## Facts

- An employee was hired under a written contract for a fixed term to work as a designer, cutter, and foreman at a stated weekly wage.
- The contract authorized the employer to retain $5 per week from wages “as a guaranty of faithful performance.”
- Over more than a year, the employer accumulated about $70 through the weekly retention.
- The employee claimed the employer prevented him from doing the work contemplated by the contract and required him to sit idle in a dark room during working hours.
- After the employee and his attorney complained, the employer allegedly ordered them to leave the premises, which the employee treated as a discharge.
- The employee, through counsel, promptly notified the employer that he tendered continued performance under the contract.
- The employer asserted the employee was not discharged and instead voluntarily quit.
- The trial court granted a nonsuit at the close of the employee’s evidence in an action seeking damages for breach and recovery of the retained wages.

## Issues

1. Whether the employee’s evidence, taken as true with all reasonable inferences, was sufficient to submit to the jury the question whether the employer wrongfully discharged him rather than the employee voluntarily quitting.
2. Whether the $5-per-week wage retention “as a guaranty of faithful performance” operated as an automatic forfeiture/penalty or as security applicable only to the employer’s proven actual damages.

## Decision

- The appellate court reversed the judgment of nonsuit and ordered a new trial.
- The court held the employee’s testimony could support a jury finding that the employer repudiated the employment contract and discharged the employee.
- The court construed the wage-retention clause as a guaranty/security fund, not an automatic forfeiture; retained sums could be applied only to proven damages caused by the employee’s breach.
- The court indicated that if the employer wrongfully discharged the employee, the employee could recover the retained wages, subject to any proper offsets supported by proof.

## Legal Principles

- On a nonsuit motion, the plaintiff’s evidence must be accepted as true, and the plaintiff receives the benefit of all reasonable inferences.
- Where the evidence permits competing inferences on discharge versus voluntary quit, the issue is for the jury and may not be resolved as a matter of law by nonsuit.
- A contractual provision retaining part of wages “as a guaranty of faithful performance” is treated as security for actual loss; it does not create a punitive penalty or automatic forfeiture without proof of breach and damages.
- If the employee breaches, the employer may credit the retained fund against the employer’s proven damages, but may not retain amounts beyond compensation for actual injury.
- If the employer breaches by wrongful discharge, the employee may recover retained wages held as security, subject to any legally supportable offsets.

## Conclusion

The appellate court held that the employee’s proof required jury resolution of whether a wrongful discharge occurred and ruled that a wage-retention clause framed as a “guaranty” functions as security for actual damages rather than an automatic forfeiture, warranting reversal of the nonsuit and a new trial.


Sigmon v. Goldstone, 116 A.D. 490, 101 N.Y.S. 986 (1st Dep’t 1906)