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The Colorado Court of Appeals recently affirmed a breach-of-contract case highlighting the importance of carefully drafting employment agreements, especially for highly paid employees.  

In June 2019, Zuni Payments, LLC, d/b/a Banctek Solutions, LLC, entered into an employment agreement with their new executive vice president of sales (EVP). The parties negotiated a $200,000 annual base salary, and the agreement included a non-solicitation and exclusivity clause. The agreement allowed termination for “cause” based on the EVP’s negligence “of his material duties” if not cured within 30 days of receiving written notice. Additionally, it required payment of severance and unused paid time off (PTO) if the EVP was terminated without cause. The agreement also gave Banctek exclusive discretion to modify the EVP’s salary, given any modifications were made in a written and signed agreement.  

In March 2020, Banctek orally advised the EVP that it was reducing his salary by 50%. In July 2020, Banctek moved the EVP to a commission-only pay structure and warned him that if he did not agree, he would be terminated. Afterward, the EVP was terminated and did not receive severance or payment for unused PTO. The parties subsequently sued each other, arguing breach of contract.  

The trial court ultimately concluded Banctek materially breached the employment agreement first, rendering it liable for damages to the EVP. The court found the agreement required written notice of negligence and an opportunity to cure it, unless uncurable. The court determined Banctek failed to prove the EVP was negligent in the performance of his obligations or that any such negligence was incurable because the agreement failed to provide guidelines as to the obligations the EVP was required to perform to be entitled to his base salary. Accordingly, the court held that the EVP was terminated without cause and was entitled to his contractually obligated severance pay, unused PTO, and attorneys’ fees. The Colorado Court of Appeals recently affirmed the trial court’s decision.  

This case is a warning to employers about the perils of poorly written employment contracts. Employers should take care to draft contracts that are clear and unambiguous and that specifically define the obligations of the parties involved. Employers should also be aware of the applicable law in their jurisdiction, as some states, like Colorado, have strict requirements for non-solicitation and non-competition provisions.  

If you are considering entering into an employment agreement or have any questions about employment law, please contact Employers Council. We can help you protect your organization’s interests and ensure compliance with federal and state laws.