Published on March 22nd, 2017 by Alan L. Sklover
“During the day, I don’t believe in ghosts.
At night, I’m a little bit more open-minded.”
– Author Unknown
ACTUAL CASE HISTORIES:
Case History #1: Newly Established Entity: George interviewed for a position with a well-known sales and marketing agency headquartered in Italy. After being told he was their first choice candidate, basic terms were successfully negotiated. George was then presented with an Offer Letter to sign, which he forwarded to us for review. His email said, “Looks fine to me. All terms are what was agreed to. I will be opening a U.S. office. Two year commitment. Please look for any legal issues. I resigned my present position yesterday.”
One “legal issue” really troubled us: the name of the “Employer” in the Offer Letter was very similar to the Italy-based company, but it was slightly different. Our internet research revealed that the “Employer” listed in the Offer Letter was not the same employer George thought he would be employed by. Instead, it was a new company, established in the U.S. just two weeks earlier by the Italian company, with no bank account, no assets and no credit. Sure enough, George’s Offer Letter represented far less of a “commitment,” than George had thought.
As we explained to George, at any time it wished, the Italian parent company could decide that the new U.S. company was not meeting expectations, simply close it down, and “walk away.” Should that happen, George would have nowhere to turn for anything he was owed, and his “two year commitment” was in reality no more secure than a mere handshake.
Case History #2 – “Affiliates” Included: After experiencing sexual harassment at her job in the hospitality industry, Danielle filed a complaint with HR, and when she decided to leave, she was offered a severance package. The severance agreement included a provision that Danielle would not disparage or criticize the “company” to others, and the “company” would not disparage or criticize her to “others.” (That last word was key.)
A careful reading of the first line in the severance agreement revealed that the “Employer” was defined as “Colossal Hotels, it parents and its affiliates.” After leaving, Danielle was shocked to find out that many hotel companies she considering working for had received a letter telling them that Danielle had been “requested to leave, immediately if not sooner.”
When we wrote to her former employer, threatening a lawsuit, they responded by sharing with us that the 12 hotel companies that received that letter were all “affiliates” and, thus were all part of the “Employer,” and that none were “others” to whom they were prohibited from disparaging Danielle. The definition of “Employer” permitted them to say anything they wanted, however disparaging, to those 12 companies.
Case History #3 – “Leased” Employee: Jim, an attorney who had been working for a large Philadelphia law firm for nine months, decided to purchase a home. He put down a significant down payment, and submitted a mortgage application. Just days before the closing was scheduled to take place, Jim quite surprised when he was notified that he was rejected for the mortgage loan because the bank was unable to verify his employment.
It turned out that Jim was recruited for his law firm position by a small recruiting agency headquartered in another state, and that “paperwork” he never saw provided that he was technically an employee of the recruiting agency, and not the law firm. He had been told something along these lines at the time, but he didn’t pay much attention to the “details.” Because the recruiting agency had, itself, several times defaulted on loans, and had once even declared bankruptcy, Jim’s mortgage lender viewed his employment as insecure, and chose not to make the mortgage loan to him. Unable to secure the mortgage loan in time to close the house purchase, Jim lost his entire down payment.
LESSON TO LEARN: Far more employees than you might imagine are not aware of exactly who their true employer is, even when the name of that employer is prominently displayed on the front door to the office. For those who are given an Offer Letter or an Employment Agreement, almost always their eyes look at only one thing: how much they are being paid. They don’t look nearly as carefully at who is their “employer.” For those who are not given Offer Letters or Employment Agreements, they are often satisfied by “the name on the door,” or “the name on the stationery.”
Does it really matter? Well, for most people, and in most circumstances, it probably doesn’t. But, it sure did to George, Danielle and Jim. Depending on your circumstances, it may well matter to you, too. It can’t hurt to keep a sharp eye out for who, exactly, it is you work for, and how “Employer” is defined in any document given to you just in case.”
The implications could be huge, including your job security and rights to benefits, compensation, and stock or stock options. It would be a shame if you worked hard for 10 years under the mistaken belief that doing so made you eligible for a pension, only later to find out that you were not truly employed by the company that offers it, and thus you are truly “pension-less.”
WHAT YOU CAN DO: Take the time to consider who it is – or who it may not be – that is your true employer. For example:
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