THE EMPLOYMENT RELATIONSHIP
I. Introduction
"I'm what, fired?!!!" The setting is an area business. An employee, who is not doing the job to the full expectations of the employer, is called into the employer's office and fired. Surprised and shocked, the employee questions the reasons for the firing and contacts an attorney. Meanwhile, the employer continues on with its business believing that it is protected by the "Employment at Will" status. But is the employer protected when it is later sued by the employee for "wrongful discharge"?
Wrongful discharge is the second fastest growing trend in lawsuits. Employers and employees alike should be aware of their rights and obligations. This article examines "Employment at Will" and the firing of employees from both the employer's and the employee's perspective.
II. "Employment at Will"
What is "Employment at Will" and how does it affect you? North Dakota, like several other states, is an "Employment at Will" state. This means that an employer can fire an employee at any time for almost any reason -- in other words "without cause." However, decisions to fire based on race, color, religion, sex, national origin, age, mental or physical disability, marriage, public assistance, etc. are not appropriate reasons for firing an employee and may subject the employer to liability. The same is true for firing based on such things as the employee's refusal to commit a wrongful act; fulfillment of a public obligation such a jury duty or obeying a subpoena to appear in court; filing a Workers' Compensation claim; etc.
There are several exceptions to "Employment at Will" and an employer who is not aware of these exceptions can inadvertently change the "Employment at Will" status and subject the employer to liability. The more common exceptions to the "Employment at Will" status are discussed below.
III. Employee's Perspective
Employees are presumed to be "at will" employees meaning that the employer can fire an employee at any time with or without cause. The employment at will status can be changed by the employer, whether it be intentionally (i.e. requiring the employee to enter into an employment contract) or inadvertently (i.e. through the employer's policies, manuals, or oral or written promises). If the employment status is changed to a contractual one, then the employee may be fired only "for cause."
Several documents supplied by the employer to the employee may change the employment status to a contractual one. These documents may include employee handbooks and personnel manuals. However, the sole fact that the employee is given a handbook or manual does not automatically change the employment to a contractual one. Instead, the handbook or manual must be closely examined to determine if these documents give the employee a reasonable belief that their employment is permanent and may only be terminated for certain given reasons. If so, the employee may have an "implied in fact" employment contract. This is one where the employer and employee do not intentionally enter into an employment contract. However, a contract is implied through certain representations made by the employer.
Employment contracts may also be created through the employer's oral or written promises, such as letters of employment or oral representations which may include promises regarding the term of the employment or future growth with the business. Also, benefit plan agreements, stock options, etc. may create an employment contract if they give the employee a belief of permanent or future employment. Furthermore, contractual employment may be implied if the employee forbears from doing something as a result of his or her employment with the employer, such as turning down another job offer due to the employer's representations. The above-described exceptions to at will employment are just a few common exceptions. Employees must keep in mind that each employer-employee relationship is unique and must be examined on a case by case basis. Just because the employee is given benefits or an employee handbook does not automatically mean that the employee can be fired only for cause. Absent an employment contract, the employee has the burden of proving a reasonable belief of permanency and job security. Additionally, if the employee is provided with grievance, disciplinary or termination procedures, the employer must follow these procedures.
IV. Employer's Perspective
We are all familiar with the saying "the best defense is a good offense." The most important thing an employer can do to protect itself from employee lawsuits, is to accurately and consistently document all employee matters. This preserves the record for possible future lawsuits and makes it easier for the employer to defend itself against an employee's claim that the employee was wrongfully terminated. Another important point for employers is to always try to preserve the employment at will status, but to also always try to terminate for cause. Terminating an employee for cause reduces the possibility of a wrongful discharge claim brought by employees.
An employer must be careful to preserve the at will employment status. The documents an employer provides to its employees may allow the Courts to imply an employment contract. Accordingly, if the employer has an employee handbook, policy manual, etc., these documents should carry a disclaimer informing the employee that the employment is "at will." This disclaimer should be present several times throughout the document, but at a minimum, should be at the beginning and the end of the document, and should be high-lighted, underlined, and/or in bold print. It is also recommended that the employer require the employee to sign a disclaimer that the employee understands his or her employment is "at will."
Although a well-drafted policy manual or handbook may create the groundwork for effective defenses against employee claims, an employee handbook or policy manual may create an implied employment contract if employers are not careful when drafting such documents. An employer should refrain from using the following terms in any handbook or policy manual: "permanent," "long-term," "tenure," "career," "vested," "future," "security," and "probationary." These terms may create a reasonable belief of employee permanency or of future job security. Employers should also be careful when including extensive discipline policies in their handbooks or manuals. These policies may be read as implying a contractual employment. Additionally, if such polices are instituted, they must be strictly followed by the employer.
Employers must be cautious in all representations made to its employees, whether verbal or written. To preserve the at will employment status, employers should always include a sentence in all documents to employees that their at will employment status is not changed by any representations made by the employer. This is especially important in benefit plans or agreements.
V. Conclusion
Each employer-employee relationship is unique and must be examined on a case-by-case basis. The general rule is that an employee's employment is "at will." The employee can be fired at any time for good reason or for no reason at all. The employer may change the "at will" status by a formal written employment agreement or by certain other promises or representations. This change means that the employer must now have a valid legitimate reason for firing the employee.