How Damages for the Breach of an Employment Contract Are Calculated Under NY Law July 9, 2010

If you read my previous blog post, “How a Demotion Can Be Deemed a Breach of Employment Agreement Under NY Law,” you are probably wondering (or should be) the following: let’s assume a fact finder (i.e., whether a judge or jury) finds that my employer breached my employment agreement. What damages can I reasonably expect to recover under New York law?

As you might expect, the answer is a little bit complicated, and the determination of the right measure of damages is inherently fact-specific. That said, here are some of the major principles at play:

First, and as a threshold matter, the employee is entitled to recover the amount of salary and other benefits that (he, she) would have received under the contract – and here’s the important caveat – less certain deductions. (It’s the “fine print that always gets you, isn’t it.)

Those deductions allow the employer a set-off of those amounts that the employee, using his/her best efforts, either earned, or should have earned from other employment since the date that the agreement was ended. However, on this point the defendant bears burden of proving the amount the plaintiff could – or should – have earned through diligent efforts.

Additionally, although the newly-discharged employee is required to try to find similar employment, that does not mean that he/she is barred from starting his/her own business.  It is just that the damages will still be reduced by what plaintiff can reasonably be expected to earn from the venture during the unexpired term of the contract, Cornell v T. V. Development Corp., 17 NY2d 69, 268 NYS2d 29, 215 NE2d 349.

One final point is in order here: the expenses that were necessarily incurred by the employee in the course of seeking new gainful employment are recoverable – provided that the employee has conducted the job search in good faith, and with reasonable prudence, and skill.

Jonathan Cooper is a New York Business Litigation and New York Commercial Litigation Lawyer with a focus on New York breach of contract and New York business fraud claims before the Nassau, Queens, Brooklyn, Bronx, Westchester and Suffolk County courts of New York State. For more information, feel free to contact his Long Island office at 516-791-5700.

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