J. Promises of Job Security

Courts in some states are ruling that employees have the right to rely upon representations made before hiring and during the working relationship. In a growing number of recent cases throughout the country, discharged employees are suing and winning lawsuits against ex-employers for breach of oral agreements promising secure employ- ment and even jobs for life. While courts have generally recognized that employers may be bound by written assurances and statements made in employee manuals, handbooks and work rules, they are now increasingly willing to consider oral contracts extended by manage- ment and company officers having the apparent authority to make such promises.

It is important to recognize that informal, off-the-cuff oral assur- ances can bind your company to devastating results. For example, a Michigan jury recently awarded $1.1 million to a worker, based on a claim of an oral promise of lifetime employment. In that case, the jury found the existence of a valid, oral contract and ruled that the company unjustifiably breached that contract when the worker was terminated.

To avoid similar problems, all of your company's hiring policies should be clearly spelled out so they cannot be misunderstood or misinterpreted by prospective job candidates and present employees. Interviewers, recruiters and other intake personnel must be careful not to say anything at the hiring interview that can be construed as a promise of job security. Avoid using words at the hiring interview which imply anything other than an at-will relationship. For example, use of the words "permanent employment," "job for life," or linking the phrase "just cause only" with termination, as well as broad statements concerning job longevity, assurances of continued employ- ment (e.g., "Don't worry. No one around here ever gets fired except for a good cause."), or specific statements regarding career oppor- tunities, should be avoided at all times, unless they are being stated as deliberate reflections of considered commitments.

As a first line of defense, your company should include language such as the following in the employment application:

"I understand that no promises regarding continued employment have been given to me about this job. If I am offered this position, I have the right to be terminated at will, with or without cause or notice, and may resign at any time. The foregoing is not to be construed as a guarantee of employment for a specific time."

Counsel Comment #17: It's not unusual for job inter- viewers to be over-exuberant in their job descriptions, leading to unrealistic expectations by the applicant and possible suits for damages. Take the precaution to word your applications so as to avoid problems arising from promises which hiring personnel might make without your company's approval. The use of language like that suggested above can be helpful.

Promises Of Lifetime Employment

Even when employee handbooks and written personnel guidelines make it clear that no employee's job is guaranteed, there are circum- stances when an oral assurance of secure lifetime employment can bind the employer assuming:

1. The discharged employee can prove such a statement was made;
2. The statement was a crucial factor in the decision to accept the job or decline a job with a competitor; and
3. The employee reasonably relied on such a promise and suffered damages as a result.

These were the facts with a worker who served for four years as a national sales manager with a New Jersey company and then was fired. He claimed that four months earlier the president had persuaded him to turn down a job offer from a competitor by a promise of lifetime employment. Although the company argued that the words were merely "friendly assurances" and weren't enforceable, the court ruled that the president's remarks had persuaded the employee to stay and could constitute a contract. In this case, it was proved that a better employment opportunity was turned down based on an employee's reliance on that oral promise of lifetime employment.

Companies are protected to a certain extent in this area because many employees have difficulty proving that such statements were made. However, when a supervisor who allegedly made such a statement has died, or no longer works for the company and can't be located or left under unpleasant terms, companies may be unable to rebut the employee's statements if a lawsuit is commenced.

Counsel Comment #18: The best way to avoid problems is to notify your interviewers, recruiters and intake personnel not to say anything at the hiring interview that can be construed as a promise of job security. It may be a good idea for the person offering the position to have a colleague present when the offer is made, to serve as a witness that no additional promises were stated. In addition, it is beneficial to furnish a memo to the worker after he/she is hired which specifically denies that promises of job security have been made, or to include such a statement in a written employment contract which the worker is required to sign. Finally, pay special attention to welcoming letters sent out by company executives, particularly those in marketing and sales, which may talk in inflated terms and sometimes make statements or promises that the company never intended to keep.

Just as it is critical to train recruiters, it is equally important to train hiring managers and other interviewers regarding what they may and may not say in this area. Be sure they understand that, since their oral statements may be treated as enforceable contracts, broad statements regarding job longevity or assurances of continued employment must be avoided. Some courts have ruled that conversations conducted in an atmosphere of critical one-on-one negotiation regarding terms of future employment may give rise to a contract of lifetime employment. One court held that an employee could be terminated only "for cause" where the employee had inquired about job security during the job interview and the employer had agreed that the employee would be employed "as long as he does the job."

Counsel Comment #19: Even though promises of lifetime employment from low or middle-level company officials may not legally bind your company, instruct all officers, no matter what rank, to avoid making any representations regarding a person's future employment status. State in your employment manual that no one other than the president has the authority to make promises regarding job security and that any other employees discovered making such unauthorized promises may be summarily discharged. Note that in many cases even the president does not have the authority to give a lifetime contract without the written approval of the company's Board of Directors and in some states, (i.e., California) employment contracts which exceed a specified number of years are unenforceable.

Employment Agencies

If you use recruiting agencies, instruct them not to make any oral representations during the hiring process that may be binding on your company at a future date.

Counsel Comment #20: Incorporate this provision in your contract with the employment agency and include a provision indemnifying your company for damages awarded in the event your company is sued and/or held liable. For maximum protection, the indemnification should also include legal fees and court costs.

         

From Hiring to Firing: The Legal Survival Guide for Employers
Copyright © 1995 by Steven Mitchell Sack