Thinking about terminating an employee who recently came to work for you? You may be feeling relatively safe. After all, he’s an “at-will” employee and things just aren’t working out. Not so fast – with the right combination of facts and legal theories, the at-will doctrine may not provide as much protection as you think. Most folks understand the at-will doctrine will take a back seat if improper treatment based on a protected characteristic is established. However, terminating an employee who just relocated to work for you (or withdrawing a job offer) can also create legal claims – even in an at-will employment relationship. While legal theories will vary based on state law (but would commonly be for breach of an implied contract or promissory estoppel), there is a common sense and somewhat universal take away – watch out for situations that may look unfair to the individual or situations in which the person may claim they gave up something better and relied on promises about the new situation.
A recent Pennsylvania case illustrates the point. The Philadelphia office of a law firm makes a job offer to a practicing attorney in Chicago. After eight months, the firm terminates her employment. The attorney sues, claiming the termination was a breach of an implied contract because of the hardships involved with her relocation. She also claims promissory estoppel/detrimental reliance alleging the firm failed to deliver on its promise to provide mentoring and training. Not surprisingly, the firm counters, claiming that because the attorney was an “at-will” employee, there was not a viable legal claim.
The main dispute was whether an implied contract was created because the firm knew that the attorney incurred “substantial hardship” by accepting the job offer. Accepting the offer meant the attorney would close her own legal practice, move over 700 miles, including moving away from friends and family, and relocate to Philadelphia – where she was not admitted to practice law. At this early stage of litigation, the court denied the motion to dismiss – deciding there was enough involved in the relocation that it could support a claim. The attorney’s claim was also likely helped by a good review she received just weeks before the termination and the fact that her offer letter did not spell out her at-will status, even though it referred to the employment manual that included the at-will policy.
While such claims are not common they can arise – most often based on withdrawing a job offer, especially if someone has rejected another offer or already quit a current job, or terminating someone fairly quickly after they start. Such claims also usually require some helpful facts, such as relocation, but they can also arise if the communication to the candidate is too rosy (think of detailing all expansion plans without mentioning concerns about cash flow) and the candidate turns down or leaves a clearly better opportunity.
What can you do to help limit such claims? Here is a short list:
- Be clear about the “at-will” status, and make that part of an offer letter
- Be positive with the candidate without being misleading
- Be proactive with performance management and document steps the company has taken to help ensure a good working transition
- If the person is being hired because of skills they claim to have that may not quite show up later, make sure those skills or the expectation is documented – are the credentials part of a resume or are expectations clearly part of an offer letter?
This cautionary tale is of course not an excuse to postpone dealing with performance problems. It still makes good sense to deal with performance concerns when they show up. However, it is a reminder to consider all the circumstances – both before an offer is made and before there is a termination decision. And of course, it may help to run things by your legal counsel.