In Sheng v. M&TBank Corp., 2017 U.S. App. LEXIS 1912 (2d Cir. Feb. 2, 2017), the Second Circuit Court of Appeals held that the District Court erred in permitting the admission of an employer’s offer of reinstatement because the offer was, as a matter of law, not unconditional.

 In this case, the plaintiff was working remotely in Los Angeles as Team Lead for the defendant’s New York office through the defendant’s Alternative Work Arrangement policy.  While working remotely, the plaintiff notified the defendant that she was pregnant.  Soon thereafter, the defendant began to require that all Team Leads, including the plaintiff, be present in New York two (2) days a week.  When the defendant denied the plaintiff’s request that this requirement be delayed until after she gave birth, the plaintiff submitted a letter from her doctor stating that for health reasons, she should not fly while pregnant.  The defendant again denied her request and instead offered her the choice of relocating to New York within thirty (30) days, applying for short-term disability leave, or accepting termination.  The plaintiff rejected the offer and had her attorney contact the defendant’s attorney alleging that she had been effectively terminated because of her pregnancy.  During these pre-litigation settlement negotiations, the plaintiff’s attorney made a settlement demand of $200,000.  In response, the defendant’s attorney stated that the defendant was “not prepared to agree to such a monetary settlement” and instead “suggested that [the plaintiff] be reinstated and that she be allowed to work remotely … for the remainder of her pregnancy,” which the plaintiff rejected.

 In the employee’s subsequent lawsuit, the District Court ruled that the offer of reinstatement, made by the defendant’s attorney to the plaintiff’s attorney, could be offered as evidence at trial to show that the plaintiff had not attempted to mitigate her damages.  The jury rendered a verdict for the defendant and the plaintiff appealed.

 The Second Circuit found that the District Court erred in admitting evidence of the offer of reinstatement in violation of Federal Rule of Evidence 408, which prohibits, among other things, the admission of “[e]vidence of the following … to prove or disprove the validity or amount of a disputed claim …: (1) … offering … valuable consideration in … attempting to compromise the claim.”  As the court stated, “where a party is represented by counsel, threatens litigation and has initiated the first administrative steps in that litigation, any offer made between attorneys will be presumed to be an offer within the scope of Rule 408.”  Moreover, according to the Second Circuit, there is an “almost universal” expectation that a settlement offer is conditioned on “some sort of release,” and evidence of the reinstatement offer here “may have substantially affected the jury’s verdict.”

 The court also noted that the attorneys began their discussion of the plaintiff’s claims by agreeing that Rule 408 would govern the conversation, and while this “by itself does not preclude a party from making an unconditional offer,” the Second Circuit found that “it does suggest that the parties here were hoping to take advantage of Rule 408’s protection – protection available only for conditional offers.”

 If you are presented with an offer of reinstatement and have questions with respect to the admissibility of such offer, it is always best to consult with a New York employment attorney before accepting or rejecting the offer.

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