Terminating An Employee May Violate An Implied Agreement If

Terminating an Employee May Violate an Implied Agreement If…

Terminating an employee is a serious undertaking with significant legal and ethical ramifications. While employers generally have the right to dismiss employees, this right is not absolute. A dismissal can be challenged if it violates an implied contract, a concept often overlooked but with potentially severe consequences for the employer. This article delves into the circumstances where terminating an employee might breach an implied agreement, exploring the nuances of implied contracts and offering practical advice for employers.

Understanding Implied Contracts in Employment

Unlike express contracts, which are explicitly written and agreed upon, implied contracts arise from the conduct and interactions between the employer and employee. These agreements aren't documented but are inferred from the parties' actions, statements, and the overall employment context. A court will consider the totality of circumstances to determine if an implied contract exists.

Key Elements of an Implied Contract:

• Offer and Acceptance: While not explicitly stated, the offer of employment and the employee's acceptance implicitly create a contractual relationship.
• Consideration: This involves the exchange of promises – the employee's services for the employer's payment and benefits.
• Mutuality of Obligation: Both parties must have understood there was an obligation for continued employment under certain conditions.
• Certainty of Terms: While not as specific as a written contract, the terms of the implied agreement must be reasonably certain.

Situations Where Terminating an Employee Might Breach an Implied Agreement

Several scenarios can lead to a court finding that an employer breached an implied contract by terminating an employee.

1. Breach of Implied Promise of Continued Employment:

An implied promise of continued employment can arise from various factors. Employers must avoid creating an expectation of long-term employment, particularly through statements or actions. Examples include:

• Long-term employment history: Consistent employment with promotions and positive performance reviews might lead a court to infer an implied promise of continued employment, particularly if the dismissal seems arbitrary or unfair.
• Statements by management: Casual promises or assurances of job security made by superiors, even if not formally documented, can be considered part of an implied agreement. Such assurances must be avoided unless they are explicitly documented.
• Company policies and handbooks: While not necessarily legally binding contracts, company handbooks and policies detailing dismissal procedures or expectations of continued employment can contribute to the existence of an implied agreement. These should be reviewed regularly and updated to reflect current best practices.

Case Example: An employee with 20 years of consistently excellent performance reviews is terminated without warning or cause. The court might consider this a breach of an implied contract based on the long-term employment history.

2. Violation of Implied Covenant of Good Faith and Fair Dealing:

Most jurisdictions recognize an implied covenant of good faith and fair dealing in employment contracts. This means employers must act fairly and reasonably in their dealings with employees. Violations could include:

• Wrongful dismissal: Dismissing an employee without just cause or in a manner that is arbitrary or capricious.
• Retaliatory dismissal: Terminating an employee for exercising legal rights, such as reporting illegal activity or filing a worker's compensation claim.
• Bad faith conduct: Acting dishonestly or deceitfully towards an employee, such as misleading them about their job security or performance.

Case Example: An employee is fired for reporting safety violations within the company. The court could rule that the dismissal was a violation of the implied covenant of good faith and fair dealing because it was retaliatory.

3. Breach of Implied Promise of Promotion or Advancement:

While there is no guaranteed right to promotion, if an employer has consistently led an employee to believe a promotion is forthcoming, then terminating that employee without a legitimate reason before delivering that promotion might be viewed as a breach of an implied agreement. Factors to consider:

• Consistent promises of promotion: Repeated assurances from management regarding future advancement.
• Employee's reliance on promises: The employee's actions based on the promises of promotion (e.g., taking on additional responsibilities).
• Lack of objective justification for non-promotion: The employer fails to provide clear, legitimate reasons for not granting the promotion.

Case Example: An employee is consistently told they are in line for a promotion and takes on extra duties in anticipation of it. Then, they are terminated shortly before the promotion is supposed to occur. This could be a breach of implied contract.

4. Violation of Implied Terms Regarding Employee's Benefits:

If the employer has consistently provided certain benefits to employees (e.g., health insurance, bonuses), a pattern of such benefits might create an implied agreement that these benefits will continue as long as the employee remains in good standing. Terminating an employee and abruptly cutting off these benefits without a clear reason could be a breach. This is particularly true if these benefits were included in employment negotiations or explicitly promised.

Case Example: An employee with a history of receiving annual bonuses is terminated without notice and is denied their final bonus. This could breach an implied agreement about the continued provision of bonuses.

Mitigating the Risk of Implied Contract Claims:

To minimize the risk of facing legal challenges related to implied contracts, employers should take proactive steps:

• Avoid making casual promises: Refrain from making casual statements or assurances about job security or future opportunities. Any promises should be formalized in writing.
• Develop clear and comprehensive employment contracts: Written contracts, even for lower-level employees, can help avoid ambiguity.
• Document performance reviews accurately and thoroughly: Regular, well-documented performance reviews provide a strong basis for making employment decisions.
• Follow a consistent and fair disciplinary process: This demonstrates adherence to the implied covenant of good faith and fair dealing.
• Adhere strictly to company policies and procedures: Consistency in applying policies reduces the risk of arbitrary or discriminatory actions.
• Seek legal counsel before terminating an employee: An attorney can provide guidance on complying with all applicable employment laws and avoiding potential lawsuits.

Conclusion:

Terminating an employee can be a complex legal process. While employers possess the right to dismiss employees, they must act within the bounds of the law and avoid breaching implied agreements. Understanding the subtleties of implied contracts and taking preventative measures is critical for employers to protect their interests and manage their workforce effectively. Ignoring the possibility of implied contract claims can lead to costly litigation and reputational damage. By implementing best practices and seeking legal advice when necessary, employers can navigate the termination process responsibly and avoid unnecessary legal disputes. Remember, prevention is always better than cure when it comes to employment law. Proactive measures and a clear understanding of the law will always serve employers better in the long run. The information in this article is for informational purposes only and should not be considered legal advice. Always seek advice from a qualified legal professional for specific legal guidance.