When Can a Contract Expand?
by Ron Davis
A loosely written employment contract has allowed a former Tennessee shopping center construction manager to collect for work he never performed.
The construction manager worked for the developers of strip shopping centers built primarily in the Knoxville area. His job was to supervise various projects to assure that they met the standards of the developers. His employment contract guaranteed him a minimum salary of $75,000 a year, but he could receive additional compensation through certain incentives.
During the year of his employment, the construction manager apparently performed his work in a satisfactory manner. Accordingly, the developers paid him all amounts due.
After the completion of his first year of his employment, the construction manager simply continued in the same capacity, and the developers continued to pay him as before. A few months into the construction manager’s second year, however, the developers told him of their plans to “scale back” and that they would no longer need his services.
The construction manager sued, arguing that the developers owed him compensation for at least till the completion of his second year of employment—and perhaps, based on a conversation with one of the developers, for a total of four years. In response, the developers contended that once the construction manager had completed the first year, he was then on a project-by-project basis and could be dismissed at will.
Tennessee’s courts rejected the construction manager’s argument that he was hired for four years, explaining, “On its face, the employment agreement does not provide, expressly or by implication, for a four-year term.”
But the judges also decided that the employment contract was automatically renewed at the end of the first year of employment. The basis of that decision was a previous Tennessee Supreme Court ruling, stating, “When, upon the expiration of a contract of employment for a definite term, the employee continues to render the same services as he rendered during the term of the contract without explicitly entering into any new agreement, it will be presumed that he is serving under a new contract having the same terms and conditions as the original one.” (Salvatore v. Baron Corporation, 2003 WL 22220340 [Tenn.Ct.App.])
Decision: October 2003
Published: January 2004