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Implied Employment Contracts

Employment Law

4 minute read

An employer can be liable for wrongfully terminating an employee if either the employee is in a protected class (i.e., age, gender, religion) and the termination was the result of the employee being in that protective class, or the termination was in breach of contract or an implied contract. Otherwise, an employee is generally deemed an at-will and is not protected against termination.

An implied employment contract exists if the surrounding circumstances give rise to a reasonable inference by the Court as to the existence a contract. Such a finding is normally based on an employment handbook or manual and whether the handbook or manual creates an implied contract between the employee and employer. When determining whether an employment agreement arises out of an employment handbook or manual, a court looks at a several factors.

Those factors include whether the employee acknowledged his or her understanding and belief that they and the employer were bound by the employment manual and whether the employee followed the grievance procedure set forth in the manual with respect his or her termination. On the other side, the courts look to see if the employer relied on the employment manual in reviewing employee grievances and personnel matters.

The Court does not accord much weight to the provisions that an employer can modify the handbook/manual in its discretion. Disclaimers that the employment is at-will and the handbook/manual does not affect the at-will relationship must be prominent and conspicuous in order to be considered effective.

If the terms of the manual/handbook are negotiated, that would be strong evidence that the handbook/policy is a contract. Certainly, if the there is a term of employment set forth in the handbook/manual, that would also be strong evidence of the existence of an employment contract.

Primarily, the Court will seek to determine if the employee believed that employment manual constituted the terms or conditions of employment, equally binding on employee and employer; and whether this belief was reasonable under the circumstances.

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