The employment relationship is governed by the agreement, oral or written, between the employer and the employee (and the union, if any, which represents the employee), and federal, state, and local laws which impose obligations independent of private agreements.
Employment without a fixed term is "employment at-will," terminable by the employer or the employee at any time and for any lawful reason. Thus, in the absence of a written or oral contract, in fact or implied, the employment relationship will be presumed to be "at-will."4 This legal doctrine is very important for employers, permitting the termination of employees without extensive administrative and judicial review. Employment contracts should be used sparingly, particularly by small non-profit organizations.
While the law in many states, including New York and Connecticut, presumes that employment is at-will and not contractual, over the last decade, employees asserting various theories of "wrongful termination" have succeeded in convincing courts to establish certain exceptions to the at-will doctrine.
Employees who believe they have been wrongfully discharged often attempt to circumvent the at-will doctrine by alleging that oral communications and language contained in job applications, correspondence, performance appraisals, supervisor manuals, hiring letters or, more frequently, employee handbooks, create an "implied" contractual right to continued employment or that their employment can only be terminated for cause.
Language relied on by such employees generally states that an employee will only be terminated for "cause" or "just cause." These terms usually require an employer to prove that an employee was terminated because of legitimate performance deficiencies, misconduct or other economic justification. Therefore, it is important for employers to review their forms, personnel manuals and practices to ensure that no language will be unintentionally construed as a limitation on their right to terminate at-will employees.
It is also recommended that employers add language to their employment applications5, offer letters6 and employee handbooks underscoring that employment is at-will: an employee may resign at any time, with or without cause, and may be discharged at any time, with or without notice and with or without cause. Having employees acknowledge receipt and acceptance of these documents will strengthen the employer's position in the event an employee later claims that his or her employment is not at-will. Appendix F contains a sample employment handbook provision.
Of course, not every employer seeks to employ its employees at-will, and key executive or others with special skills may require a contractual relationship. The initial question to be addressed, therefore, during the review of the hiring process is the nature of the employment relationship. The organization must determine whether it wishes to employ its employees at-will or to require employees to sign employment contracts or to use a combination of these two concepts. Employers should review their forms and practices to ensure that the language is consistent with the preferred form of employment relationship, and that such language does not create unintended contractual obligations.
Generally, in New York, employees must point to a writing to establish an express limitation on an employer's ability to terminate employment at-will. Neither mere promises of future employment, expectations of rehiring after expiration of a term of employment, salary patterns, nor other oral assurances have been found to be sufficient to establish employment that is not at-will. On the other hand, a hiring letter or even an oral promise which sets forth a definite term of employment7 may be viewed as a limitation on the ability to terminate at-will.
Furthermore, even at-will employees have statutory, and under certain circumstances, contractual rights, to wages and fringe benefits, including vacation, severance or bonus pay, in accordance with whatever policy the employer has communicated to them. Under the New York Labor Law, an employer is required to notify its employees of its policy on sick leave, vacation, personal leave, holidays and hours.8 An employer is subject to civil and criminal penalties if it fails to pay wages and fringe benefits in accordance with its policies.9 Accordingly, although an employer is not required to provide its employees with severance or vacation pay, for example, if the employer adopts benefits, it must exercise caution in drafting the description of the benefit because it will be required to comply with any policy it decides to adopt.
While, New York courts continue to voice their strong disinclination to alter the traditional rule of at-will employment , a narrow exception to the at-will employment9a doctrine was recognized by one court where an attorney was fired for complying with his ethical duties to report the wrongdoing of other attorneys in his firm.9b
Like New York, Connecticut law presumes that employment is at-will and not contractual. However, representations made in employee manuals or handbooks, offer letters and even oral statements may be sufficient to create a contractual employment relationship. Once a contractual relationship has been established an employer can terminate that employee only for cause. As stated above, "cause" generally requires an employer to prove that an employee was terminated because of legitimate performance deficiencies, misconduct or other economic justification. In contrast, an employer or an employee can terminate an at-will employment relationship for any reason at any time.
Once an employer has determined whether to employ personnel at-will or on a contractual basis, it is important to preserve the nature of that relationship. Employers should review oral and written communications carefully for any language that could alter the employment relationship. In applying a contract analysis to employment manuals and handbooks, Connecticut courts generally defer to the employer when sufficient disclaimers are included in the literature. Such disclaimers should be prominently displayed and clearly state the at-will nature of the employment relationship, that the document is not a contract and that the document can be altered by the employer at any time.
It is recommended that all organizations have a comprehensive employee handbook that is provided to all employees from the first day of employment. The handbook should be the principle document describing the relationship of the employee and employer, and aid in avoiding inconsistent application of personnel practices. However, it is far better not to have a manual than to have one that is not consistently applied. The manual also serves as the main communication tool describing the benefits available to employees and their responsibilities. It is suggested that the handbook be issued in a loose-leaf binder with each page numbered and dated so that it may be updated easily.
