The following is a memorandum on the status of Colorado law on the subject of termination of employees. While there are general rules that may be relied upon in Colorado Court decisions, employment termination is an active area of litigation. A number of major decisions have been announced in the past several years and one Court of Appeals opinion has been granted tacit approval to decisions from other jurisdictions of significance.
The long standing general rule is that an employee without a written contract for a specified duration may be terminated by either party without cause and without notice, and the termination is not subject to judicial review.1 In Colorado an agreement of employment that is for an indefinite term is presumed to be at will.2 Colorado case law has modified the "employment at will" doctrine, particularly in cases involving employee handbooks and personnel manuals.
In Colorado, termination at will is recognized as a presumption, which may be rebutted by an employee under certain legal theories:
The Continental Air Lines v. Keenan case4 allows that an employee handbook or personnel manual or other document can be shown to form a contract which modifies the general "at will" presumption. Typically, this could occur where the manual includes specific procedures for termination, and "in promulgating the termination procedures the employer was making an offer to the employee ... and ... the employee's initial or continued employment constituted acceptance of and consideration for these procedures", and "the parties have agreed to be bound thereby."5 An employee could have a valid claim for wrongful termination if the specified procedures then are not followed.
For example in Salini v. Farmers Insurance Group6 an employee was unilaterally demoted following an investigation of his conduct. The employee alleged that the company violated its own policies, procedures and regulations in the demotion, an that this constituted a breach of contract. The trial Court dismissed the claim, reasoning that an employee who could be terminated at will could be demoted at will. The Colorado Court of Appeals held the breach of contract claim should not be dismissed before trial, stating:
Further, the consideration element may be supplemented by the circumstances of hiring, such as inducement to leave another position.8
If an employee can show that a promise was made to the employee, that the employer would reasonably expect to induce action or inaction on the part of the employee, and the employee did in fact act in reliance upon the promise, the employer could be estopped from denying the benefit of the promise. Thus, where the employee reasonably considers the existence of the manual as a commitment to follow procedures in the manual and relies upon it to his detriment, the Court may require the procedures to be followed to prevent injustice.
In Kiely v. St. Germain, a written employment contract was never executed and the employee was never hired, but he had terminated his prior employment and otherwise relied to his detriment.9 The employee was awarded damages for lost wages and legal expenses, and the case was remanded to the trial court to determine the appropriateness of "lost profits" as damages.
Promissory estoppel was discussed at length in the recent opinion in Churchey v. Adolph Coors Co..10 In Churchey, the employee was terminated after a complex scenario of medical problems and missed work, for reasons of "dishonesty." Pleaded amid several tort claims was a claim for wrongful termination, based on the employer's failure to follow a disciplinary warning and "second chance" policy and a "Leaves of Absence" policy posted on a company bulletin board. The Trial Court granted summary judgment for the employer based on the "at will" doctrine. The Supreme Court reversed, holding that material factual issues existed as to both contract and promissory estoppel theories of recovery:
In a foot note, the Court addressed the employer's argument that it had complied with its employee manual procedurally by conducting a review hearing, when other procedures for discipline were also in effect:
Colorado Courts from time to time have expressly rejected imposing an actionable duty of "good faith" and "fair dealing" on an employer, or recognizing a tort liability for wrongful discharge.15
The at-will nature of the employment relationship reflects a matter of public policy.16 The at-will employment doctrine promotes flexibility and discretion for employees to seek the best position to suit their talents and for employers to seek the best employees to suit their needs.17 By removing encumbrances to quitting a job or firing an employee, the at-will doctrine promotes a free market in employment analogous to the free market in goods and services generally.18
At the same time, strict application of the at-will doctrine may invite
abuse and lead to injustice.19 Accordingly,
legislation and the common law have restricted application of the at-will
doctrine to balance the interests of employers and employees.20
Colorado recognizes a claim for relief for wrongful discharge in violation
of public policy. This judicially crafted exception restricts an employer's
right to terminate when the termination contravenes accepted and substantial
public policies as embodied by legislative declarations, professional
codes of ethics, or other sources.21
Colorado Courts have limited the public policy exception to a clear violation of a specific statutory right or duty.24
Colorado Statutes governing employment and labor practices, and civil
rights claims generally, including various discriminatory or unfair employment
practices could be of significance if a termination is alleged to be for
constitutionally prohibited reasons or concurrently with wage or labor
violations. For example, certain federal and state statutes have created
private claims for relief for wrongful discharge based on discrimination
with respect to race, color, gender, national origin, ancestry, religious
affiliation, disability, and age.25 State
statutes also permit such claims in cases of termination resulting from
an employee engaging in lawful activity off premises during nonworking
hours, responding to a jury summons, and certain activities of "whistleblowing."26
It is clear that where an employee handbook has been circulated, the Colorado Courts will consider the terms of the handbook and inferences that may be drawn from it; specifically, inferences that employment will be permanent, or continuing, or that certain procedures will be followed prior to termination. It is, therefore, essential that an employee handbook include a sufficient "disclaimer"; that is, a statement that the employee is an at-will employee and that procedures set forth in the manual are not contractually binding and are merely policy statements by the employer. Case law from some states indicates that the disclaimer should be "clear and prominent" to be effective.28
Ideally, a disclaimer should be in bold print on a document signed by the employee, and should also include language to the effect that the terms of the employee handbook and other statements by the employer are merely policy statements and do not constitute a contract with the employee.
