Employment Client Alert: Court Upholds Enforceability of Ambiguous Employment Contract

In Pacific Corporate Group Holdings, LLC v. Keck, No. D062277, published December 12, 2014 (Keck), the Court of Appeal held that an employee could enforce the terms of an employment contract where the parties’ conduct showed intent to be bound by it, despite the employee’s failure to provide a signed copy to the employer.

The employer, PCGH, filed suit against a former employee to recover $200,000.00 on a promissory note. In response, the employee, Keck, filed a cross-complaint alleging PCGH owed him amounts that offset and exceeded the amount of the promissory note. Keck obtained a jury verdict in his favor and PCGH promptly moved for judgment notwithstanding the verdict (JNOV). PCGH argued that in 2006 Keck was provided an offer letter setting forth compensation incentives. The offer letter specifically stated it had to be signed and returned. PCGH argued it was unenforceable because there was no substantial evidence presented at trial that the letter was signed and returned. In opposition, Keck argued (1) the parties exchanged e-mails confirming they had each signed the 2006 agreement; (2) PCGH notified a key client that the agreement had been entered; (3) PCGH management informed its payroll department that the agreement was final; and (4) PCGH paid Keck a signing bonus. The trial cout denied PCGH’s motion.

Affirming the lower court’s decision, the Court of Appeal concluded the offer letter did not specify that return of the letter was the only means of acceptance. Relying on the distinction between a “positive requirement” and “an absolute condition,” the court concluded the agreement was ambiguous as to whether it had to be signed and returned. Citing to the evidence presented by Keck, the trial court concluded adequate evidence was admitted to support the trial court’s order denying PCGH’s JNOV.

Although general principles of contract law regarding offer and acceptance apply to the interpretation of these agreements, Keck serves to remind employers that such contracts should be drafted so as to require an unambiguous manifestation of acceptance regarding the terms.

This document is intended to provide you with general information about employment law developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

December 16, 2014