At Will...or Not?

If you are an employer, you probably think that your employees work for you on an "at will" basis. In other words, either you or the employee can terminate the relationship for any lawful reason or for no reason at all.

Careless language in your employee handbook, however, can change the "at will" relationship and prove very costly for you. In Roberson v. Wal-Mart Stores, Inc., 202 Ariz. 286, 44 P.3d 164 (Ariz. App., 2002) the court held the following (all citations omitted):

¶ 15 Generally, an employment contract of indefinite duration is terminable at will. As such, either party may terminate the contract at any time for good cause or no cause without incurring any liability. Id. at 375, 710 P.2d at 1030. It is undisputed that Roberson was not hired for a specific term, thus giving rise to a rebuttable presumption that his employment was terminable at will. See id. at 381, 710 P.2d at 1036.

¶ 16 Because an at-will employment relationship is contractual, however, "the parties are free to create a different relationship beyond one at will `and define the parameters of that relationship, based upon the totality of their statements and actions.'" Limitations on the right of the employer or employee to terminate the employment relationship can be either express or implied. An implied-in-fact contract term is one that is inferred from the statements or conduct of the parties and becomes as enforceable as an express term.

¶ 17 In Arizona, implied-in-fact terms may be found in an employer's policy statements regarding job security or employee disciplinary procedures, such as those contained in personnel manuals or memoranda. Whether there is a promise of job security or certain disciplinary procedures implied-in-fact by an employer through its personnel manual or otherwise is a question of fact. ("Evidence relevant to this factual decision includes the language used in the personnel manual as well as the employer's course of conduct and oral representations regarding it.")

¶ 18 Not all employer policy statements, however, create contractual promises. "A statement is contractual only if it discloses `a promissory intent or [is] one that the employee could reasonably conclude constituted a commitment by the employer.'" "An implied-in-fact contract term is formed when `a reasonable person could conclude that both parties intended that the employer's (or the employee's) right to terminate the employment relationship at-will had been limited.'" Disclaimers in personnel manuals that clearly and conspicuously tell employees that the manual is not part of the employment contract and that their jobs are terminable at will "instill no reasonable expectations of job security and do not give employees any reason to rely on representations in the manual."

¶ 19 The inclusion of disclaiming language in a personnel manual, however, may not always insulate the employer from liability. For example, contrary oral or written assurances made at a hiring interview or during employment may constitute an implied contract, altering the at-will relationship. ("Unless an employee handbook specifically negates any intention on the part of the employer to have it become a part of the employment contract, a court may conclude from a review of the employee handbook that a question of fact is created regarding whether the handbook was intended by the parties to impliedly express a term of the employment agreement.").

If you'd like a review of your employee handbooks to ensure that they do not unwittingly create an implied contract of employment, visit my website at www.sbantalaw.com, or call me at 480-707-2835.