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Thank you for your recent advise on how best to handle our…

Thank you for your recent...
Thank you for your recent advise on how best to handle our disgruntled ex-employee. There are a few points that I would like clarified:
To recap the basis of our original question: Our employee was the manager of our shop workers. He was being paid generously for his services and in 2013 my dad had verbally told him that our company would pay him a bonus of 10% of the profit of the company (after expenses, salaries and owner’s equity were taken out) for the year. Since my dad is not an accountant, the 10% was not an easily definable amount. Consequently, in 2014 he wrote out a formula that was based on the gross sales of the company. This was the amount that was paid as a bonus to this particular employee over the past three years.
You mentioned in your previous answer that oral contracts were both hard to prove and have a statute of limitation of two years. However, a week ago, I had sent the disgruntled employee a few text messages that might be damaging. So my first question is, are text messages on smart phones recognized by a court of law? If they are not, that is the only question we have. If they are, please respond to the possible implications of the following text message that I sent to this employee. Bare in mind that I was not present when my dad had mentioned the 10% bonus and my dad was at the time the sole owner of the company. Now I am an officer of the company (president) although the company is still 100% owned by my dad. Here’s the text that I sent:“I think the problem is the way you were interpreting ownership and equity. I believe you are thinking that my dad had given you a 10% ownership in the company, and you’re thinking that you are getting screwed because that 10% ownership was never in writing and that all along you have owned 10% of the company. That is not the case, nor was it ever the intention. My dad was offering you 10% of the profit the company made at the end of the year. If we were to have drafted a contract, it would have explicitly stated that, and explicitly said that if you were to ever leave or be fired from the company, you would obviously no longer get the 10% of the profit. Likewise with me, I get 20% of the profit, but if I leave I don’t just continue to draw a paycheck. The profit sharing was intended to make us work harder and to be watchful of saving costs and not spending too much. Never was it ever a thing where for free we were just given equity in the company - that makes no sense.”
When my dad read this text he became concerned that, as an officer of the company (now), that my interpretation of the oral contract (I was not present when the oral contract was made), may have inadvertently committed our company to paying our ex-employee 10% of the profits of the company for the years after 2013. Do you see it that way? Would a judge interpret it that way and is a text message legally binding?
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11/7/2017
socrateaser
socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 40,157
Experience: Retired
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Hello again...you asked:

So my first question is, are text messages on smart phones recognized by a court of law?

A: Yes, a text message is admissible evidence, provided it can be proved to have been sent by the opposing party (you).

If they are not, that is the only question we have. If they are, please respond to the possible implications of the following text message that I sent to this employee. Bare in mind that I was not present when my dad had mentioned the 10% bonus and my dad was at the time the sole owner of the company. Now I am an officer of the company (president) although the company is still 100% owned by my dad. Here’s the text that I sent:

“I think the problem is the way you were interpreting ownership and equity. I believe you are thinking that my dad had given you a 10% ownership in the company, and you’re thinking that you are getting screwed because that 10% ownership was never in writing and that all along you have owned 10% of the company. That is not the case, nor was it ever the intention. My dad was offering you 10% of the profit the company made at the end of the year. If we were to have drafted a contract, it would have explicitly stated that, and explicitly said that if you were to ever leave or be fired from the company, you would obviously no longer get the 10% of the profit. Likewise with me, I get 20% of the profit, but if I leave I don’t just continue to draw a paycheck. The profit sharing was intended to make us work harder and to be watchful of saving costs and not spending too much. Never was it ever a thing where for free we were just given equity in the company - that makes no sense.”

When my dad read this text he became concerned that, as an officer of the company (now), that my interpretation of the oral contract (I was not present when the oral contract was made), may have inadvertently committed our company to paying our ex-employee 10% of the profits of the company for the years after 2013. Do you see it that way? Would a judge interpret it that way and is a text message legally binding?

A: The text appears to be an admission that the company would pay the employee 10% of the profits. It doesn't say for how many years, so it's quite possible that it could be interpreted to mean for as long as the employee continues to work for the company.

In the real world, there would likely be a jury, and your lawyer would call your father as a witness to explain his version of the original deal; your employee's lawyer would ask the employee to explain his version, and the jury would decide who's telling the truth. This assumes that there would be no settlement beforehand.

The (rhetorical) question that I have is when did you stop paying the 10%? If it was more than 2 years ago, then the statute of limitations has probably expired. Though, it could also be argued that the 10% was to be paid as wages, and if so, then the statute of limitations would be three years.

The difference could be very meaningful, because if the claim is made for unpaid wages, then the employee is entitled to attorney's fees and costs of suit -- and that could be a lot of money in addition to the unpaid profits.

On the other hand, there's nothing in your note that suggests any ownership interest in the business -- so, if you terminate the employee, then the "profit-sharing" terminates along with the employment.

In my opinion, your best recourse is to try to get a settlement and release, in exchange for money (which could be made in payments, such as a note payable by the company over time to limit the financial pain), before the employee finds a lawyer and sues or files a wage claim with the labor commissioner (assuming this hasn't already happened).

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

Thanks again for using Justanswer!

socrateaser
socrateaser, Lawyer
Category: California Employment Law
Satisfied Customers: 40,157
Experience: Retired
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