The New Jersey Appellate Division examined a town’s termination of payments to its former employee under a separation agreement when the employee became employed by another town.
Background
Alberto Cabrera was the municipal clerk of the Town of Guttenberg, New Jersey. As so often happens, the parties wished to terminate their relationship. They entered into a Separation Agreement which provided that Cabrera would stop performing his duties and go on paid leave beginning on August 18, 2022, and the leave would terminate with his retirement on March 31, 2023. He would be on the payroll and paid his regular salary by the Town through that day. He would continue to get medical benefits through March 31, 2023. The Town would also pay him his accrued but unused vacation, sick, compensatory and personal days for 2022 and 2023. Cabrera agreed to submit a letter requesting this paid leave of absence, which he did the same day. The Town’s Mayor and Council voted to approve the agreement. Cabrera inquired about amending the agreement once, but it was never changed in any way.
In January 2023, while still on his terminal leave from Guttenberg, Cabrera began working as the municipal clerk for Belleville. In February 2023, the Town issued a check for his “remaining leave time for the year 2022,” but it was not received by Cabrera until 2024. He received nothing else, including pay for 2023 and his accumulated unused paid time off.
Cabrera sued Guttenberg in the Law Division of the Superior Court of New Jersey. Thereafter the two sides both moved for summary judgment. The judge granted Cabrera’s motion and entered judgment against the Town. It denied the Town’s request to dismiss Cabrera’s lawsuit. The Town appealed to the Appellate Division of the Superior Court. The
The Appellate Division’s Decision
Town argued that Cabrera’s entitlement to pay ended when he took the job with Belleville, and therefore it didn’t breach the Separation Agreement by cutting off his pay. It also argued that Cabrera agreed to retire and so he breached the Separation Agreement when he went to work for Belleville.
In an unpublished opinion, the Appellate Division rejected the Town’s argument and affirmed the Superior Court judge. It explained that a settlement agreement is a contract between the two parties to it. The goal is to enforce the intent of the parties, by the plain language of the contract if possible. In order for there to be liability for breach of contract, the breach must have been of a material term of the agreement.
When the court looked at the plain language of the contract, it found that the intent was solely to end the employment relationship between Cabrera and the Town, and that the Separation Agreement referred only to Cabrera retiring from the Town, not from all public employment. It was altogether silent on whether or not Cabrera could go back to work. Therefore there was no breach, and certainly not a “material” breach since the purpose of the agreement was to end the parties’ relationship.
The Appellate Division therefore affirmed the lower court. (It reversed the trial judge’s award of attorneys fees, but because the trial court judge did not explain his decision rather than because the decision itself was wrong.)
The Takeaway
While this was an unpublished decision, it stands for the proposition that when a separation or settlement agreement is silent there will be no penalty for the employee going to work elsewhere. However, there are a lot of caveats to this. The most obvious one is if the agreement itself addresses the issue; if so, it will normally control. Also, in the public sphere there may be restrictions by statute or the rules governing pension systems which conflict with this ruling. Therefor the best practice is to spell it out clearly in the agreement.
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Our New Jersey employment attorneys represent employers and employees in all aspects of New Jersey employment law, including negotiating, reviewing and drafting separation agreements, employment agreements and settlement agreements. Call us at (973) 890-0004 or fill out the contact form on this page to schedule a consultation with one of our New Jersey employment lawyers. We can help.