Menite v. Sahara Plaza, LLC (#neversettle)
Pouring over what went down at the #PlazaHotel on 5th Ave.
Serving Up the Truth (the facts of the case)
In September 2022, Menite commenced an action against his former employer, defendant Plaza Hotel. The action alleged that the Plaza violated New York State and New York City Human Rights Laws by discriminating against him based on his age and disability and for wrongfully terminating his employment in retaliation for complaints against the discrimination.
Menite, in his early to mid-50’s at the time of bartending became aware of several younger female servers and bartenders stealing tips and reported it to management, who failed to investigate or take disciplinary action.
Menite further alleges that these employees then created a hostile work environment by treating him disrespectfully and calling him derogatory names.
Around that time, Menite had to take medical leave in order to treat a hernia condition and cataracts and was granted approved leave with a return-to-work date of November 19, 2019. However, shortly after applying for leave, an anonymous tip, allegedly one of the younger servers, reported to the management that Menite had stated he was “going to bring a gun to work”.
The Plaza Hotel did not investigate the origin of the complaint or its legitimacy but instead terminated Menite via letter in the mail, informing him that he would not return to work after taking medical leave but that a final check would be made accounting for all proper compensation.
On November 1, 2019, Menite his New York & Motel Trades Council, AFL-CIO delegate, and Union delegate and counsel for Plaza held a meeting where a voluntary settlement agreement was executed. The hotel paid $6,000 for full and complete release in satisfaction of any and all matters arising out of employment at the hotel.
Despite this agreement, Menite commenced the action arguing that the settlement agreement is not enforceable alleging that the Plaza Hotel induced the signing of the agreement through fraud, duress, and/or misrepresentation—as necessitated by contract law to prove unenforceable.
The Court ultimately found that the settlement agreement was, in fact, enforceable, and accordingly granted the Plaza Hotel’s motion to dismiss.
Sipping on Precedent (#sippingonprecedent)
Courts will enforce clear, unambiguous settlement agreements according to their terms so long as both parties entered knowingly and voluntarily.
(See Global Mins. & Metals Corp. v Holme, 35 AD3d 93, 98, 824 N.Y.S.2d 210 [1st Dept 2006]; Skluth v United Merchants & Mfrs., Inc., 163 AD2d 104, 106, 559 N.Y.S.2d 280 [1st Dept 1990].)
Settlement agreements are governed by Contract Law and may be found invalid if a byproduct of fraud, duress, misrepresentation, or undue influence.
(Id.; Global Mins., 35 Ad3d at 98, citing Hack v United Capital Corp., 247 AD2d 300, 301, 669 N.Y.S.2d 280 [1st Dept 1998].)
Likewise, Courts will look to the equity of the contract. Where the person releasing had little time to investigate or was placed in an unfair situation in which there is an overreach or unfair proposition to sign the release.
Here, Menite attempts to argue and rely on fraud in the inducement, which occurs when a person tricks another person into signing an agreement to one’s disadvantage by using fraudulent statements and representations. Because one party in the contract based their decision on misleading information, the contract is voidable. The injured party can choose to proceed with the contract even after learning about the fraudulent inducement.
However, Menite incorrectly relies on the holding of the Appellate Division, First Department in Johnson v Lebanese Am. Univ. In Johnson, the release agreement framed backpay already owed to the Plaintiff for time worked and unused vacation and sick time, as “settlement payment” and wrongfully induced the agreement.
In Menite’s case, the Plaza Hotel did in fact settle all backpay and monies owed to him as an employee and offered an additional $6,000 in payment as consideration of release.
Further, Johnson only discovered only a possible discrimination claim following the release, where Menite knew of such claims and accordingly had filed a grievance with his union representation prior to any settlement agreement.
In its discussion, the Court acknowledges that although Menite did not have legal counsel and signed the settlement agreement on the same day it was presented to him, it did not constitute that the Plaza Hotel obtained the release inequitably. The Court cites Skluth, which established that there is no requirement to consult with a lawyer when an agreement has been knowingly and voluntarily entered into.
In Menite’s case, both a union delegate and Union representative were present to advocate for his interests. In addition, according to the terms of the agreement, Menite had the ability to consult with an attorney and explicitly raised his right to do so.
Finally, Menite alleges that overreaching and duress occurred under threat of being blackballed from the hospitality industry after a 30-year long career. However, precedent states that a party seeking to repudiate an agreement on the grounds that it was procured by duress requires a showing of both a wrongful threat and the preclusion of the exercise of free will. Neither of which were argued in the complaint. (See Fred Ehrlich, P.C. v Tullo, 274 AD2d 303, 304, 710 N.Y.S.2d 572 [1st Dept 2000]; Wujin Nanxiashu Secant Factory v Ti-Well Intl. Corp., 14 AD3d 352, 352, 788 N.Y.S.2d 78 [1st Dept 2005].)
Pouring it Over (#pouringitover)
While it very well be that Menite had reasonable claims under both New York State Human Rights Law (NYSHRL) and New York City Human Rights Law (NYCHRL), by signing a settlement agreement and accepting $6,000 in consideration of the release, he was barred from filing any further claims against the Plaza Hotel in relation to the incidents surrounding his termination.
However, new related legislation suggests that lawmakers are shifting their focus in barring claims regarding harassment and discrimination.
Senate Bill S4516 shall prohibit settlement agreements in any claim involving sexual harassment or any other form of discrimination prohibited by law from containing any condition that requires the complainant to pay the defendant liquidated damages in the event that the plaintiff violates a nondisclosure agreement included in such settlement agreement. This bill has passed the senate and assembly and marks a shift towards further protections to victims and less incentives for proprietors developing release agreements.
Best practice for Businesses is to have timely investigation of any allegations and complaints, and clear and open communication regarding acceptable behavior in the workplace.