- Salary Incentive To Remain Employed Was Not A Bonus Under TRS
- Employee’s Breach of Contract Triggers Enforceable Non-Compete
- Appellate Court’s Rulings To Restore Tenured Teacher Was Judicial Overreaching
Salary Incentive To Remain Employed Was Not A Bonus Under TRS
The New York State Teachers’ Retirement System (“TRS”) provides generous pensions for teachers and administrators based on years of service and final average salary calculations. However, reacting to abuses brought to light a decade ago in the Roslyn School District, TRS now carefully examines additional compensation paid on the eve of retirement to assure that the system is notbeing gamed with “unusual” or “artificial” payments or “conversions ” made on the “eve of retirement.” Sometimes, however, TRS sees malice where none exists, and disallows lawfully bargained-for bonuses and salary increases that a district offers in order to retain a highly skilled teacher or administrator for a few years longer.
That was the case with our client, an assistant superintendent for business who gave both the school district and TRS ample notice of his retirement to be effective at the end of the school year. In order to keep that administrator as long as it had, his last three-year contract had provided for a retention bonus of $25,000 to be paid upon contract expiration. But when the district could not find a suitable replacement for this important position, the board of education opted to offer the administrator, in addition to the bonus already earned, an extra $25,000 a year to stay on for an additional three years. The assistant superintendent accepted and withdrew his retirement notice. As part of this new arrangement, the retention bonus was also converted to a regular salary payment.
Fast forward three years, and the assistant superintendent again puts in his retirement papers but TRS disallows, for purposes of calculating final average salary (“FAS”), the $25,000 converted to regular salary for the last year of the earlier three-year contract plus the $25,000 extra earned in each of the three additional contract years.
In a successful administrative appeal, this firm conceded that the $25,000 retention bonus that had been converted to regular salary was properly excluded from FAS, but persuaded TRS that FAS should include the $25,000 salary increase received in each year of the final three-year contract. That increase was not negotiated on the “eve of retirement,” but three years before retirement. That increase was only 6.8% and was, therefore, not “unusual.” Payable over a three-year period, that increase was not “artificial.” And because it was negotiated at arms-length in advance of the actual services provided, that increase did not represent a retroactive bonus “conversion.”
Employee’s Breach of Contract Triggers Enforceable Non-Compete
In Town New Development Sales and Marketing, LLC v. Reuveni, an employer sought a preliminary injunction to enforce restrictive covenants within an employment contract with a former highly compensated employee, Reuveni. The agreement bound Reuveni to a non-compete restriction if he voluntarily resigned, but not if he served in his position until expiration of his three-year employment term through March 2017. The employer alleged Reuveni abruptly resigned on December 2, 2016, triggering the non-compete restriction in his employment agreement. Reuveni claimed he was compelled to leave by the unreasonable conduct of plaintiff’s CEO, Heiberger, thus, the restrictive covenant should not be enforced against him.
In order to resolve the disputed issue of fact as to whether or not defendant Reuveni “resigned” the Court had denied an initial TRO and scheduled an immediate evidentiary hearing which lasted three days.
After the hearing the Court found the employer had demonstrated that the terms of the covenants were reasonable, establishing a strong likelihood of success on its claims. The Court reasoned that to be “entitled to a preliminary injunction, a drastic remedy, the moving party must demonstrate: (1) the likelihood of successon the merits, (2) irreparable harm if the provisional relief is not granted, and (3) the equities tipping in the movant’s favor. To make a prima facie showing of likelihood of successon the merits, a restrictive covenant in an employment agreement must meet a three-pronged ‘reasonableness’ test. A restraint is reasonable if it: (1) is no greater than required to protect the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) does not injure the public. An employer has a legitimate interest in protecting its confidential and proprietary information.
In granting the preliminary injunction, the Court concluded the employer had established “a strong likelihood of success on plaintiff’s claim that defendant Reuveni breached his unexpired employment contract by unilaterally terminating the contract by resigning prior to the expiration of his employment term (without the requisite 60-days’ written notice required by Paragraph 4(c)(ii) of the Employment Agreement) and subsequently opening a competing business in the limited geographic market (Manhattan) in which he was prohibited by his contract from competing with plaintiff. Plaintiff has demonstrated that the terms of the restrictive covenants, particularly the non-compete, are reasonable and that both the balance of the equities tips in plaintiffs favor and the harm to plaintiff by defendant’s breach of the contract is not easily calculated in monetary terms.”Also, the Court found that credible testimony revealed Heiberger was interested in retaining Reuveni, while Reuveni’s own testimony showed he was interested in alternate arrangements as early as 2015.
Appellate Court’s Rulings To Restore Tenured Teacher Was Judicial Overreaching
In our December 6, 2016 newsletter we wrote about the case of Williams v. City of New York, where the Appellate Division had recently held that the penalty of termination was so disproportionate to that offense as to “shock the conscience of the Court,” and the arbitration award that terminated his employment was vacated. The tenured physical education teacher was terminated for inappropriate inquiries of his 8th grade female students regarding their female relatives – he asked them how old their older siblings were, whether they had boyfriends, and whether they had photographs of them, and even accepted the phone number of one student’s 23 year old sister.
After a hearing officer’s determination to terminate the teacher was reversed by the Appellate Court, the State’s highest court, the Court of Appeals, heard the matter. The Court of Appeals backed the Arbitrator’s decision and reversed the Appellate Court, reasoning that “reasonable minds might disagree over what the proper penalty should have been does not provide a basis for vacating the arbitral award or refashioning the penalty,” and that “the penalties imposed are not irrational and do not shock the conscience.” Rather, the Court of Appeals concluded that the “Appellate Division exceeded its authority by reweighing the evidence and substituting its judgment for that of the hearing officer.”
One Justice wrote a concurring opinion because, as she stated, “the Appellate Division analyses in these appeals are so clearly at odds with uncontroversial, established legal standards, and because respondent Department of Education compellingly argues this Court should clarify the scope of review to avoid judicial overreach in school disciplinary cases, it appears that full articulation of applicable standards is in order.” She concluded that the Appellate Division not only improperly reweighed the evidence, but had “ignored the credibility determinations of the arbitrator, who did not credit petitioner’s testimony and found it contradicted by the student’s consistent description of the events. As the record reveals, petitioner admitted the conversations occurred, although he minimized their significance or impropriety. Despite his years as a teacher, he maintained that he was not a role model for students, evincing an utter failure to appreciate his impact on his students’ educational and personal development. Under these circumstances, there was substantial evidence that petitioner’s actions crossed the line of a proper student-teacher relationship and demonstrated a lack of professional understanding of the potential harm inflicted on his students by seeking to date their female relatives. Significantly, petitioner’s actions directly conflicted with and undermined DOE’s mission by sending the message that women are measured by their physical appearance rather than their character and the strength of their ideas. The impact of that message on females in early adolescence—delivered by a health and physical education teacher—cannot be underestimated.”
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