I.     Changes In Employment-At-Will Doctrine

A.     The  employment-at-will doctrine is, simply stated, that all employment is by the mutual consent of the employer and employee, and may be terminated at will by either party for a good reason, a bad reason, or no reason at all.

B.     Subsequently, virtually every state in the United States including Colorado came to adopt the employment-at-will doctrine as law.  The law as stated was, or depending upon the state, is, “an employer may discharge an employee for a good reason, a poor reason or no reason at all” so long as no contract for a specific term exists and no statutory obligation is violated.  Budd Mfg. Co. v. NRLB, 138 F.2d 86, 90 (3rd Cir. 1943), cert. denied, 321 U.S. 778 (1944).

C.     Notwithstanding the doctrine, the recent trend in many states, again including Colorado, has been away from a strict interpretation of the doctrine.  In any situation, the first step of the analysis must be to determine whether or not there exists a statutory exception to the employment-at-will doctrine.  If not, the case must be evaluated under applicable theories as adopted by courts.

II.    Statutory Exceptions To The Employment-At-Will Doctrine

A.     Notwithstanding the employment-at-will doctrine, there are a series of federal, state, and local statutes and ordinances which restrict the ability of an employer to hire or fire employees.

B.     Federal Statutes

1.     Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.)

a.     Prohibits discrimination on basis of race, color, religion, sex or national origin in:  hiring, discharge, compensation, promotion, classification, training, apprenticeship, referrals for employment, union membership, and terms, conditions or privileges of employment.

b.     Provides administrative process through Equal Employment Opportunity Commission (EEOC) and state and local enforcement agencies.  Claimants must use administrative process before filing suit.

2.     Equal Pay Act of 1963 (29 U.S.C. §  206(d))

c.     Prohibits sex based discrimination in rates of pay to employees. Exceptions for wages paid pursuant to a seniority system, merit system, piece work system, or differential based on factors other than sex.  Applies to employers having employees subject to Fair Labor Standards Act (FLSA) minimum wage requirements.

3.     Civil Rights Act of 1866 (42 U.S.C. § 1981)

a.   Covers racial discrimination claims.  It is a federal remedy against discrimination in private employment on the basis of race.

4.     Age Discrimination in Employment Act (29 U.S.C. § 621 et seq. )

a.     Prohibits age discrimination in employment for persons at least 40 years of age.

5.     Rehabilitation Act of 1973 (29 U.S.C. § 791 et seq. )

a.     Enacted to prevent discrimination against the handicapped.  Applies to persons or entities who have contracts with the federal government, or recipients of federal grants.

b.     Statute prohibits discrimination in employment against the “qualified handicapped”, i.e., those handicapped persons who are capable of performing a particular job provided the employer makes “reasonable accommodation” to their handicap.

c.     Act contains an expansive definition of the term “handicapped”.

d.     Some courts have held that drug problems or alcoholism constitute a “handicap” (see Whitelock v. Donoval, 598 F. Supp. 126 (D.D.C. 1984).  However, the statute does not include an alcoholic or drug abuser whose current use of alcohol or drugs prevents the individual from performing the job, or which would constitute a direct threat to property or safety of others.  See Guillot v. Gerrett, No. 91-2644, U.S. Dist. Court, E.D. Va. (June 26, 1992).  Court held that the failure to disclose existing cocaine addiction and alcoholism was not protected by the Act.

6.     National Labor Relations Act

a.     Prohibits discrimination against employees exerting their right to organize and designate representatives for collective bargaining, and acting in concert for mutual aid and protection.

7.     Fair Labor Standards Act

a.     Sets requirements for certain terms and conditions of employment (overtime payment, child labor).  Exceptions for executives, professional employees, certain administrative employees.

8.     Americans with Disabilities Act of 1990 (42 U.S.C. § 12101 et seq. )

a.     Title I of the ADA provides that no employer, employment agency or labor organization may discriminate against a qualified individual with a disability because of the disability in job application procedures, hiring, advancement, compensation, job training, discharge, and other terms, conditions and privileges of employment.  [§ 12112(a)]  Title I became effective July 26, 1992 for employers with 25 or more full-time employees, and on July 26, 1994, for all employers with 15 or more full-time employees.

b.     An employer may not discriminate against a “qualified individual with a disability.”  Of critical importance are the essential job functions  of any position.  Written job descriptions prepared before filling a position will be evidence of the essential functions.  A qualified individual is defined as an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the position.  A disability is defined as 1) a physical or mental impairment that substantially limits one or more of the major life activities of such an individual; 2) a record of such impairment; or 3) being regarded as having such impairment.  The employer must make a reasonable accommodation, but not if it causes undue economic hardship.  The ADA went into effect in July of 1994 for employers with 15 or more employees.  There is a split of authority among federal courts whether a person is disabled when a medical condition is controlled by medication.  The Tenth Circuit Court of Appeals has held a person is not disabled while a medical condition is controlled by medication.

9.     Uniformed Service Employment and Reemployment Rights Act 38 U.S.C. § 4301-4333)

a.     Subject to meeting certain specific requirements of the Uniformed Service Employment and Reemployment Rights Act (USERRA), a returning service member is entitled to regain his or her “old” job with the same seniority, status, benefits and pay.

b.   USERRA provides special protection from discharge without cause for a specified period after release from active duty.  If the veteran is fired during the period, the employer has the burden of proving that the veteran was guilty of misconduct which would have caused him or her to be fired if he or she had not been a veteran.

C.     State Statutes

1.     Colorado, like most states, has a state anti-discrimination remedy making it illegal to refuse to hire, fire, demote, promote, pay compensation to anyone otherwise qualified because of handicap, race, creed, color, sex, age, national origin, or ancestry.  Sexual harassment and discrimination against pregnancy are also covered.  Unlike Title VII, there is no requirement in the Colorado statute (C.R.S. 24-34-401 et seq.) that an employer have a minimum of 15 employees.  The statute applies even if there is only one employee.  Under this statute, employees must file a charge with the Colorado Civil Rights Commission which follows a procedure somewhat similar to the EEOC.  Colorado’s definition of handicap or disability with respect to employment discrimination includes not only physical impairments, but mental impairments as well (C.R.S. 24-34-301).

2.     The Colorado state anti-discrimination statute also makes it a discriminatory employment practice to discharge or refuse to hire a person solely on the grounds that such person is married to or plans to marry another employee of the employers unless one spouse would exercise supervisory authority over the other, or one spouse would have access to confidential personnel records.

3.     The Colorado Wage Act (C.R.S. 8-4-101 et seq.) requires immediate payment of wages or compensation due employees following the termination of their employment.  Upon termination of employment, an employee has 60 days to make a written demand for any wages or compensation that the employer has refused to pay.  The employer then has ten days from the receipt of the demand to mail the employee his earned, vested and determinable wages.  If the employer fails to do so, the employer will be liable for the greater of either fifty percent of the amount of wages due or the employee’s average daily earnings for each day, not to exceed ten days, until the payment or other satisfactory settlement has been made.  This penalty is in addition to the wages or compensation itself.  The employer may deduct from the amount payable to the employee payroll taxes, shortages due to employee theft, and the value of any property entrusted to the employee not returned to the employer.

4.     There are numerous other statutes under certain circumstances that limit or prohibit the right to discipline or discharge employees.  Examples include smoking, jury duty, garnishments, and participation in lawful activities outside of the work setting.

D.     Local Ordinances.  Again, these will vary widely from jurisdiction to jurisdiction.

1.     Many localities have adopted ordinances prohibiting discrimination in employment, and establishing local discrimination or human rights commissions for enforcement purposes.

III.    Public Policy Exception To Employment-At-Will Doctrine

A.     In recent years, courts have established judicially created exceptions to the employment-at-will doctrine.

B.     The most generally accepted exception is the public policy exception, usually applied where employees are terminated for:

1.     Refusing to violate a criminal statute;

2.     Exercising a statutory right;

3.     Complying with a statutory duty; or

4.     Observing the general public policy of the state.

C.     In evaluating a given situation, caution is necessary in evaluating a public policy discharge under the “general public policy of the state” principle.

D.     In the case of general public policy, the employee is generally required to demonstrate initially the termination concerns are a matter of public policy clearly affecting the rights of others at or outside the workplace.   When only private interests are involved, employees have had their claims denied.

E.     Whistle Blowing

1.     Protective whistle blowing occurs where the employee is asked to commit a crime and refuses.  For example, in Tameny v. Arco, 27 Cal. 3d 167, 610 P. 2d 1330, 164 Cal. Rptr. 839 (1980) the court upheld a complaint alleging unlawful discharge for refusal to take part in an illegal price fixing scheme.  The court found that the employer’s action breached the employment contract and, thus, there was a contract cause of action.  In addition, the court held that a common law tort is committed when a termination violates public policy, as in this case.  Conversely, active whistle blowing involves employees who seize the initiative and disclose their suspicions (that may or may not be well founded) to government or employer authorities regarding conduct that may violate the law, although no statute requires an employee to report it.

2.     In the wake of the highly publicized cases of whistle blowing at Enron and WorldCom, the Sarbanes Oxley Act of 2002 was enacted, in part, to provide broader remedies for employees who are retaliated against by their employers for coming forward with information about unethical or illegal practices engaged in by their employers.  The remedies available to a whistle blower under this act include a right to reinstatement, back pay and damages.  Note, however, that under this act, these remedies are available specifically to employees of publicly traded companies who provide information regarding conduct that violates any rules of the SEC or any federal law relating to fraud against shareholders.

IV.  Contract Exceptions To Employment-At-Will Doctrine

A.     Traditionally, parties could always expressly contract out of the employment-at-will rule — parties can enter into contracts which provide for specific terms and conditions of employment, or a specific duration of employment.  Indeed, in many situations, written contracts of employment are common.  However, in recent years, some courts, in the absence of an express contract provision regarding the terms and conditions of employment,  have fashioned an exception to the employment-at-will rule by finding an implied contract, either from the facts and circumstances of employment, or from other documents, such as employee manuals.

B.     California Approach.  Because the employment relationship is presumptively “at-will”, there is a remedy for discharge from employment only if the termination contravenes a valid express or implied agreement for job security, results from a pernicious form of discrimination, or violates some other clear and fundamental public policy.  Hall v. Great Western 282 Cal. Rptr. 640.  An employment contract limiting the right to discharge an employee, is implied from written or oral assurances.  Pugh v. See’s Candies. Inc., 116 Cal. App. 3d 311, 171 Cal. Rptr. 917 (1981).  In an action for breach of an employment contract, the employee must first establish a prima facie case of breach of implied or express employment contract by showing that he or she had an implied or express contract that he or she would not be terminated except for good cause.  Hall, supra.  An employer’s promise not to terminate an employee except for good cause may be implied in fact from an employee’s longevity of service, the employer’s assurances of continued employment, unwritten policy routinely followed, and common practices in the industry involved.  Hall, supr.

C.     A number of courts have recognized a theory of implied contract based upon representations contained in employee handbooks or personnel manuals.

1.     In Toussaint v. Blue Cross and Blue Shield Michigan, 408 Mich. 579, 292 N.W. 2d 880 (1980), the court held that the employer had a contractual obligations not to discharge an employee without just cause, which was implied from the employee’s “legitimate expectations” derived from the employer’s policy statement, oral assurances at hiring interview, or representations in policy manuals, even though the employee was not necessarily aware of them at the time.

2.     In Weiner v. McGraw-Hill, Inc., 457 N.Y.S. 2d 193 (N.Y 1982), the New York Court of Appeals held that oral representations made to a job applicant indicating that the company policy was only to terminate for just cause, and personnel policies set forth in the employee handbook (stating that dismissal would occur “for just and sufficient cause only”) constituted an enforceable contractual obligation.

3.     In Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (Colo. 1987), the Supreme Court of Colorado held that an employee originally hired under a contract terminable at will may be able to enforce termination procedures in an employee manual in one of two ways.  First, an employee may be able to enforce provisions of an employee manual if he can prove that in promulgating the termination procedures the employer was making an offer to the employee (i.e., that the employer manifested a willingness to enter into a bargain in a way that justified the employee in understanding that his assent was invited and would result in a bargain) and that the employee’s initial or continued employment constituted acceptance of and consideration for the termination procedures.  Alternatively, if these contract formation requirements are not met, the employee may still prevail on a theory of promissory estoppel if he can show: (1) that the employer should have reasonably expected that the employee would consider the employee manual a commitment from the employer to follow the termination procedures contained in it; (2) that the employee reasonably relied on the procedures to his detriment; and (3) that injustice can be avoided only be enforcement of the termination procedures.

4.     In Soderlun v. Public Service Company of Colorado, 944 P.2d 616, the Colorado Court of Appeals stated that, in determining whether an alleged promise is claimed to be a part of an express contract or is asserted as the basis for a promissory estoppel argument, the statement by the employer must either disclose a promissory intent or be one that the employee could reasonably conclude constituted a commitment by the employer.  Secondly, even if the promise or statement meets the foregoing requirement, it must also be sufficiently definite to allow a court to understand the nature of the obligation undertaken.  Therefore, general assurances of a secure job will most likely not result in a contract that requires just cause for termination, as opposed to an employment at will contract.

D.     Where employee manuals, handbooks, etc., have been held to create an employment contract, discharge has typically been litigated under the two possible theories; (1) that the manual contains language stating that an employee may be terminated only “for cause”, and if the particular facts and circumstances do not amount to “for cause”, the discharge is in breach of the contract, or (2) that the manual sets forth a specific grievance or termination procedure, and if the employer terminates the employee in violation of procedures specified in the manual, that is a breach of contract.

E.     In Colorado, courts have held that an employee manual can create a contract, but the determination is essentially a case-by-case basis.

V.    Implied Covenant of Good Faith and Fair Dealing

A.     Some courts have held that there is an implied covenant of good faith and fair dealing contained in all contracts, including employment contracts.  Among factors supporting this are:

1.     Length of service;

2.     Good employee performance verified by routinely receiving raises, bonuses and promotions;

3.     Employer assurances that employment would continue;

4.     Employer practice of not terminating except for cause, whether based on an oral or written policy; and

5.     No prior warning that the employee’s position was in jeopardy.

B.     In Massachusetts, the Massachusetts Supreme Judicial Court has held that the absence of just cause does not by itself establish bad faith, but is only a factor in determining whether there was fair dealing.  Gram v. Liberty Mutual Insurance Co., 384 Mass. 659, 429 N.E.2d (1981).

C.     Virginia has not recognized an implied covenant of good faith and fair dealing in employment relationships.  See Mason v. Richmond Motor Co., 625 F. Supp. 883, 890 (E.D. Va. 1986), affd. 825, F. 2d 407 (4th Cir. 1987).  While it seems clear that the Supreme Court of Virginia would reject claims that a general employment contract contains a covenant of good faith and fair dealing, there are, however, some circuit courts which have held to the contrary.

VI.   Other Legal Theories of Liability

A.     Frequently, where an employee alleges wrongful discharge, arising out of a contact or tort theory, the employee would add additional counts for other possible torts.  In cases in state court, tort counts will typically be additional counts with a claim for wrongful discharge.  If the case is in federal court (which would require a case arising under a federal statute, such as Title VII, or meeting other standards for federal jurisdiction), the tort counts will be added as additional counts which a federal court may consider under the doctrine of pendent jurisdiction.

B.     Fraud

1.     Fraud requires a showing of intentional misrepresentation of existing facts or misrepresentation of matters which are believed true but not warranted by the known facts.

2.     For example, in Food Fair v. Anderson, 382 So.2d 150 (Fla. App. 1980), an employee was assured she would not be fired if she signed an admission of theft.  She signed the admission, and was fired.  The court held that she had a cause of action for fraud.

3.     A critical element of fraud is that there must be reasonable reliance by the party misled upon the false or misleading statement of the other party, which results in that person’s detriment.  In Woodring v. Board of Grand Trustees, 633 F. Supp. 583 (W.D.Va. 1986), the court rejected a fraudulent misrepresentation claim where the employer had allegedly told the employee “not to worry” about a written provision in the employment agreement providing that the employment was at will, thereby inducing the employee to sign an employment contract.  The court held that the statement was too vague, and “could not justifiably be relied upon by Woodring to have meant anything.” 633 F. Supp. at 591-92.

C.     Defamation.  This is of critical importance in a discharge situation.  Employers must be extremely careful in statements made to third parties about an employee who has been terminated.  Defamatory statements may conceivably be made in a discharge letter, statements made by the employer to prospective employers, to other employees, or to state authorities such as an unemployment compensation agency.

1.     Defamation requires, generally,

a.     Publication by the defendant of false or derogatory information about the plaintiff;

b.     Which false or derogatory information is communicated to a third party;

c.     Which third party would believe such information to be true; and

d.     Which results in injury to the plaintiff’s reputation.

Recognizing that employers must be able to speak candidly concerning their employees, courts have granted employers a qualified privilege, even when the discussions involve derogatory statements that are detrimental to the employee.  See Castrio v. Holt, 425 So.2d 820 (La. App. 1983); Berger v. Gilbert, 410 N.Y.S.2d 427 (App. Div. 1978).  However, this privilege may be lost if the employer acted improperly, i.e., by acting with malice, or communicating the derogatory information outside of the scope of persons to whom it should reasonably be disseminated.  See Hover v. Pearless Publications, Inc., 461 F. Supp. 1206 (E.D.Pa. 1978).

Colorado developed the concept of compelled self-publication.  See Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo. App. 1988).  Generally, in order to have defamation, there must be communication of the defamatory statement to a third party.  The essence of “compelled self publication”, however, is that there are circumstances where the employee has no choice but to communicate that statement to a third party.  An example would be if the employer discharges an employee, stating that, “you are fired for being a thief,” when this is not the truth.  When the employee then goes to look for a new job, if he tells the truth, he has no choice but to tell his new employer why he was fired.  He probably has to tell his new employer something to the effect that “I was fired because my former employer said that I was thief, but it is not true.”  Thus, even though the employer’s defamatory statement was communicated to a third party by the employee himself, he may still, depending on the state, be able to sue for defamation.

D.     Intentional Infliction of Emotional Distress

1.     This requires a showing of conduct so outrageous and extreme as to exceed the bounds of decency.  Courts have been hesitant to apply this as a means of avoiding the employment-at-will rule.  However, there are cases where, for example, a supervisor’s conduct was so outrageous, as to create a cause of action for intentional infliction of emotional distress.

E.     Interference with Contractual Relations

1.     A discharged employee may claim that a manager or supervisor intentionally and unjustifiably interfered with his employment relationship, and caused him to be discharged.  An employee must establish that his employment was not terminable at will in order to allege the tort of interference with contractual relations.  However, the employer itself cannot be liable for this tort because it is a party to the contractual relationship, and only a third party’s interference can be actionable.  See Mackie v. LaSalle Industries, 460 N.Y.S.2d 313 (App. Div. 1983).


I. Employee Handbooks

A.     Scope of the Problem

1.     Some manuals may contain provisions such as, “employees are discharged for just cause”, “as long as you do your job, the company will use its best efforts to make sure that you have a job”, or specific requirements for progressive discipline.  If the employee can establish that the employee manual was a contract between the employee and employer, a discharge in a manner contrary to the terms stated in the manual would be a breach of contract.

2.     In cases of this nature, typically the employee’s argument is that, for example, the terms and conditions contained in the employee handbook or manual were part of a binding contract, the handbook stated that an employee would only be discharged for “just cause”, and therefore if the employee is terminated for some reason other than “just cause”, the discharge is a breach of contract.

B.     Step One.  Does a community association really need an employee manual?

1.     Employee manuals can have a positive use in presenting information to all employees, communicating policies to employees, aiding in the orientation of new employees, and emphasizing significant legal issues such as the company’s commitment to equal employment, policy concerning reporting incidents of sexual harassment, etc.  Employee manuals can also help to maintain discipline and create uniform expectations.

2.     However, in smaller companies and associations with only a few employees, it is less clear as to whether there is a need for a manual regarding employment issues.  Employee manuals can reduce flexibility in changing practices and procedures and might prove to be more trouble than they are worth in small companies, where informal communication methods between employees and supervisors may be more beneficial.

3.     Ultimately, the decision as to whether to have a manual or not is a management decision.  However, if the decision is made to have a manual, extreme care should be used in how it is prepared and disseminated to employees.

C.     Steps an Employer Can Take to Minimize Contractual Liability from Employee Manuals.

1.     Manuals should contain conspicuous disclaimer language which expressly recites, in bold letters, that the manual is not a contract and that employment continues at the mutual will of both parties.  This disclaimer should be acknowledged in writing by all employees.

2.     Review manuals to ensure that there are no unintentional guarantees of job security, that if there is a reference to progressive discipline, there is language stating that the “employer may alter procedsures depending upon the facts and circumstances of any given case”, and eliminating statements such as that an employee will only be discharged for just cause.

3.     When employees receive employee manuals, they should sign for them.  The signature sheet should contain a recitation that the employee understands that the manual is not a contract, that the employment relationship is at the mutual will of both parties, and that no manager or representative of the employer (except for a specifically delegated official) has authority to enter into any agreement or employment for, and specified period of time.

4.     The manual should contain a reservation that management or the association reserves its rights to change the manual or handbook at any time.

5.     If there is a probation period, state that the conclusion of the probation period is not designed to convey any kind of tenure or guarantee of a job.  Do not use the word “permanent” to describe employees who have completed their probationary period — use words such as “regular”.

6.     Persons who interview job applicants should be very careful in interpreting the handbook for employees, or making any representations that would be inconsistent with the manual or handbook.

7.     Do not include any statements that employment will continue for so long as the employee satisfies a particular condition (such as meeting certain goals, or a specific contract with a customer is in force).

8.     If there is a list of reasons for termination, be certain to state that the list is meant to be illustrative not exclusive, and include language such as, “for reasons which include, but are not limited to, the following .”

9.     Avoid wording that can be construed as a guaranty of long-standing employment.

10.     Be certain that the handbook conforms to actual practice — do not include in the handbook any policies or procedures that are not enforced uniformly and consistently.

11.     Detailed and formalistic grievance procedures are typically unnecessary for an association.  Bear in mind that simply because the manual does not contain a progressive discipline or grievance procedure, does not mean that you intend to be unfair.  If you feel compelled to have language pertaining to progressive discipline or a grievance procedure, be certain to add language to the effect that, “notwithstanding the foregoing, each case is unique, and, accordingly the Board reserves the right to apply procedures, or refrain from applying procedures, without regard to any suggested procedural steps, based upon management’s evaluation of the facts and circumstances of any given case.”

D.     Revising the Manual

1.     Some employers who have manuals which create exposure to liability are taking action to change the manuals.  This is the classic “putting the toothpaste back into the tube” scenario.

2.     In at least two cases where manuals were deemed to be contracts, the United States District Court for the Eastern District of Virginia held that, “the issuance of a new handbook does not automatically amend the prior handbook.  For the new handbook to have force, the elements of contract modification are necessary, and the employee must have assented to and received consideration in exchange for the change in status.”

3.     The threshold question, therefore, is whether the old handbook was a contract.  If the old manual was not a contract, it may be amended at any time.  If, however, the old manual was a contract (which is probably why the employer wants to substantially revise it now), elements of contract modification may be necessary.

4.     In Virginia, the issue has not been completely resolved by the Supreme Court of Virginia.  In such a case, the discharged employee would argue that because he or she continued to work under the old manual, with no change in status, the new manual was not supported by “consideration” and did not amend the prior contract.  The employer would argue that continued employment after the new manual was distributed constitutes “consideration” for the termination of their prior contract, if there was one.
If the employer is considering replacing a deficient employee manual with a new one, containing the appropriate disclaimers and other language, it must be carefully planned and executed in order to have effect.

II.   The Hiring Process

A.     The Application Process

1.     In job announcements, employers should avoid use of words such as “temporary”, “permanent”, “career path”, and “job security”, as such language could be construed to create a for cause contract.

2.     If you use an employment agency, specifically instruct the agencies to avoid similar terminology in recruiting.

B.     The Application Form

1.     There needs to be an appropriate disclaimer on the application form.  It should specifically state that the employment relationship is terminable at-will and that no employment contract is intended or created by any statements made in the hiring process.  The form should also contain the statement that no supervisor has the authority to change the employment at-will nature of the relationship and that any alteration of the at-will relationship must be in writing and signed by a designated official.

2.     The form should state (i) that it represents the entire agreement pertaining to the applicant’s employment, and (ii) that it supersedes any prior agreements or understandings.  This helps to defend against claims that promises were made during the hiring process concerning job security, etc.

3.     The application should contain a statement that the applicant represents that all information provided has been true and correct, and that he or she understands that any falsification of information on the application form or given during the application process may be grounds for immediate discharge.

Depending upon the circumstances, it may be necessary or advisable to obtain authorization for drug testing or searches.  It should be noted that companies which have contracts with the Department of Defense may be required to have programs for drug testing, and companies which have contracts with the federal government, including the Department of Defense, are obligated to maintain a drug-free workplace.  The Americans with Disabilities Act permits an employer to require employees to comply with the Drug-Free Workplace Act of 1988, and any federal regulations on alcohol or illegal use of drugs.  The ADA neither encourages nor prohibits drug testing.

C.     Job Interviews

1.     During interviews, employers should similarly take steps to avoid creating an implied contract, as they should in job announcements and applications.  Statements that assure the applicant continued employment “as long as you do a good job or perform satisfactorily” may create a contract of employment and defeat the employer’s intention to create an at-will relationship.

2.     Do not state, verbally or in writing, that the employer requires the employee to resign from his or her former employment or move to a new location as this may provide a basis for a contact of employment.

3.     Do not have an offer letter stating the salary on an annual basis — the offer letter should state a monthly salary.

C.     Appraisals

1.     Evaluate your existing appraisal system.  A well designed and implemented employee appraisal system can provide significant protection against both wrongful discharge and discrimination claims.

2.     Use an appraisal system based on specific job related functions rather than general employee traits.

3.     Provide specific instructions to supervisors in the use of the evaluation systems.

4.     Require supervisors to provide copies of all evaluations to employees and review the evaluations with employees.

5.     Oversee evaluations by supervisors and require frank rather than tactful evaluations of the unsatisfactory performers.

6.     Provide reasonable documentation concerning performance problems by employees.  Avoid excessive or “nitpicky” documentation which can be interpreted as retaliatory.

III.  Termination of Employment

A.     Scope of the Problem

1.     There is an interface between the law of employment contracts/wrongful discharge under state law, and applicable discrimination statutes.  If employment is truly at-will, then absent a situation covered by a specific statute (such as firing an employee for bankruptcy, garnishment, jury service, etc.), the employment relationship may be terminated for a good reason, bad reason, or no reason at all.  However, if the employee is of a class of persons protected by EEO statutes or ordinances (race, religion, sex, national origin, etc.), while the employer might be in a situation where the discharge was permissible under state law, the employee can argue that the termination was merely a pretext for discrimination, and therefore, actionable under federal, state, or local EEO law.

2.     To establish a claim under Title VII, the employee bears the burden of proof to make a prima facie case that he or she was a member of a protected group, and that other people in the same circumstances were treated differently.

The burden of going forward (but not the burden of proof), then shifts to the employer to articulate a legitimate, non-discriminatory reason (it does not have to be a good reason, it just has to be unrelated to race, religion, sex, etc., and it has to be the truth), for the action taken.  The employee can then show that the “legitimate, non-discriminatory reason” is really a pretext.

3.     In such situations, consistency, planning, and common sense are a relatively small price to pay for an employer to avoid the high cost of a mismanaged termination.

B.     Once a decision has been made to terminate the employee, it is essential that the employee be advised of termination in a manner that does not exacerbate an already difficult situation.

C.     The employee should be accurately told the reason for the termination, but not in excessive detail.  Listen to the employee’s reactions without becoming defensive or angry.  It is amistake to apologize or get into a protracted argument or engage in personal attacks (i.e., once you have made the point that, for example, performance has been less than satisfactory, it is unnecessary to “beat a dead horse”.)

D.     It is important to bear in mind that except in cases of willful misconduct, the employee will be able to collect unemployment compensation.  The burden of proof is on the employer to prove willful misconduct.

IV.   General Suggestions

A.     Hiring and General Personnel Practices

1.     Beware that discrimination on the basis of sex, race, national origin, handicap, or age is illegal.  Be careful not to make discriminatory comments to applicants (i.e., statements that women belong at home, or inquiries about child care arrangements of female but not male applicants).

2.     Avoid promises of job security or benefits which are not intended to be legally enforceable.
Have your attorney review your personnel policies for language which may create unintended enforceable rights (i.e., references to “permanent” status or the termination of employees for “just cause”).

B.     Appraisals

1.     Evaluate your existing appraisal system.  A well-designed and implemented employee appraisal system can provide significant protection against both wrongful discharge and discrimination claims.

2.     Use an appraisal system based on specific job related functions rather than general employee traits.

3.     Provide specific instructions to supervisors in the use of the evaluation systems.

4.     Require supervisors to provide copies of all evaluations to employees and review the evaluations with employees.

5.     Oversee evaluations by supervisors and require frank rather than tactful evaluations of the unsatisfactory performers.

6.     Provide reasonable documentation concerning performance problems by employees.  Avoid excessive or “nitpicky” documentation which can be interpreted as retaliatory.

C.     Terminations

1.     Be careful about terminating older, especially long-term, employees.  Consider transfer to another position if appropriate, or early retirement.  Obtaining an agreement and release from the employee may be worthwhile.

2.     Avoid retaliatory terminations.  Retaliation against employees who file EEOC charges is illegal, as is retaliation against employees who point out what they sincerely believe to be illegal discriminatory practices.  Retaliation against employees who assert specific rights (i.e., a workman’s compensation claim) or exercise legal duties (i.e., jury duty) is probably illegal.

3.    Avoid firing pregnant employees unless you are confident that termination is unrelated to pregnancy, and you can prove it.

4.     Encourage exit interview by terminated employees.  Develop a system to monitor terminations by supervisor to insure that terminations are not resulting from personal or non-business related reasons.

Decisions involving hiring and termination of employees may have significant legal ramifications.  Laws governing employee/employer relationships have changed radically in the last few years, greatly increasing both the likelihood and extent of liability.  Employers should review existing policies and practices in light of these new legal developments.

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