Definition of At-Will Employment

Colorado is an At-Will Employment state.  Unless a contract provides otherwise, neither the employer nor the employee is required to give a reason for terminating the employment relationship, and an employee may quit, or an employer may fire, at any time, with or without cause, and without advance notice.  An employee is not required to give two-weeks’ notice.  It also means that the employer can generally change the terms of employment, including pay, hours, benefits, paid time off, and holidays.

The legal doctrine of “employment-at-will” was recognized by the Colorado Supreme Court in Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (CO 1987).  If an employee is hired for an indefinite period of time, and does not have an employment contract, that employee is presumed to be an at-will employee.

Exceptions to At-Will Employment

Just because an employee is hired at-will does not mean that he or she can be fired for any reason.  Congress, the Colorado legislature, and the Courts have each created numerous exceptions to the legal doctrine of at-will employment.  Some of the exceptions to at-will employment include:

Discrimination.  Both federal and Colorado law prohibit an employer from firing an employee for certain discriminatory reasons.  Under Colorado law, an employer cannot fire an employee based upon: race, color, national origin, ancestry, creed, religion, sex, age, physical disability, mental disability, marriage to a co-worker (subject to specific circumstances), or sexual orientation.

Violation of Public Policy.  The courts have held that an employer cannot fire an employee for actions that violate public policy or a public interest.  Some examples include, firing an employee for:

• Exercising a statutory right.  For example, an employee cannot be fired for filing a workers’ compensation claim.
• Refusing to perform an illegal act.  For example, an employee cannot be fired for refusing to commit perjury for an employer at trial.
• Reporting violations of the law.  For example, an employee cannot be fired for reporting an employer’s fraudulent tax filings or violations of employment laws.
• Engaging in Activities that are in the Public Interest.  For example, an employee cannot be fired for serving jury duty, joining the military Reserves or National Guard, or engaging in lawful off-duty activities.

Breach of an Oral or Implied Contract and Promissory Estoppel.  Even though the employer and employee did not sign a written employment contract, the Courts may find that an oral contract, or an implied contract exists, based upon an employer’s statements, policies, or actions.  Most contracts do not have to be in writing to be enforceable.  A contract is created when there is an offer, an acceptance of that offer, and sufficient consideration (i.e. value given) by the parties.  Both the offer and acceptance of an employment contract can be made orally, creating an enforceable oral contract.

An implied contract can be found when: (a) both parties assumed that a contract existed and acted accordingly; or (b) when the parties’ actions would result in one party being unfairly enriched if the other party was not bound to an implied contract.  For example, an implied contract may arise when one party furnishes services or property, that party expected to be paid for the services or property, and the receiving party knew or should have known that there was an expectation of payment and accepted the goods or services anyway.  Under those circumstances, a Court may find that an implied contract exists to require payment.

Promissory estoppel is a legal doctrine that prevents someone from going back on a promise after the other side acted in reliance on that promise.  It has three elements: (1) a party made a significant promise, expecting another party to rely upon that promise; (2) the other party acted in reliance of that promise (which could also include not taking a certain action in reliance of the promise); and (3) the other party suffered damages from relying on the promise.  Under those circumstances, a Court may require the first party to keep their promise.

There are numerus examples of these legal doctrines in the employment law context.  Here are a few that we have seen.  If an employment policy manual states that an employee will only be fired for good cause, or if the employer made similar statements during the hiring process or afterwards, a Court may find that an oral contract or implied contract exists that limits the employer’s right to fire an employee to grounds constituting good cause.  If an employer tells a new employee that he or she will be given six-months to learn how to use a new piece of equipment, the Courts may find an implied contract exists that prevents the employer from firing the employee during those first six-months for failing to learn to use that new equipment.  If an employer tells an employee to use personal funds to buy materials for a job, and the employee does, the Courts will most likely require the employer to reimburse the employee, even if the job gets cancelled and the employer cannot use those materials.

Best Employment Practices for Businesses

The best practices for employment actions by your business should include the advice of an experienced Colorado employment law attorney.  An employment attorney can draft or review your employment policy handbooks and other employment documents to limit claims of an implied employment contract.  A lawyer can review your company’s hiring practices train your management personnel to minimize the likelihood of entering into unanticipated oral contracts.  An employment lawyer can provide your business advice on decisions to terminate an employee, to limit allegations of discrimination, or violations of public policy.

If your business has employees, call Business Law Group for a free consultation where we can discuss your hiring practices, written policies, and termination procedures to protect the at-will employment status of your employees.  Give us a call at (719) 355-8840 or email us at info@businesslawgroup.us.