Be careful employers, your promises can be understood as contractual obligations!  Your words can create a contract obligating you to do something – or prohibiting you from doing something – that the law otherwise would not require.

In a recent South Carolina case, a long-term employee was asked by the company’s Board to describe an unfavorable experience she had with the newly-hired company CEO.  She was hesitant and said she feared retaliation.  The Board told she had a duty to answer the questions, and promised that she would not face retaliation for discussing the incident with the Board.   The employee talked.

About two weeks later, the CEO fired the employee for being negative at the board meeting and failing to promptly respond to emails.

We know what comes next- the now former employee filed a lawsuit for breach of contract and fraud.

The company defended its actions by relying on the fact the employee was “at-will” and could be fired with or without cause.  The law does not prohibit the company from firing the employee for bad-mouthing the CEO.  But the court did not buy this argument, concluding that the Board’s oral promise altered the at-will relationship.  The jury awarded $518,000 in lost wages and benefits and $350,000 in punitive damages.

The outcome of this case presents a few helpful reminders for employers looking to avoid similar lawsuits.

  1. Management should avoid making verbal promises to employees that can be understood to alter the default at-will presumption.  Oral promises with specific terms, like the alleged promise in the case discussed here, can create or alter an employment contract.
  2. Be sure that your entire management team knows what has been promised. This case could have been avoided if the employee had been fired for legitimate reasons unrelated to her participation in the board meeting (i.e., failing to promptly respond to emails).
  3. Finally, make sure to clearly document an employee’s record of misbehavior or underperformance if you are faced with a troublesome employee. Merely stating that an employee is being “unprofessional,” creates a weak documentary record.  Avoid labels, and stick to facts.  Juries are comprised of employees, but they will support the company if they conclude that the discipline was fair.  But to reach that conclusion, they often want to see details about what happened, not just the employer’s summary conclusion.