Employer beware the preliminary employment discussions…
Modise v. North Carolina Wesleyan College, Inc.
Modise v. North Carolina Wesleyan College, Inc. addresses the issue of whether or not an offer of employment can create a binding contract. The court held that there can be a cause of action for breach of contract even when the “official” contract had not yet been signed where the major terms of the contract had already been discussed.
In this case, Wesleyan (the employer) made an offer of employment, in writing to Modise who accepted the offer. Although Modise hadn’t signed the official contract, he quit the job he had in anticipation of beginning to work with Wesleyan in reliance on the offer letter and conversations with personnel at the College. Modise had received the offer letter and knew it wasn’t the official contract, but it encompassed some of the terms Modise and Wesleyan had verbally agreed upon and Modise was under the impression the official contract was being Fedexed to him.
After Modise resigned his position with a different college, Wesleyan rescinded the offer of employment. Modise filed suit in the Eastern District of North Carolina. Wesleyan filed a “Motion to Dismiss for Failure to State a Claim,” or a 12(b)(6) motion. The Judge in this case found a valid contract and a breach of the contract when Wesleyan rescinded its offer of employment, holding that the major terms of the contract had been agreed upon verbally, some of which were reflected in the offer letter. For a contract to be valid there must be offer, acceptance and consideration, all of which were present. When Wesleyan withdrew the offer of employment the contract was breached.
It is always a good idea, and even more so after this decision, for employer to be careful during the negotiation process with prospective employees. If the court is going to adopt this line of reasoning an offer of employment once accepted, even if no official documents have been signed, may be a binding contract. Then, if the offer is rescinded, a breach of contract claim could follow. To avoid this result make sure a prospective employee knows that nothing is binding until the official contract or employment paperwork is signed.
We are watching this case with great interest to see what happens if it is tried and if (when) it is appealed to the 4th Circuit. We will make sure to keep you updated.