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Beit Midrash Series P'ninat Mishpat

Complicated Employment Agreement – part I

The plaintiff (=pl), an acquaintance of the defendant (=def1), the manager and owner of a business (=def2), told her that he could improve her revenue collection. Pl sent def1 an email stating what he would charge her: 1000 GBP (British pounds) per month – 500 to be paid immediately and 500 when the business could “afford it.” Also, he would obtain a 15% share of def2, which she could buy back whenever she wanted for 10,000 GBP. Def1 did not respond to the email, and no contract was signed, but pl started working in Nov. 2014 and started receiving 500 GBP a month. In March 2015, def1 informed pl that she was discontinuing his work. Pl asked for the 10,000 GBP buyout, agreeing to payment in twelve 750 GBP installments (i.e., he forgave 1,000 GBP). After receiving one such payment, pl agreed to delay other payments due to def2’s cash flow problems, but as of January 2016, he is demanding the various back payments. Def1 raised a procedural issue about who the defendant is: she never intended to pay from her pocket, def2 never signed a document, and the payments were made by a front company created by def1’s husband. Def1 claims that she did not see pl as an employee to whom she owed money, and she began paying him only to avoid acrimony. She did not respond to the pay scale email because she did not understand it, and thus she did not accept its provisions. In any case, payment should be linked to benefit from pl’s services, which were never achieved; that which she already paid was more than enough for his efforts. The extra 500 GBP a month were anyway to be paid only when def2 was profitable, which it never became. Pl points out that in the meantime hundreds of thousands of GBP were paid to other workers.
---- ---Adar I 29 5779
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Based on ruling 77021 of the Eretz Hemdah-Gazit Rabbinical Courts
P'ninat Mishpat
Rabbi Yosef Goldberg
1 - A Man Who Died Without Known Inheritors
2 - A Will To Bequeath Bank Accounts
3 - A Will That Was Not Publicized
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Case:
The plaintiff (=pl), an acquaintance of the defendant (=def1), the manager and owner of a business (=def2), told her that he could improve her revenue collection. Pl sent def1 an email stating what he would charge her: 1000 GBP (British pounds) per month – 500 to be paid immediately and 500 when the business could "afford it." Also, he would obtain a 15% share of def2, which she could buy back whenever she wanted for 10,000 GBP. Def1 did not respond to the email, and no contract was signed, but pl started working in Nov. 2014 and started receiving 500 GBP a month. In March 2015, def1 informed pl that she was discontinuing his work. Pl asked for the 10,000 GBP buyout, agreeing to payment in twelve 750 GBP installments (i.e., he forgave 1,000 GBP). After receiving one such payment, pl agreed to delay other payments due to def2’s cash flow problems, but as of January 2016, he is demanding the various back payments. Def1 raised a procedural issue about who the defendant is: she never intended to pay from her pocket, def2 never signed a document, and the payments were made by a front company created by def1’s husband. Def1 claims that she did not see pl as an employee to whom she owed money, and she began paying him only to avoid acrimony. She did not respond to the pay scale email because she did not understand it, and thus she did not accept its provisions. In any case, payment should be linked to benefit from pl’s services, which were never achieved; that which she already paid was more than enough for his efforts. The extra 500 GBP a month were anyway to be paid only when def2 was profitable, which it never became. Pl points out that in the meantime hundreds of thousands of GBP were paid to other workers.



Ruling: Is def1 or def2 the defendant? – One who spoke to a worker about employment is not always the legal employer; it is usually the one on whose behalf the work is done (see Shulchan Aruch, Choshen Mishpat 336:1). All agree that def1 presented herself as she who ran def2. Therefore, when she agreed to pay for work done for def2, the obligation naturally falls on def2. The fact that payments were not (directly) done by def2 is not relevant, as it is clear that the front company was paying on def2’s behalf (they were also used for other payments). On the other hand, the 10,000 GBP to buy back rights to def2 are the responsibility of def1. Principal owners of companies buy back rights to the company; the company does not buy itself back.

Claim that pl was never hired – Employment does not have to be finalized by a contract or even by a standard act of kinyan; rather, beginning the work after an oral agreement is binding as a kinyan (Shulchan Aruch, CM 333:1). Even if def1 never asked pl to be a worker, the fact that she invited him to the office to give advice while knowing that pl understood this as an act of employment is grounds to obligate def1/2 (see Rama, CM 14:5). It is also very strange to argue that serious, ongoing work that pl did on behalf of def2 could be viewed just as a favor.

Next time we will discuss what exact compensation package is binding.
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