III. THE FUTURE OF EMPLOYMENT AT WILL AS A PUBLIC POLICY
It is significant that in Colorado the employee still has the initial burden of proof to show his employment is not at will. A clear disclaimer makes that a difficult burden to carry. In contrast, the New Jersey Court in Woolley v. Hoffman-LaRoche and the Michigan court in Toussaint v. Blue Cross and Blue Shield29, make extensive public policy arguments in favor of "job security" as a goal of public policy.30 Employment at will may have a limited existence in those jurisdictions. The Churchey case cited above, states that Toussaint was "cited favorably" in Continental Air Lines, Inc. v. Keenan, the previous major pronouncement. This is significant because in the Continental Air Lines, Inc. text, the case is actually cited with neutrality as one side of the spectrum. Furthermore, Continental cites the case in support of the actual contract theory and the promissory estoppel theory discussed above, while the Court in Toussaint admits that it relies on neither a contract nor promissory estoppel to grant relief.
In Toussaint, the Michigan Supreme Court stated: "We hold that employer statements of policy ... can give rise to contractual rights in employees without evidence that the parties mutually agreed ... It is enough that the employer chooses, presumably in its own interest to create an environment in which the employee believes that, whatever the personnel practices, they are established and official at any time." In reality, the case holds that public policy prefers job security over employment at will:
Similarly, Woolley v. Hoffman-LaRoche is a policy making opinion, focusing on the larger social issue rather than the specifics of contract law:33
In the future, it may be that the real issue is not the language in an employment manual, but the judicial determination of the worthiness of the "at will" doctrine as a public policy.
The Churchey opinion certainly represents movement by Colorado in the direction of the "job security" decisions, although it does not embrace job security as a public policy, nor renounce at will employment as a public policy. But clearly, the decision should be of concern to employers.
It is important to remember the context in which most of these appellate decisions are written. In almost every case, the employer has been granted summary judgment in the trial court, and the employee is appealing only for the chance to present his case to a jury. The appellate courts in Churchey, Toussaint and Woolley are merely allowing the employee to present his full case in the trial court. The employee's recovery will still depend on the trial.
At this time, the Colorado employee would still have to carry the burden
at trial of proving that the elements of a contract or promissory estoppel
exist and modify the at will nature of the employment contract. A clear
disclaimer in an employee handbook will make that a difficult burden for
the employee to meet. As new employee termination cases rise through the
Court system, we may see Colorado case law continue to shift toward a
presumption of job security, where the employer has the burden of proving
the employment is terminable at will.
1Continental Air Lines,
Inc. v. Keenan, 731 P.2d 708, 711 (Colo. 1987). Garcia v. Aetna
Finance Co., 752 F.2d 488 (10th Cir. 1984). Fremont RE-1 School
District v. Jacobs, 737 P.2d 816, 820 (Colo. 1987). Hoff v. Amalgamated
Transit Union, Div. 622, 758 P.2d 674 (Colo. App. 1987). See also
Wisehart v. Meganack 66 P.3d 124 (Colo. Ct. App. 2002). Back
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