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If you assert at-will employment status, be sure your position is
clearly stated in your policy manual and other employee communications.
Such a statement helped this company overcome an employee’s charge that
he had an enforceable contract for long-term employment.
A ruling by the Sixth Circuit Court of Appeals (Michigan, Ohio,
Kentucky, and Tennessee) helps employers understand what is needed in
order to maintain
at-will employment status. Under the
at-will principle,
both the employer and employee are free to terminate the employment
relationship at any time and for any reason. The case, Highstone v. Westin
Engineering, Inc., No. 98-1548 (8/9/99), involved an employee who claimed
he was terminated in violation of both written provisions in the employee
policy manual and oral statements made to him in a pre-employment
interview. The Court found that the employee did not have a reasonable
expectation of a continuing employment relationship with the employer and
ruled him to be an at-will employee who could be terminated at any time.
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Employee Says He Was Assured There Would Be Plenty of Work
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The employee alleged that when he interviewed for the position of
Principal Engineer/Project Manager he told the company he wanted a job
with long-term employment possibilities. He claimed that during his
interview with the Chief Engineer he was told there would be plenty of
work for that office because of an ongoing five-year project.
[Creating HR Policies or Employee Handbook?]
When he first went to work in September 1992, he was given a copy of
the company’s policy manual and was asked to sign an “Employment
Agreement” in which he consented to abide by all of the company policies
and procedures. By his signing, he also acknowledged the company’s
disclaimer which held that the policy manual did not constitute a contract
and was not a guarantee of continuing employment.
Early in 1995 it became apparent to the company that revenue from its
major project was declining, and in April the employee was terminated
because of a lack of work. On July 16, 1996, the employee brought suit
against the company alleging a breach of contract based on the oral
statements that were made to him before he was hired.
The employee also alleged that the company’s policy manual created a
contract between the parties and gave him an expectation of job security.
He interpreted these representations as a promise that he would not be
terminated without just cause, i.e., without his violating company
policies. The employee argued that the company breached the contract when
it terminated him without just cause. The district court disagreed and
found in favor of the company on both the oral and policy manual contract
claims. The employee then appealed to the Sixth Circuit.
Employee Must Prove Enforceable Contract
In deciding the case, the court applied Michigan contract law, which
holds that an at-will relationship is generally presumed to exist.
However, if an employee can produce evidence of the existence of an
express written contract which promises a definite period of employment or
prohibits termination without just cause, the employee may be able to
prevail and overcome the at-will presumption. The court said that an
express contract could exist if there are clear oral or written
statements, including the employer’s policies and procedures, that give
a “legitimate expectation” of job security to the employee.
The oral statements. The Sixth Circuit said that oral statements
could be an express contract, but that they would have to be understood as
such by “reasonable people,” and they must be clear and unequivocal.
In his interview, the employee claims to have made it clear he was seeking
a stable position and that he was told there would be “plenty of work.”
He took this as a promise of job security. However, the court found these
statements to be only expressions of “optimistic hope” and were “not
sufficient to create a reasonable expectation” of long-term employment.
The policy manual as a contract. The court’s next focus was on
whether the company’s policy manual created an expectation that the
employee would only be terminated for just cause. The court first looked
to see what, if anything, was promised in the policies. It found the
specific disclaimer that the employee had signed said that the manual was
not a guarantee of employment. Further, the manual clearly stated in its
“Application of Contents” section that it was not a guarantee of
employment to any employee, and the employer reserved the right to
terminate its employees at any time for such reasons as lack of work or
reorganization. Finally, the manual did not contain an express statement
saying that employees could be discharged only for just cause. For these
reasons, the court ruled that the manual could not reasonably be
interpreted as giving the employee an expectation of job security.
Additional note. While the employee was still working for the
company, the manual was revised to add the actual term
“at-will.” The
new language said: “Note that all… employees are at-will employees and
that neither the Employee Agreement nor this manual are guarantees of
continuing employment.” The revision was completed at the end of 1994
and was published on-line on March 16, 1995, one month before the employee’s
termination. Although the employee claimed that he did not receive the
revised manual, the court said this did not matter. It went on to explain
that the addition of the term to the manual did not change the employee’s
at-will status, rather only clarified it.
Eliminate At-Will Confusion
If you intend to be an at-will employer, make the point clear in all
your hiring and policy communications. The company in this case may have
been able to avoid litigation if the oral statements had been more
consistent with its written policies. Forty-nine states and the District
of Columbia recognize the at-will employment relationship. Only Montana
has a “for cause” requirement for the termination of nonprobationary
private employees. However, just because the at-will relationship exists
in your state, you should be aware that most states also have some
limitations on this principle. Even so, there are proactive steps that you
can take to help avoid misunderstandings:
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Add a statement to your employee policies stating that all employees
are employed at the will of the company for an indefinite length of
time, unless they have a written contract for a definite period of
employment. The statement needs to be highly visible so that employees
are sure to read it.
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Explain that no statements made in any of the company’s policies
will alter the at-will relationship.
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Have prospective employees sign a statement acknowledging they
understand they are applying for an
at-will job.
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Let employees know that completion of any introductory period of
employment does not change their status as an at-will employee.
These steps and careful
supervisory training can help you preserve your
at-will status. However, you still need to remember that the at-will
status will not protect you against all employment legal actions. Your
state laws may have restrictions on the application of the at-will status,
and at-will status will not protect you from violations of discrimination
laws.
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Personnel
Policy Service, Inc.
