Implied Contract exception to Employment at-will

posted by Neil Klingshirn  |  Jul 14, 2009 5:21 PM [EST]  |  applies to Ohio

In general, under the employment-at-will doctrine, the employment relationship between employer and employee is terminable at the will of either.  See At-will Employment.  In Mers v. Dispatch Printing Co. (1985), 19 Ohio St.3d 100, 104-105, however, the Ohio Supreme Court recognized the existence of implied or express contractual provisions that alter the terms of discharge.

Facts and Circumstances Implying a Contract

The Mers, Court held the fact finder could review the history of relations between the employer and employee and the "facts and circumstances" surrounding the employment-at-will relationship to ascertain the explicit and implicit terms concerning discharge in an oral employment agreement. These "facts and circumstances" include "the character of the employment, custom, the course of dealing between the parties, company policy, or any other fact which may illuminate the question * * *." Id. at 104.

In Wright v. Honda of Am. Mfg., 73 Ohio St. 3d 571, 576-577 (Ohio 1995) the Court identified  other "facts and circumstances" that the trial court should consider.  They included:

1. information contained in employee handbooks, 
2. oral representations made by supervisory personnel that employees have been promised job security in exchange for good performance, and
   
3. written assurances reflecting company policy.

In Wright, the employee submitted an array of evidence to raise a factual issue that an implied employment agreement existed in which the employee could not be terminated unless she failed to perform her job adequately. That evidence included:

1. Beginning at orientation, Honda stressed to its employees the importance of attendance and performing quality work.
   
2. The expectation of continued employment based upon these principles was further reinforced by language contained in Honda's Associate Handbook, including the handbook provision that "the job security of each of you depends on you doing your very best on your job with the spirit of cooperation." Although employee handbooks are not in and of themselves a contract of employment, they are nevertheless evidence of the employment contract. Kelly v. Georgia-Pacific Corp. (1989), 46 Ohio St.3d 134, 139, 545 N.E.2d 1244, 1249.
3. Progress reports and promotion letters also stressed appellant's "continued growth" with the company and future opportunity "to help [Honda] achieve the goal of becoming the best place to work in the motor vehicle industry."
   
4. Wright's supervisor commented in a progress report that appellant was destined "to go as far as she wants to if she has the ability to maintain her good work ethic and determination." 
5. Management also believed that this was Honda policy. The manager who terminated Wright testified by deposition that if an employee performs his or her job in an acceptable manner and does not violate any practices of the company, the employee can expect to have continued employment with Honda.
6. Honda's course of dealing with appellant regarding her alleged violation of its anti-nepotism policy reinforced appellant's belief that she could expect job security. According to appellant, when she was interviewed, she was neither asked about direct relatives nor told that Honda has an anti-nepotism policy. Once she became aware of such a policy, she was told by two individuals in management that she had no reason to be concerned and that there were other employees who retained their positions under similar circumstances. Based upon these assurances and upon her reliance on the Associate Handbook, which called for the transfer, not termination of, direct relatives, appellant felt secure and continued to work diligently for Honda.
   

On these facts, the Wright Court was persuaded that the employee has presented sufficient evidence to create a fact question as to whether Honda, through its policies, past practices, and representations altered the at-will nature of the employment agreement by creating an expectation of continued employment. Wright v. Honda of Am. Mfg., 73 Ohio St. 3d 571, 576-577 (Ohio 1995).

At-Will Disclaimer Negates an Implied Contract

In Wing v. Anchor Media, Ltd., the employee asserted that his employment was not terminable at will, but rather was a contract of employment terminable for cause only based upon the terms of the employee handbook.

The handbook and a "confirmation of employment" in Wing, however, included the following disclaimer:

I . . . understand and agree that my employment is terminable at will, so that both the Company and I remain free to choose to end our work relationship at any time[,] subject to any contractual agreement the Company and I have entered into. I further understand and agree that nothing in this Policy Booklet in any way, creates an express or implied contract of employment between the Company and me."

The Wing court held that this disclaimer "bars the finding of a contract of employment other than an at will relationship" and announced the rule that, "[a]bsent fraud in the inducement, a disclaimer in an employee handbook stating that employment is at will precludes an employment contract other than at will based upon the terms of the employee handbook.
Wing v. Anchor Media, Ltd., 59 Ohio St. 3d 108, 110 (Ohio 1991) (citing Tohline v. Central Trust Co. (1988), 48 Ohio App. 3d 280, 549 N.E. 2d 1223).

posted by Neil Klingshirn  |  Jul 14, 2009 5:21 PM [EST]  |  applies to Ohio