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Back to Archives | Back to August 2007 Contents 

Chief's Counsel

Implied Contracts of Employment

By John M. (Jack) Collins, General Counsel, Massachusetts Chiefs of Police Association


here are an increasing number of documents a chief should review before taking disciplinary action or recommending that an employee be terminated or not reappointed. Certainly the language of any applicable “civil service” statute or other legislative basis for tenure or job security is the place to start. (This would include not only state statutes but also any municipal personnel ordinances or bylaws.) Likewise, should the employee be a member of a bargaining unit, the provisions of the union contract will often address the issue. Even where formal collective bargaining is not allowed, any written documents resulting from any “meet and confer” arrangements should be studied. Obviously, if an officer had an employment contract, this would be required reading. Unlike employees in the private sector, however, most police officers do not have an employment contract. Chiefs might think, therefore, that they have covered all the bases in seeking out the sources of an employee’s rights. What may come as a surprise to many chiefs is that even in the absence of a written employment contract, some courts have found that an employer’s actions, policies, practices, or occasionally even informal communications amount to an implied contract, often limiting the ability to discipline or terminate an otherwise “at-will” employee.

The personnel manuals in use in many cities and towns, as well as the policies and procedures manuals adopted by most police departments, may contain enforceable provisions concerning procedures and grounds for disciplinary action. In some cases, mostly in the private sector, employees have successfully pointed not only to personnel manuals but also to written practices, statements made to the employee, and even an employee’s subjective understanding in establishing an “implied contract.” Examples include the following:

  • Personnel policy, a retirement plan, and statements made to the employee by the employer1

  • The personnel manual, the employer’s practice not reduced to writing, and the employee’s subjective understanding2

  • The employee manual, oral assurances, and the employer’s publicly announced policies3

  • A personnel manual serving as a basis for an express or an implied contract, under certain circumstances4

As the Supreme Court of Wyoming put it,

The jury should also be told that in arriving at the determination as to the existence of an employment contract, the handbook, personnel policies, letters of employment, performance evaluations, and a course of dealing may supply the terms for an implied-in-fact employment contract which, in the absence of an adequate disclaimer requires termination for cause.5

The case generally considered the leader in the area of implied employment contracts is Toussaint v. Blue Cross & Blue Shield, a case decided in Michigan in 1980.6 There the personnel manual handed to the employee at his hiring stated that it was company policy to release employees “for just cause only.” The court ruled that an employee may enforce personnel policies even though no preemployment negotiations had taken place, the parties’ minds had not met on the subject, the employee knew nothing of the particulars of the policies and practices, and the employer had been free to change the policies unilaterally.


Justification

Courts have used various rationalizations to justify finding an employer’s policies or manuals to be enforceable employment contracts. Courts have found that employers have derived from their personnel policies such benefits as improved employee relations7 as well as an atmosphere of fair treatment and job security, thereby defeating a unionization campaign;8 one personnel manual stated that it provided “an attractive alternative to collective bargaining.”9

Some courts have found an implied contract only where a personnel manual was distributed to employees as an inducement to come to work for the employer.10 However, other courts have declined to do so, even when employees were shown to rely on the manual.11 For example, a handbook that had been neither bargained for nor signed created no contractual rights.12

Occasionally, courts look to whether the parties intended the manual to be binding.13 Some have asked whether the employee reasonably could have expected the employer to follow the manual’s procedures.14 This is not always required. As one court pointed out, “remaining with an employer after, or commencing employment upon receiving an employee manual can . . . supply the necessary considerations to incorporate the manual’s terms into an employment contract.”15


Disclaimers

Many state courts have rejected the contractual effect of personnel manuals where such manuals either expressly disclaimed an intent to constitute a contract or insisted upon the at-will nature of employment. A 2003 federal case construing state law falls under this category.16 In that case, the plaintiff did not demonstrate that he was performing his work at an acceptable level, because a new supervisor may determine an employee’s job performance to be inadequate even though a previous supervisor believed it to be adequate.

Various factors in the totality of the circumstances may create an employee’s reasonable and enforceable belief that the handbook provisions will be followed.17 What may come as a surprise to some officers, however, is that they must follow all applicable provisions and not just select those that seem to support their claim. For example, one court ruled that although a handbook’s discipline policy was contractually enforceable, the employee was not entitled to its benefit since he had failed to follow the handbook’s grievance procedures.18

The fact that an employer retains the right to unilaterally change an employment manual, especially where it has done so on occasion, may suffice to prevent the manual from becoming the basis for an implied contract. In a 1993 Federal District Court case interpreting a state’s contract law, the court held that the manual was not a basis for an implied contract for three reasons:

  • The employer had not given up the right to unilaterally modify the handbook’s terms (and had introduced modifications on occasion).

  • There had been no negotiations over the handbook’s terms.

