Monday, June 20, 2016

Can an Employer Unilaterally Change the Compensation of an Employee with a Contract?

Let’s say you have an employee with whom you have a written employment agreement, but that agreement does not include a written duration, commonly known as an at-will employee.  Let’s also say that you want to reduce the salary of the at-will employee.  Do you need the employee to agree to this?  The First District, Fourth Division Appellate Court of Illinois decided that when such an agreement exists, one with no fixed term of employment, an employer may modify the agreement as a condition of its continuance.  An employer does not need the employee to agree to any change in their employment agreement, and this applies to compensation terms.  However, while the employee does not have to agree to a modification, they still must accept it.  The difference between the two is that an employee does not have to say it’s okay to make a change to their agreement, but if they do not accept the change, that’s where there’s a problem.  

In the First District case of Geary v. Telular Corp., the employer, Telular Corp., altered the percentage of compensation Geary received and what revenue this was based off of.  The court decided that not only was this allowed, but Geary accepted the modification when he continued to work under these new terms.  While Geary objected to the change more than once, his continued employment with the company was satisfactory to establish acceptance.  Although Geary did not agree with the modification of his compensation terms, he stayed with Telular Corp. and continued doing his work, knowing the new compensation would be implemented in the agreement.  

What that means is there’s a very fine line between agreeing and accepting modifications made by an employer to an employee agreement.  While an employee may object to the changes, as long as they continue with their job, they have accepted them.