Employer unwilling to pay on a legally enforceable severance agreement

Recently I was the President and CEO of a company that was purchased by a much larger Indian outsourcing business. Suffice it to say I was recently let go. While my severance package is minimal compared to my position and overall compensation (<$10,000), I signed a severance agreement stipulating payment as of Aug 30th. I found out on the 29th the company would not pay my severance since they did not feel it was valid due to two exceptions I wrote at the end of the agreement. Mind you, the person that countersigned the agreement and the exceptions was an officer of the company and authorized to sign this ageement on behalf of the company.
I was told to deal with a Board member on resolving the issue. Basically, their intent is to renegotiate the severance agreement in order to remove my claim on approximately $40,000 of deferred compensation that is still owed to me (one of the exceptions I noted in the agreement). While I stressed I have a signed and countersigned document, they are so far unwilling to even respond to me. I want to get this resolved but I have a feeling they are just waiting to see if I get a lawyer involved.
What do you suggest? Do I need to get a lawyer involved? Thoughts? Comments?
Thanks for your help

1 answer  |  asked Sep 6, 2006 1:57 PM [EST]  |  applies to Pennsylvania

Answers (1)

Christopher Ezold
You appear to have claims for breach of contract and nonpayment of wages.

Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania or Federal law apply, unless otherwise specified.

That being said, you appear to have claims for breach of contract and nonpayment of wages. If you altered the severance contract to include new terms, and it was executed by an officer of the company, it is likely a valid contract. The severance pay is 'wages' under Pennsylvania's Wage Payment and Collection Law ("WPCL"). Furthermore, the $40k you are still owed is likely to be considered 'wages' under the WPCL. Therefore, if neither the $40k nor the $10k have been paid, you also likely have claims for breach of contract for both and for nonpayment of wages under the WPCL for both.

The WPCL claims include an extra 25% of the nonpaid wages as damages (about $12,500 in the case of the combined unpaid $50k) AND include as damages your attorneys' fees. The $50k claim can therefore present a $75k-$100k liability for the company.

Finally, their delaying of payment may put you at risk of tax penalties on the deferred compensation under the IRS new Sec. 409A regs. You should seek advice ASAP in order to avoid those penalties.

In my experience, a solvent employer that is holding out on paying wages that are clearly due is either playing a game of legal chicken with the employee, or there is a personality conflict between the employee and an executive inside the employer. In either case, it is rarely resolved to the employee's satisfaction without an attorney getting involved.

If you would like to discuss this matter further, please feel free to contact me at the below address(es) or number.

/Christopher E. Ezold/
Nancy O'Mara Ezold, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585
Cezold@Ezoldlaw.com

posted by Christopher Ezold  |  Sep 6, 2006 2:11 PM [EST]

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