Monday, July 25, 2011

Court Reviews Whether an Employee Relinquished a Promised Ownership Interest When He Signed a Subsequent Employment Contract

STEPHEN BROWN v. COLUMBIA PRECAST, LLC, ET AL. (Tenn. Ct. App. July 22, 2011)

An employee was promised 10% ownership interest in the company he worked for if he stayed with the company for six years. When the time came to transfer the employee's 10% interest to him, however, the parties learned that the tax laws then in effect made the transfer impractical at that time. The parties therefore decided to delay the transfer.

The parties entered into a contract the following year which the employer interpreted to mean that the employee was giving up his 10% ownership interest in exchange for a raise in his salary plus 10% of the company's net profits each year. The employee claimed he did not give up his 10% ownership interest and sued the company and former majority owner for his 10% interest when the company was sold a few years later.

The trial court concluded the employee did not give up his 10% ownership interest by signing the later agreement and awarded the employee 10% of the company's net profits for the years following the employee's termination plus 10% of the ultimate purchase price. We affirm the trial court's judgment.

Opinion may be found at: