"At-Will" Default Rule and its Limits

There are five policies underlying the "At-Will" presumption

(1) The policy of freedom of contract; (2) the need for mutuality of obligation; (3) common experience that it usually effectuates the intent of the parties; (4) as a procedural protection against meritless but vexatious lawsuits; and (5) fairness and equity.

Grouse v. Group Health Plan, Inc (Cited by Goff-Hamel)

A pharmacist accepted employment with a clinic and gave two weeks notice to the drugstore he worked at. During this period, he declined a job with a hospital because he accepted employment at the clinic. Upon reporting to work, he was told that someone else had een hired because the pharmacist did not satisfy certain hiring requirements of the clinic. The Court Stated: "Appellant had a right to assume he would be given a good faith opportunity to perform his duties to the satisfaction of respondent once he was on the job. He was not only denied that opportunity but resigned the position he already held in reliance on the firm offer which respondent tendered him." The court recognized that under appropriate circumstances, promissory estoppel could apply even if the employee was fired after he had commenced employment.

The "Additional Consideration" Requirement

Absent an express term of employment or "additional" consideration to the employer, a contract of employment is deemed terminable at will.

Pugh v. See's Candies, Inc (Ct. App. 1981) Section "B. Oral and Implied Contract Rights to Job Security." Page 100

After 32 years of employment with See's Candies, Inc., in which he worked his way up the corporate ladder from dishwasher to vice president in charge of production and member of the board of directors, Wayne Pugh was fired. Upon Pugh's return from Europe on Sunday, June 25, 1973, he received a message directing him to fly to Los Angeles the next day and meet with Mr. Huggins. Pugh went to Los Angeles expecting to be told of another promotion. The preceding Christmas season had been the most successful in See's history, the Valentine's Day holiday of 1973 set a new sales record for See's, and the March 1973 edition of See's Newsletter, containing two pictures of Pugh, carried congratulations on the increased production. When Pugh asked why he had been fired, Huggins said "look deep within [him]self" to find the answer, that "Things were said by people in the trade that have come back to us." Pugh's termination was subsequently announced to the industry in a letter, which again stated no reasons. During the entire period of his employment, there had been no formal or written criticism of Pugh's work. No complaints were ever raised at the annual meetings which preceded each holiday season, and he was never denied a raise or bonus. He received no notice that there was a problem which needed correction, nor any warning that any disciplinary action was being contemplated. Pugh's theory as to why he was terminated relates to a contract which See's at that time had with the union. Pugh had objected to the proposed new seasonal classification on the grounds that it might make it more difficult to recruit seasonal workers, and create unrest among See's regular seasonal workers who had worked previously for other manufacturers at highr rates. Huggins overruled Pugh's objection and (unknown to Pugh) recommended his termination for "lack of cooperation" as to which Pugh's objection formed "part of the reason." His recommendation was not accepted. While oblique language will not, standing alone, be sufficient to establish agreement, it is appropraite to consider the totality of the parties' relationship; Agreement may be "'shown by the acts and conduct of the parties, interpreted in the light of the subject matter and of the surrounding circumstances.'" We therefore conclude that it was error to grant respondents' motion for nonsuit as to See's.

The Implied-in-fact Contract Connor v. City of Forest Acres

Before performance is rendered, the offer can be modified by the employer's unilateral withdrawal of the old offer and substitution of a new one: The employer makes a new offer with different terms and the employee again accepts the new offer by performance (suc has continued employment). Thus a new unilateral contract is formed--a day's work for a day's wage. When an employer chooses to include a handbook statement "that the employer should reasonably have expected the employee to consider as a commitment from the employer," that term becomes an offer to form an implied-in-fact contract and is accepted by the employee's acceptance of employment. MODIFICATION To effectively modify a contract, whether implied-in-fact or express, there must be (1) an offer to modify the contract, (2) assent to or acceptance of that offer, and (3) consideration. CONTINUED EMPLOYMENT ALONE DOES NOT CONSTITUTE CONSIDERATION FOR MODIFICATION Consideration will be found when an employer and its employees have made a "bargained for exchange to support [the employees'] . . . relinquishment of the protections they are entitled to under the existing contract. ACCEPTANCE Continued employment after issuance of a new handbook does not constitute acceptance, otherwise the "illusion (and the irony) is apparent: To preserve their right under the [existing contract] . . . plaintiff would be forced to quit." To manifest consent, the employee must first have legally adequate notice of the modification. Legally adequate notice is more than the employee's awareness of or receipt of the newest handbook. An employee must be informed of any new terms, aware of its impact on the pre-existing contract, and affirmatively consent to it to accept the offered modification. ::The majority of contract terms are not contractual and can be revised, that the existence of contractual terms can be disclaimed in the handbook in effect at the time of hiring and, if not, permission to modify can always be obtained by mutual agreement for consideration.

Employment and Unilateral Contract Theory

Bilateral contracts involve two promises, made in exchange for each other, which each party is obligated to perform. The presence of a promise on each side creates mutuality. Unilateral contracts involve a single promise made in exchange for a performance, which obligates the promisor only if the offeree renders the requested performance. In a unilateral contract there is no mutuality, nor is mutuality required, because the contract is formed following performance, at which point only the promisor is bound. Employment contracts are considered unilateral, the employer promises to pay the employee for work performed, but the employee is not obligated to work, and can quit at any time.

Conner v. City of Forest Acres page 120 Employee Manuals

Connor received two employee handbooks. After receiving each one, Connor signed an acknowledgment form. "I have received a copy of the City of Forest Acres Personnel Policy and Procedures Manual. I understand that I am responsible for reading, understanding, and abiding by the contents of these policies and procedures." The handbook set out a discipline plan "Ordinarily, discipline shall be of an increasingly progressive nature, the step of progression being (1) oral or written reprimand, (2) suspension, and (3) dismissal. Discipline should correspond to the offense and therefore NO REQUIREMENT EXISTS FOR DISCIPLINE TO BE PROGRESSIVE. FIRST VIOLATIONS CAN RESULT IN IMMEDIATE DISMISSAL WITHOUT REPRIMAND OR SUSPENSION." The city argues that there was no contract created by the handbook because (1) the procedures in the employee handbook did not alter Connor's at-will status, (2) the disclaimers in the handbook were conspicuous and therefore effective, and (3) Connor signed acknowledgments of her at-will status. Additionally, the City contends that even if the handbook did create a contract, it did not breach the contract because it followed the prescribed procedures. In Fleming v. Borden, the Court indicated that whether the disclaimer is conspicuous is generally a question for the jury . Specifically, the Fleming Court stated that "in most instances, summary judgment is inappropriate when the handbook contains both a disclaimer and promises." The Appropriate test on the issue of breach is as follows: "If the fact finder finds a contract to terminate only for cause, he must determine whether the employer had a reasonable good faith belief that sufficient cause existed for termination." We note that the fact finder must not focus on whether the employee actually committed misconduct; instead, the focus must be on whether the employer reasonably determined it had cause to terminate.

The Express Term Exception

Courts generally treat indefinite time periods like this -- as well as promises of "lifetime employment," "permanent employment," or "long-term employment" --as expressing nothing more than an ordinary at-will relationship.

Reasonableness of Reliance

Courts rejecting the applicability of promissory estoppel often do so on the grounds that, while the worker does in fact rely, the reliance is not reasonable if the offer is for at-will employment.

Written Employment Manuals and Employee Contract Rights

Employment manuals and other written policies can be contractually binding. That idea was first established in two influential 1980s decisions, Woolley v. Hoffmann-LaRoche, Inc and Toussaint v. Blue Cross & Blue Shield,

Green v. Oliver Realty, Inc. (Pa. Super. 1987) Section: "A. Job Security and the Principle of At-Will Employment." Page 74.

Greene allegedly agreed to work at a pay rate below union scale in exchange for a promise that Grant would employ him "for life." In 1975, appellee Oliver Realty, Inc. took over management of Grant building but Oliver's president assured former Grant employees that existing employment contracts would be honored. In 1983, Greene was laid off and he brought this action for breach of contract. The trial court ruled that under Pennsylvania law a contract for life is a contract at will. If the parties to an employment contract do not specify the duration of the contract, a court will not imply a reasonable duration. The contract is considered terminable at will. Courts routinely refuse to enforce employment contracts if they entail a single promise made in exchange for several promises. In reaching these results, courts rely on anachronistic theories which they would never apply in the field of contract law. If two parties desire to contract "for life," courts should be encouraged to enforce their agreement. Of course, the at-will presumption may still be a sound rule. It is only when it is allowed to conclusively foreclose proof of the parties' intent that it becomes an obstacle to freedom of contract. An employer is free to promise lifetime employment to someone in exchange for that person coming to work for the employer. Once that person accepts and starts work, the employer has received exactly what they bargained for. Some court's view presence of consideration as proof that the parties intended the employment relation to be more binding than the standard terminable at will agreement. These courts view additional consideration as a factor to consider in determining the parties intent but not as a rigid requirement. If the parties exchanged "extra" consideration, it is logical that they expected their relationship to be more lasting than the usual employment agreement. However, it is very possible that the parties so intended but did not exchange additional consideration. The surrounding circumstances and the parties' own expression may still provide clear evidence of that intent. The Trial court concluded that Greene worked at sub-union rates in exchange for a promise that he would not be laid off and not in exchange for a lifetime contract. This is an inappropriate conclusion. The Court must allow the jury to consider Greene's alleged "additional consideration" as well as all the circumstances surrounding the agreement.

State v. Saxon, Marquoit, Bertoni & Todd, (2000)

Held that a law clerk at the defendant law firm had no cause of action when the firm reneged on its offer of an associate attorney position. Given the nature of at-will employment, there was no reasonable basis for reliance since "the plaintiff could not reasonable have understood tat the promised employemnt would las for any particular length of time"; further, "the plaintiff would have experienced the same losses if the defendants had hired him, but had 'discharged him immediately after he came to work rather than before.'"

Cocchiara v. Lithia Motors, Inc. (Ore. 2013) Page 92

Issue: Whether a prospective employee may bring a promissory estoppel claim for a fraudulent misrepresentation claim based on an employer's representations regarding a job that is terminable at will. Plaintiff worked as a salesperson for defendant for nearly eight years before he had a heart attack that required him to seek a less stressful job. In reliance on his manager's promise that plaintiff had been given a new "corporate" job with defendant that would meet his health needs, plaintiff turned down a job with a different employer. Summers (Defendant) told plaintiff not to take the Medford Mail Tribune position because he was "too valuable" to defendant. Summers then told plaintiff that there was a new "corporate job" available with defendant that would meet his health needs. Ultimately, defendant did not hire plaintiff for that job. When plaintiff then tried to accept the Medford Mail Tribune's prior offer, that job had been filled. Plaintiff later accepted a different sales rep job with the Medford Mail Tribune, but the job paid less than the previous job at the medford Mail Tribune. TRIAL COURT granted summary judgment on the promissory estoppel and fraudulent misrepresentation claims, noting that, even if plaintiff had relied on all the statements that Summers allegedly made, plaintiff would lose. AT-WILL DOCTRINE (OREGON) Courts have disagreed whether it is reasonable to rely on an offer of at-will employment, which in turn affects whether an employer's termination of an at-will employment agreement before employment begins working is actionable under a theory of promissory estoppel or fraudulent misrepresentation. Although an employer has a right to fire an at-will employee without liability, the fact that the employer has the right does not mean that a prospective employee can never reasonably rely on a promise of at-will employment. Plaintiff may seek to prove what he would have earned in the corporate job and how long he likely would have remained in that job had he been hired as a promised and allowed to start work.

Hanson v. Central Show Printing Co., Inc. (Iowa 1964) Section: "A. Job Security and the Principle of At-Will Employment"

Plaintiff had arrangement with employer, "Starting today Oct. 21, 1959, I will guarantee you 40 hours per week thru out the entire year each year until you retire of your own choosing. Plaintiff remained employed until 1961 when he was discharged without cause. General Rule: In the absence of additional express or implied stipulation as to the duration of the employment or of a good consideration additional to the service contracted to be rendered, a contract for permanent employ, for life employment, for as long as the employee chooses, or for other terms purporting permanent employment is no more than an indefinite general hiring terminable at the will of either party. We think the real basis for the majority rule is that there is in fact no binding contract for life employment when the employee has not agreed to it; that is, when he is free to abandon it at any time. So in the instant case, the plaintiff was bound only as long as he chose to work... The fact is he has not agreed to serve for life, or permanently; but only so long as he does not elect to "retire of his own choosing." These observations go to the lack of mutuality and would not be important if there was another consideration.

Goff-Hamal v. Obstetricians & Gynecologists (Neb. 1999) Section: "B. Oral and Implied Contract Rights to Job Security" Page 84

Prior to leaving Hastings Family Planning, Goff-Hamel was making $24,000 plus benefits. Dr. George Adam approached Goff-Hamel in June 1993 about working for him as a patient relations and outreach coordinator. [she initially declined offer]. At the meeting, Adam represented to Goff-Hamel that the position would be full time and would start at a salary of $10 per hour and that she would be provided 2 weeks' paid vacation, three or four paid holidays, uniform and an educational stipend. Subsequently, Goff-Hamel was provided with uniforms for her job. She was given a copy of her schedule for the first week of work. Draper told her that Janel Foote, the wife of a part owner of the Obstetricians, Dr. Terry Foote, opposed the hiring of Goff-Hamel. Goff-Hamel sought replacement employment, but was unable to find until April 1995, when she was employed part time at the rate of $11 per hour. TRIAL COURT concluded that since Goff-Hamel was to be employed at will, her employment could be terminated at any time, including before she started working TRIAL COURT correctly determined as a matter of law that Goff-Hmel could not bring a claim for breach of an employment contract. Goff-Hamel's SECOND CAUSE OF ACTION was based upon promissory estoppel. PROMISSORY ESTOPPEL provides for damages as justice requires and does not attempt to provide the plaintiff damages based upon the benefit of the bargain. It requires only that reliance be reasonable and foreseeable. ISSUE: Whether promissory estoppel can be asserted as the basis for a cause of action for detrimental reliance upon a promise of at-will employment. Some courts have held that when a prospective employer knows or should know that a promise of employment will induce an employee to leave his or her current job, such employer shall be liable for the reliant's damages. In contrast, other jurisdictions have held as a matter of law that a prospective employee cannot recover damages incurred in reliance on an unfulfilled promise of at-will employment, concluding that reliance on a promise consisting solely of at-will employment is unreasonable as a matter of law because the employee should know that the promised employment could be terminated by the employer at any time for any reason without liability. We conclude under the facts of this case that promissory estoppel can be asserted in connection with the offer for at-will employment and that the trial court erred in granting Obstetricians summary judgment.

Uncertain Damages Rationale

The Court in Hanson talks about the difficulty of calculating damages where the duration of employment is uncertain. However the court decides damages in all sorts of other cases where damages are not concrete.

The "Additional Consideration" requirement

The Hanson court articulates the traditional rule that, absent an express term of employment or "additional" consideration to the employer, a contract of employment is deemed terminable at will.

In Woolley, the employer distributed a "Personnel Policy Manual" to all its employees, including the plaintiff, who received it shortly after he began employment.

The Self-described purpose of the manual was to offer "a practical operating tool in the equitable and efficient administration of our employee relations program." THE COURT: The manual defines "the types of termination" as "layoff," and "resignation." As one might expect, layoff is a termination caused by lack of work, retirement a termination caused by age, resignation a termination on the initiative of the employee, and discharge due to performance and discharge, disciplinary, are both terminations for cause. There is no category set forth for discharge without cause. The termination section includes "Guidelines for discharge due to performance," consisting of a fairly detailed procedure to be used before an employee may be fired for cause. Preceding these definitions of the five categories of termination is a section on "Policy," the first sentence of which provides; "It is the policy of Hoffmann-La Roche to retain to the extent consistent with company requirements, the services of all employees who perform their duties efficiently and effectively." The court found a jury question as to whether the manual contained an enforceable implied promise that termination would occur only for cause. The court went on to consider whether this offer had been accepted by Hoffmann-La Roche's employees: "The manual is an offer that seeks the formation of a unilateral contract--the employee's bargained-for action needed to make the offer binding being their continued work when they have no obligation to continue." The court noted that its analysis was "perfectly adequate for that employee who was aware of the manual and who continued to work intending that continuation to be the action in exchange for the employer's promise; it is even more helpful in support of that conclusion if, but for the employer's policy manual, the employee would have quit."

Guz v. Bechtel National Inc. (Cal. 2000) Section: "B. Oral and Implied Contract Rights to Job Security" Page 105

This case presents questions about the law governing claims of wrongful discharge from employment as it applies to an employer's motion for summary judgment. Plaintiff John Guz, was released when his work unit was eliminated and its task transferred to another office. The trial court granted Bechtel's motion for summary judgment. The Court of Appeals Reversed. During Guz's employment, Bechtel maintained Personnel Policy 1101, dated June 1991, on the subject of termination of employment (policy 1101). Policy 1101 stated that "Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel." Lay off's described in Policy 1101 defined as, "a Bechtel-initiated termination of employees caused by a reduction in workload, reorganizations, changes in job requirements, or other circumstances..." Under the Layoff policy, employees subject to termination for the reason 'may be placed on 'holding status' if there is no possible Bechtel assignment within the following 3-month period." Guz sought to furnish evidence that the cost reduction and workload downturn reasons given him for the elimination of BNI-MI, and his own consequent layoff, were arbitrary, false, and pretextual.

Skagerberg v. Blandin Paper Co. (Cited in Hanson)

While he was employed by the defendant, he received an offer from Purdue University for employment. He communicated this offer to the defendant, which promised, if he would refuse the Purdue offer, it would give him permanent employment. The court said: [the plaintiff] "merely abandoned other activities and interests to enter into the service of defendant-a thing almost every desirable servant does upon entering a new service, but which, of course, cannot be regarded as a constituting any additional consideration to the master."

At-Will

both the employer and employee may terminate the relationship at any time and for any reason in the absence of a special exception. The rule is considered "default" because it can be modified by the parties.