Appendix E lists the topics that should be considered for inclusion in an employee handbook. Many of these topics are optional. However, there are a few provisions that are highly recommended for all employment manuals:
· Disclaimer: A statement that the handbook does not establish a contract and that employment is "at-will."
· Modifications: A statement that the practices and policies contained in the handbook can be amended, modified, or terminated at any time, but that any changes must be in writing signed by the executive director of the organization or another official so authorized. No statement by lower level representatives will amend the handbook.
· "Zipper clause:" A provision which provides that all employment-related policies, whether written or oral, that existed prior to the issuance of the handbook are superseded. This statement avoids litigation over whether a policy that existed prior to the handbook continues to exist. It also eliminates policies that have existed for many years of which present management may be unaware.
· Non-discrimination. Adopt a written policy stating that employment shall be based only on merit, qualifications, and competence; that all laws pertaining to fair employment practices will be complied with.
· Policy against harassment. Adopt a written policy to provide an environment that is free of unlawful harassment of any kind, and on any basis prohibited by law, including harassment on the basis of sex. See Chapter XII, and Appendix W.
A model introductory section of an employment manual which includes the above is contained in Appendix F.
It is also recommended that non-profit organizations adopt ethics policies that are applicable to all employees, supervisors, volunteers, directors, and others associated with the organization. The reputation of an agency is a most valuable asset, and a good reputation is maintained by having everyone representing the organization act with the highest standards of ethical conduct and fair dealing. The written policy should make it clear that violations will result in disciplinary action, up to and including dismissal; everyone is expected to disclose to management anything which might be in violation of the policy; and retaliation against anyone who brings suspected violations to management's attention will not be tolerated. A procedure to address concerns anonymously should be provided.
A sample ethics policy is contained in Appendix G. Among the topics to be included are:
· All activities are to be conducted in compliance with the letter and spirit of all laws and regulations.
· Conflicts of interest must be avoided and, where present, fully disclosed.
· Giving and receiving gifts of more than nominal value is prohibited, except where authorized by management.
· Support of any kind for a political candidate is prohibited.10
· The personal conduct of all must be to strive for a healthy, safe, and positive environment, free from threats, violence, drugs, harassment and discrimination based on any factor unrelated to the organization's purpose.
· Unauthorized disclosure of private employee information or other confidential information will not be tolerated.
· All must protect and control the agency's assets, and not use the agency's property for personal purposes unless authorized in advance.11
· All must record and report information accurately.
· Open communications are encouraged; all are required to disclosed to management anything which may be in violation of the ethics policy, and retaliation against anyone who in good faith brings a suspected violation to management's attention will not be tolerated.
4 In some cases, individuals who perform services for an organization under a contract, whether written or oral, and under circumstances where the organization has the right to determine the results of the work performed, but not the means and methods of accomplishing the results, may be "independent contractors" and not employees. Independent contractors, and the dangers inherent in misclassifying an individual as an independent contractor rather than an employee, are discussed more fully in Chapter IV.
5 See Appendix K.
6 See Appendix L.
7 See Rooney v. Tyson,91 N.Y.2d 685, 697 N.E.2d 571, 674 N.Y.S.2d 616 (1998).
9a See Horn v. New York Times, 100 N.Y.2d 85, 790 N.E.2d 753, 760 N.Y.S.2d 378 (2003). Indeed, in Horn, New York’s high court confirmed its intent not to “create a common-law tort of wrongful or abusive discharge,” and to adhere to its tradition of non-interference with employment relationships.
9b See Wieder v. Skala, 80 N.Y.2d 628, 609 N.E.2d 105, 593 N.Y.S.2d 752 (1992). In Wieder, the court found that because both the attorney and law firm shared a common duty to uphold the same professional ethical obligations, this became an implied term in their employment agreement, and the attorney could not be terminated for reporting such violations. In Horn v. New York Times, supra, 100 N.Y.2d 85, however, the court declined to extend the “Wieder exception” to an in-house physician who alleged she was terminated for refusing to provide the employer with confidential employee medical information in violation of state law and the ethical rules of the medical association of which she belonged, since the employer was not bound by the same ethical rules. See also McConchie v. Wal-Mart Stores, Inc., 985 F. Supp. 273 (N.D.N.Y. 1997) (narrow exception to at-will doctrine did not apply to pharmacist fired for prescribing drugs in contravention of supervisor’s orders).
10 Organizations exempt from taxation under IRC Section 501(c)(3) are absolutely prohibited from indirectly or directly supporting or opposing any candidate for political office, including providing employees paid time off or providing space for a candidate's materials. Although such organizations may engage in lobbying under certain circumstances, such as lobbying the executive branch of government or engaging in "grass roots" lobbying for legislation, appropriate forms must be filed. However, in no event may any substantial part of an organization's activities be used to influence legislation. There are very complex legal issues, so if your organization intends to engage in political activity of any type, you should consult with counsel first.
11 If the organization has confidential information on computers, an Internet web site, or gives employees access to the Internet, it should adopt an Office Equipment and Computer Workstation Security and Use Guideline. See Appendix H.