  • The handbook contained a disclaimer of contractual intent.19

In another case, despite the existence of a disclaimer in the handbook, the handbook was ruled contractually binding since it was reasonable for the employee to have thought that it created binding obligations.20 (In this case, however, the employee was fired for good cause, so no contract rights were violated.)

Along the same lines, no implied contract terms were breached by an employer’s failure to follow certain optional procedures described in the handbook and its appeals policy.21 On the other hand, where the procedures were not described as optional, two years earlier the same court held that an employer was required to follow the handbook’s disciplinary procedures.22


Recommendations

In those increasingly rare organizations where employees have neither civil-service nor union nor similar protection, chiefs have two principal avenues for avoiding having a court find an implied contract. One is not to put in writing any personnel policies concerning discipline, or not to state them at all. The other is to issue written offers of employment or to use a written contract specifying that employees serve at the employer’s pleasure or as long as their services are satisfactory to the employer.

Where an employment contract or other written notice to new employees specifies that an employee may be terminated at any time, since he or she is an employee at will, this will negate any implied contract. As long as the employer acts in good faith, the employee has no basis for complaining that there was no cause or just cause in termination; simply that the employer was dissatisfied is sufficient.23

This column is a service of the IACP Legal Officers Section, which is composed of police legal advisors who are members of IACP and the section. The opinions expressed and positions taken are those of the column’s author and do not necessarily represent the views of the IACP, The Police Chief, or even the Legal Officers Section. Attorneys who wish to submit articles for possible use in this column or anyone wishing to join the Legal Officers Section should contact Randy Means at rbmeans@aol.com.

Notes:

1Terrio v. Millinocket Community Hosp., 379 A. 2d 135 (Me. 1977).
2Wiskotoni v. Michigan Nat’l Bank-West, 716 F. 2d 378 (6th Cir. 1983).
3Frazier v. Colonial Williamsburg Foundation, 574 F. Supp. 318 (E.D. Va. 1983).
4Hobson v. McLean Hosp. Corp., 402 Mass. 413, 522 N.E. 2d 975 (1988); Jackson v. Action for Boston Community Development, Inc., 403 Mass. 8, 525 N.E. 2d 411 (1988). However, since the employer in those cases expressly reserved the right unilaterally to modify its terms, the court found the manual insufficiently clear to create contractual obligations.
5Ormsby v. Dana Kepner Co., 15 IER 1859 (Wyo. 2000).
6Toussaint v. Blue Cross & Blue Shield, 408 Mich. 579, 292 N.W. 2d 880 (1980), rehearing denied, 409 Mich. 1101.
7Morris v. Lutheran Medical Center, 215 Neb. 677, 340 N.W. 2d 388 (1983).
8Kinoshita v. Canadian Pac. Airlines, LTR 68 Haw. 594, 724 P. 2d 110 (1986).
9Preston v. Claridge Hotel & Casino, 555 A. 2d 12 (N.J. Super. Ct. App. Div. 1989).
0See Morosetti v. Louisiana Land & Exploration Co., 522 PA 492, 564 A. 2d 151 (1989); Gruver v. Ezon Prods. Inc., 763 F. Supp. 772 (M.D. PA 1991).
11See Williams v. Biscuitville, Inc., 40 N.C. App. 405, 253 S.E. 2d 18 (1979); cert. denied, 297 N.C. 457, 256 S.E. 2d 810.
12McMillan v. Massachusetts S.P.C.A., 880 F. Supp. 900 (D. Mass. 1995).
13Brooks v. Trans World Airlines, 574 F. Supp. 805 (D. Colo. 1983).
14Forrester v. Parker, 93 N.M. 781, 606 P. 2d 191 (1980).
15Jackson, 525 N.E. 2d at 415.
16Hillstrom v. Best Western TLC Hotel, 265 F. Supp. 2d 117 (D. Mass. 2003).
17O’Brien v. New England Tel. & Tel. Co., 422 Mass. 686, 664 N.E. 2d 843 (1996).
18Id.
19Rubitsky v. American Sterilizen Co., 8 IER 1335, 1993 WL 306281 (D. Mass. 1993).
20Derrig v. Wal-Mart Stores, 12 IER 188 (D. Mass. 1996).
21Sklar v. Beth Israel Deaconess Med. Ctr., 59 Mass. App. Ct. 550, 797 N.E. 2d 381 (2003).
22Ferguson v. Host Int’l, Inc., 53 Mass. App. Ct. 96, 757 N.E. 2d 267 (2001).
23See, e.g., Golden v. Worldvision Enters, Inc., 133 A.D. 2d 50, 519 N.Y. 2d 1 (1987).

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From The Police Chief, vol. 74, no. 8, August 2007. Copyright held by the International Association of Chiefs of Police, 515 North Washington Street, Alexandria, VA 22314 USA.








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