The Blog

Breach of Contract

California courts have stated the employment relationship in California is “primarily contractual.” This a misnomer because the employer and employee relationship is a special legal relationship that is framed by a mixture of statutory, contract, tort and criminal law. Even the foregoing phrase “primarily contractual” hedges its bets. What does it mean to be “primarily” contractual?

Contracts can be oral or written. They can be express or implied. What this means for employers is watch what you say and what you do (or don’t do) because your words and your actions/non-actions can create contracts between you and your employees.

In our experience, most employment positions are not set forth in a written “employment agreement.” When they are, for example high level management or sales positions, this is called an express written contract. While express written contracts can be breached, it’s the more insidious oral and implied contracts that can create unexpected obligations and liability for employers.

Example 1

If you have an orientation meeting and tell your new employees if they no show, no call once they will be terminated, does this imply you won’t fire them for other reasons?

Example 2

If your company’s employee handbook states employees will get a verbal warning and then two write-ups before the company will terminate their employment, what happens if the company terminates on the first offense? Is there an obligation to give the verbal warning and two write-ups first?

Example 3

If the Company president writes a memo to an employee telling them they will get 20% bonuses and raises every year if they continue to keep up the “great work,” have you now created an obligation (i.e. “contract”) to do so so long as your employee keeps up their end of the bargain?

Example 4

If your business has a 15 year employee who has received excellent performance reviews coupled with a raises every year, have you created an implied contract not to terminate this employee except for “good cause?”

The above are all examples of potential oral and/or implied contracts. To avoid creating oral or implied contracts, consistently preserve your “at-will” employment rights by stating that right in key employee documents, such as its employee handbook, offer letters, policy memos, etc. We also recommend using “at-will” language with an “integration clause” in your employee handbook.

Vision Law® Corporation believes employers can save time, money, and unnecessary disruption to their business through effective, proactive efforts. That is why we have created our innovative fee programs for businesses. We invite you to consider how cost-effective representation could save your company millions, or simply save your company. Then contact us for an initial consultation about your employment and labor law needs. Download our complimentary report: The Top Ten Employee Lawsuits and How to Avoid Them.