.

[objctnyrhnr]

But the promise isn’t to pay you $200k forever. The promise is to hire you at a salary of $200k. They did that. No false promise, even if they change your salary a week later.

I also always thought there was a reason why “promissory estoppel” was a joke response on ATL comments for so many years.

Wasn't there a recent-ish case in NY about some plaintiff prevailing in their suit against a firm that rescinded their (at-will employment) offer? IIRC, the damages were pegged to the average length of employment in that position.

If a candidate is promised a "starting salary" of $190k, but on day 2 their salary is reduced to $100k, it strikes me as plausible that there could be some fraud-based claim there.

The current situation is different because the statewide lockdowns, and their consequent economic effects, were not reasonably foreseeable. Even after Wuhan and Italy, it was widely considered shocking when CA implemented a lockdown, and even after CA, de Blasio and, later, Cuomo vociferously denied NY would follow suit and it was considered at least somewhat unexpected when Cuomo caved and put NY on "PAUSE".

To the bolded, thanks for coming to my intellectual rescue. Feel like a number of people on this thread are just repeating what they learned in their employment law classes and are not really in think outside of the box-litigation mode (“At will employment period full stop,” “plight of the American worker,” etc.), which I certainly understand—don’t get me wrong.

And yeah so bringing it back to the more realistic hypo/back to the current circumstances, I think you could probably get past a motion to dismiss. Then if you learn through discovery that the firm was in horrible financial troubles regardless and get a couple internal emails about how they can’t afford to stay at the market rate much longer then I think it’s conceivable that you could make a claim for negligent misrepresentation in spite of the somewhat surprising situation we now face.

And I disagree with nixy as well, from a post or two ago. I get what nixy is saying, but I don’t think it’s certain to carry the day in a promissory estoppel context. I’ve seen some intuitively questionable promissory estoppel claims make it past MSJs.

I don’t think any of this is a realistic hypo though. The L&E lawyers in the thread have made that pretty clear (based on their actual litigation etc experience with, for instance, big law firm employment manuals and such).

Well it’s definitely a realistic hypo because it’s literally happening. Whether anybody would have the cajones to bring the claims is another question (and if that’s what you meant, I guess I agree).

And I may be wrong of course, but I’d venture a guess that not one of the people shooting down my ideas, about misrepresentation or promissory estoppel, as facially ridiculous, are real life mid/senior level biglaw litigators (as I am, though admittedly I’ve not come across this type of thing). Otherwise their responses would be a bit more nuanced or at least hedge a bit, I would think.

The only offer letter in this thread did not actually have a starting salary.

Show us something else and we can talk your wildly unlikely theory of a case.

My lateral offer letter had a starting salary (market for my class year). I don’t however have a copy of if handy. Even if I did, frankly, I probably wouldn’t post it. But I remember the number being in the letter.

Hypothetically if an employer induces you to leave your 200k job under the promise of a 500k salary (note that these were of course not the numbers from my letter) and then changes its mind after a month and decides to pay you 100k instead (I’m not in this situation as my firm has assured no cuts though it hasn’t been posted on atl), there must be a promissory estoppel claim there—you reasonably relied on a false promise to your own detriment because you quit the other job (and I think this would hold even if the entity threw some wishy washy ‘subject to change’ language in there).

If through discovery you learn that the firm knew or should have known that this would happen at the time of the offer, you have misrepresentation as well.

This is my theory, in a nutshell. I’m not saying that it would unequivocally work or anything but I am saying you’d have at least a solid shot of getting past the MTD phase and anybody dismissing it as completely ludicrous probably doesn’t really have the actual litigation experience to credibly do so.

Edit: anddddd a quick google demonstrates that it’s at least conceivable to beat a MTD in the at will employment context, albeit under different facts

https://www.morrisonmahoney.com/resourc ... nt-promise

But yeah all you law students and transactional/advisory lawyers should keep crapping on my Litigation theory as facially wrong. You’re building a lot of credibility with the “at will employment period full stop” mantra haha.

[nixy]

I mean, it's a little difficult to defer to your litigation expertise when before this thread you had no idea how at-will employment worked.

[kaiser]

Part of the problem here is that we are bouncing multiple hypos at the same time, all of which are somewhat unrealistic, though we at least started in the realm of things that genuinely happen often. For example, a firm brings on an associate, and makes some kind of representation of what the associate stands to make in year 2 (no issue of fraud, the paperwork looks like any other law firm paperwork, its subject to at-will, etc.) In that situation, its a cut and dry case based on at-will employment if the firm doesn't raise the salary.

Sounds like your real question here by introducing all of the more fantastical elements is to see whether there are any circumstances where its possible to overcome a MTD if an employer changes salary or otherwise contravenes its representations (i.e., where the at-will presumption wouldn't torpedo the claim out of hand). I would imagine its possible under certain circumstances. As someone mentioned, if an employer had someone move across country to start a new job based on knowingly false representations, and then terminated them after a week without cause, the employer may be on the hook for the moving expenses and other costs (though not for the salary denied via continued employment).

I was a biglaw L&E litigator for over 6 years before going in-house, and handled a few cases involving these sorts of issues. The most common by far was denial of bonus issues, which I broke down above. I did handle a case where someone was denied a promotion and concurrent raise, but it was an employee subject to a contract of employment. So at-will wasn't in play in that matter.

[objctnyrhnr]

I mean, it's a little difficult to defer to your litigation expertise when before this thread you had no idea how at-will employment worked.

Hahahaha fair point, nixy, fair point. In my defense, I was pretty up front about my lack of specific L&E knowledge from the beginning.

[trebekismyhero]

I actually found my offer letter. It is from over 5 years ago, so it had the $160,000 salary. But it basically said that I would be paid a market salary which currently is $160,000. My old firm also always pays cravath scale for salary and bonuses, but it only included language about discretionary bonuses. So I am guessing nearly all incoming associate offer letters include that type of discretionary language. Maybe for laterals it is defined, but I assume only for that first year they lateral.