This case demonstrates that an “entire agreement’ clause in an employment contract will not preclude the Court from referring to extrinsic material in interpreting the ambit of the employee’s position where the position does not have a well known and fixed meaning within the relevant industry. It is important to ensure that a clear and accurate description of an employee’s duties and responsibilities is included in his or her employment contract. The case also demonstrates that care needs to be taken in changing an employee’s role.
On 14 March 2006, Mr Keays entered into a contract of employment with JP Morgan as a senior executive specialising in the sale of interest rate derivative products. The contract provided that Mr Keays would work on the “public side” of JP Morgan and would “wall cross” to the “private side” when necessary. JP Morgan also subsequently provided a separate written job description, at Mr Keays’ request, which identified the management of foreign exchange sales as one of the responsibilities of this position.
On 5 June 2008, the parties agreed that Mr Keays’ position was to be treated as redundant and the employment contract was terminated.
Did the removal of responsibility for management of foreign exchange sales constitute repudiation of the contract?
The Court considered that Mr Keays’ written job description formed part of the terms of the employment contract, holding that although the contract included an “entire agreement” clause, reference could be made to extrinsic circumstances in order to ascertain the meaning of Mr Keays’ position. This was because the contract referred to Mr Keays’ position as "Head of Corporate Derivative Marketing" which the Court considered was not a position that had a well-known and fixed meaning in the investment banking industry.
The Court also held that JP Morgan’s removal of Mr Keays’ responsibility for the management of foreign exchange sales in late 2007 was contrary to Mr Keays’ job description, and constituted either a breach of an essential term or a sufficiently serious breach of a non-essential term of the contract. However, the Court held that Mr Keays abandoned his right to terminate the contract, because his actions in deciding to remain in his employment (and attempting to persuade JP Morgan to revert to its previous position) constituted an affirmation of the contract.
Did the decision that Mr Keays should work on the “private side” constitute repudiation of the contract?
The Court was not satisfied that a decision by JP Morgan that Mr Keays should work on the “private side” evinced an intention to fulfil the contract “in a manner substantially inconsistent with its obligations and not in any other way”. Rather, the Court found that JP Morgan had tried to persuade Mr Keays to work on the “private side”, but had not demanded or directed him to do so. As a result, the Court was not satisfied that JP Morgan’s actions were repudiatory.
Did the making of payments due to Mr Keays conditional on the execution of a deed of release constitute repudiation of the contract?
Mr Keays argued that his contractual and statutory entitlements on termination could not be made conditional upon the execution of a deed of release. However, the Court held that the alleged repudiatory conduct of JP Morgan in requiring such a deed of release, even if made out, did not lead to any loss or damage as Mr Keays was in fact paid his contractual and statutory entitlements on 22 July 2008.
Was Mr Keays entitled to a “bonus guarantee” on termination?
Mr Keays’ offer of employment also included the payment of a “bonus guarantee” in the form of restricted stock, the vesting of which was contingent upon Mr Keays’ continued employment with JP Morgan at each “vesting date”. The offer also provided that, should Mr Keays’ employment be terminated prior to the payment of the bonus, the bonus would be included in Mr Keays’ final termination payment when his contract was terminated.
The Court found that Mr Keays was paid the bonus guarantee when he was allocated restricted stock in January 2007. Mr Keays argued that he was entitled to be compensated for $175,000 worth of restricted stock (which he had been allocated but which had not yet vested) as part of his final termination payment in June 2008.
The Court interpreted the wording in the offer of employment such that “payment” of the bonus meant the allocation of the restricted stock. The clause about the bonus being included in the final termination payment did not operate because Mr Keays’ employment was not terminated prior to the payment of the bonus. As he was not employed on the vesting dates, the restricted stock did not vest in him.
See the case.