Draft with care

Suppose that, after you’ve employed a worker for a year or so, she asks you for a raise. She doesn’t ask about any guarantee term for employment but you come back and give her a 36 month time frame for her salary going forward. 

You draft an employee “Employment Agreement” that says ‘‘[t]his will cover the 36 month period starting April 1, 2007 and ending March 31, 2010.’’

A year later, you fire the employee without cause, figuring that she is an at-will employee.  The employee sues for breach of contract and claims she could only be fired for cause. 

Who wins?

According a new decision by the Connecticut Appellate Court that will be officially released later this month — the employee.  You can download the decision in Cruz v. Visual Perceptions here (and there is a dissenting opinion here as well.)   And it has significant ramifications for employers who draft their own employment agreements.

The court had two key conclusions. First, there is a contract for a specific duration:

[T]he plain language of the contract unambiguously demonstrates that the parties intended to create a contract for a definite duration of thirty-six months. It specifically provides how many personal days would be allocated to the plaintiff for the duration of the contract and provides that any increase in health insurance premium would be absorbed by the defendant ‘‘for the duration of the contract.’’

Testimony from the parties wasn’t necessary, the court said, because the language of the agreement itself was “clear”.  (The dissent said it wasn’t clear, if you’re wondering).

Second, the court said that because the contract was for a definite term, the usual assumptions about being an at-will employee go out the door.  “As an employment contract for a definite term, it could only be terminated for good cause.”  Never mind the fact that the contract doesn’t say anything about termination; the court said it is implied by the fact that the contract was for a definite term, relying on a oft-ignored 1988 appellate court decision

What’s the takeaway for employers?

  1. Strongly consider adding language to contracts and other agreements that nothing in the agreement changes the “at-will employment” relationship.  I’ve talked about these types of disclaimers before.  The same holds true for offer letters.   
  2. Consider having each of your employment contracts reviewed by counsel or, as an alternative, have your form agreements reviewed.  As this decision shows, courts may find a contract if you didn’t intend for one to be created.
  3. Avoid contracts for a particular length of time.   If one is created, make sure to be clear about how the contract can be terminated.