Employment Contracts, Implied And Actual
California is an at-will state when it comes to employment. This means that employers are not obliged to retain an employee, as long as they do not violate the law. However, some employees have contracts describing the details of the relationship between the employee and employer. These contracts govern the terms and conditions of employment and are particularly common among executive level employees, but exist at almost every level.
Such contracts can define compensation and benefits. When the compensation stipulated in an employee contract is not paid for some reason, an employee may be able to file a breach of contract lawsuit. A 2010 example of a California banker’s lawsuit is illustrative.
Employee vs. Employer
The employee was the chief lending officer of a nationally chartered commercial bank. His contract spelled out his compensation that included bonuses and a non-funded profit sharing account. When the bank began to fail, the man resigned. Although he said that his immediate supervisor informed him verbally that there would be no problem with paying his profit-sharing account within the contract-stipulated 60 days, he subsequently received a letter saying that the company did not have the money to pay him. The amount, reported to be over $1 million, would be paid only when the bank raised additional capital. The bank went out of business, and the employee filed a lawsuit seeking the money in his profit-sharing account.
Employer vs. Employer
Employees and ex-employees are not alone in filing breach of employment contract lawsuits. Former employers can also file. One example of this type of lawsuit comes from the world of high-profile journalism. Texas Monthly Magazine sued The New York Times Magazine, saying that it was responsible for making its former editor leave Texas Monthly in violation of the editor’s contract. The Times asserted that there was no basis for the lawsuit because it had understood that the man would be allowed to break his contract to leave Texas Monthly. Neither of the employers blamed the employee for the situation – this was something to be settled between the two magazines.
Employer vs. Employee
Breach of employment contract suits can also be brought by employers against employees who allegedly breached their employment contracts. A Canadian story illustrates this scenario. An executive at the technology company Blackberry filed a lawsuit against a high level executive because he accepted a position at Apple and provided two months notice rather than the six stipulated under the man’s employment contract.
Some of the most high-profile examples of lawsuits involving employer vs. employee contracts can be found in the realm of collegiate and professional sports. For example, at the University of Minnesota, Coach Clem Haskins was sued because the university wanted to retrieve some of his buyout that it paid when they bought out his employment contract after an academic scandal.
Are Employee Handbooks Employment Contracts?
A Target employee who was fired because of alleged theft in Utah, an at-will employment state, sued Target alleging breach of contract. The employee charged that by interviewing her about the alleged theft, thus causing emotional distress, violated the implied provisions of the employee handbook that she would be treated fairly. However, the court dismissed the breach of contract claim on the grounds that Utah is an at-will state and that the employee handbook specifically stated that the employment relationship could be terminated by either party at any time for any reason.
California does not view employee handbooks as contracts under most circumstances, but other states do allow handbooks to substitute for contracts. For example, in Arizona, the state supreme court ruled that employers cannot change the employee handbook without the agreement of the employees. If the employer does make changes without the consent of the employees, those changes are not enforceable. Similarly, a court in Pennsylvania ruled that handbooks can be an implied employment contract and that it can only be enforced if the employee actually received a copy of the handbook. Otherwise, the employer could be vulnerable to a breach of contract lawsuit.
Many human resources websites stress the importance, from the employer’s point of view, of being very specific about employment practices and developing a process to ensure that receipt of employee handbooks is documented.
The issue of employee contracts is an important one for employers and employees. Both sides owe it to themselves to stay current on the latest court rulings regarding employment contracts.