Beit Midrash

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To dedicate this lesson
based on ruling 72092 of the Eretz Hemdah-Gazit Rabbinical Courts

Financial Security for a Partner/Worker? – part III


Beit Din Eretz Hemda - Gazit

Nissan 5 5782
Case: The defendant (=def) wanted to start a business with the significant funds at her disposal. She enlisted the plaintiff (=pl) a divorcee whom she had dated briefly, to help her. Def first paid pl’s consulting firm for his time. Later, pl quit his job to work with/for def. This gave pl greater work flexibility so he could manage child custody, and he received a minority stake in the LLC he opened for her (registered in Delaware). Pl started working for def on Apr. 1, 2012, and they seemed to be in the midst of finalizing an "employment agreement," which had not yet been signed, when def informed pl, on June 10, that she would no longer pursue his proposed course of action and that their "partnership" was over. Pl is suing for: $20,000 for work before Apr. 1; $29,110 for salary from Apr. 1-June 10 (based on a $150,000 yearly salary); $18,500 for expenses; $150,000 for severance pay; $7,900 in worker’s benefits. Def responds that she never hired pl; he was a partner in a business venture that never saw profits. The term "employment," which she did not oppose in the proposed contract, was just to convince custody court that def had financial stability. She denies that he worked hard for her and demands the return of $52,100 she gave him as a loan (until profits would be seen).

Ruling: [We saw last time that pl’s compensation package as a worker was not settled.]

When one does work for another without a decision on his wages, he is paid by the low scale of workers (Rama, Choshen Mishpat 332:4; Shach ad loc. 15). However, this is within the realm of the type of job/worker involved. The Pitchei Choshen (Sechirut 8:(11)) says that if the employer knows that this employee is paid within the higher levels of the field, he cannot pay him like the lower levels. This applies here where def had paid handsomely for pl’s services as a consultant.

There are complications in determining appropriate compensation here, including: pl was afforded flexibility that was important to him; part of the compensation was pl’s chance of profit sharing. Still, though, the draft contract, which we know was considered seriously, serves as the best indicator.

Regarding severance pay, the US does not require it by law, but it is common in the workforce. Here, financial security was a basic tenet of pl’s demands. On the other hand, it is unlikely that def would have agreed to a full year of severance for a few months of work, and pl would have likely agreed to that. Therefore, based on compromise that resembles din, we award pl two months’ severance pay.

Specific monetary decisions- For work before Apr. 1, $20,000; for work from Apr. 1- June 10 - $29,110 (prorated according to the contract); expenses - $18,500 – as claimed by pl and not effectively refuted; severance pay - $25,000. The subtotal is $92,610, and we subtract the $52,181 already paid for an outstanding amount of $40,429.
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