Many people here in San Antonio have an employment contract. This is because Texas is an at-will employment state, meaning that employees can generally quit or be fired for any reason as long as it does not violate a law. Because at-will employment is so broad, many employers choose to write an employment contract to specify the terms of the employment relationship.
These contracts are generally written by the employer, who is looking out for its own interests, so it is very important that employees make sure that their rights are protected by the terms of the contract as well. Not only does a contract need to protect the employee’s rights, but its provisions must all be legal in order for the contract to ever be enforceable. In a recent case a former banking executive has sued Reliance Bank, accusing it of violating his contract. The terms of his contract, however, may have been against the law.
The man was fired in 2011, but his contract reportedly dictated his employment through September 2012. He has sued to request that the company pay him everything he would have been paid had he worked for the bank through September 2012–including $338,000 in salary, $10,000 in 401(k) contributions, and a variety of perks such as $15,500 for a country club membership.
The Federal Deposit Insurance Corp. has reportedly maintained that such payments to the terminated executive would represent an illegal “golden parachute.” A golden parachute is defined under law as a payment to someone for departing from a recipient of the Troubled Asset Relief Program.
Reliance Bank is a recipient of this program, through which the U.S. Treasury invested in financial institutions in an effort to stabilize the economy. So, banks who received this help cannot pay departure or severance money to terminated employees.
The former executive has argued that he is not seeking departure pay, but rather the regular salary and benefits promised to him in his contract.
Source: St. Louis Post-Dispatch, “Banker sues Reliance Bank over pay,” Lisa Brown, Feb. 7, 2013