Here’s a story told in this post on the BeLabor the Point blog:
A contract between a company and a departing employee stated that the company would pay the employee “an annual salary in the amount of $56,398.68 pro rata from the Termination Date of April 1, 2013 through May 24, 2013.”
The company subsequently issued the employee four checks, one every two weeks, for a total of $8,676.72, representing eight weeks of salary. The employee sued the company, claiming that he had been promised his entire year’s salary and that it would be paid in four payments every two weeks, with each payment being in the amount of $14,099.67. Accordingly, the employee claimed he was owed an additional $47,721.96.
A Florida court threw out the employee’s claim, but an appellate court held that the employee’s argument was plausible, so it remanded the proceedings to the lower court.
The only way to find the employee’s argument plausible is to flush down your memory hole any sense of how pro rata, meaning “proportionately,” is actually used in contracts. But the company has no reason to feel hard done by, as it could have avoided any argument simply by stating exactly how much it would pay the employee, instead of requiring the reader to do some calculating.
So the moral of this story is, if when the contract is signed you know how much a given amount will be, state that amount in the contract instead of trying to be fancy. For one thing, doing so would make life easier for the reader. And you would avoid the risk that in not stating the number you give the other party a stick to beat you with. You might end up winning that fight, but winning a fight is a distant second to not having a fight in the first place.
1 thought on “Litigation Over the Meaning of “Pro Rata”? Don’t Be That Drafter”
Ken, the litigation above is one reason I prefer the ‘loser pays’ approach of English and commonwealth countries! The employee was simply rolling the dice because he had little to lose, and the court was right to throw it out. If claimants with spurious claims had to risk paying the other side’s costs, these claims would be decimated, IMHO.