In Keller v Castell, et al, E20171020-SC-R11-CV, Tennessee’s Supreme Court addressed the issues of employment-at-will, employee handbooks, and due process in the context of a terminated firefighter. The Court held the firefighter was an employee-at-will, the handbook did not create an employment contract, and there was no due process violation. I’ll spare you the details, but the Court does provide some important guidance regarding employment-at-will and employee handbooks.
The “employment-at-will doctrine is a bedrock of Tennessee common law.” Absent evidence to the contrary, all employees are presumed to be at-will. Under the doctrine, “employment is for an indefinite period of time and may generally be terminated by either the employer or the employee at any time, for any reason, or for no reason at all.” Stated another way, “[t]he long standing rule in this State is that an employee-at-will may be discharged without breach of contract for good cause, bad cause or no cause at all, without thereby being guilty of legal wrong.” The doctrine recognizes the importance of an employer having the freedom to operate a business without interference from the courts. That’s not to say an employer is free to fire away. You must still comply with other laws – e.g. ADA, FLSA, FMLA, etc.
But an employee is not at-will if there is an employment contract. In that instance, the terms of the contract will control – length, salary, termination clause, etc. In Keller, the plaintiff argued that the employee handbook operated as an employment contract. Addressing the argument, the Court held that “in order to constitute a contract … a handbook must contain specific language showing the employer’s intent to be bound by the specific provisions. Unless … handbook contains specific guarantees or binding commitments, the handbook will not constitute an employment contract.” Importantly, the Keller handbook contained language that it was not to be construed as binding or any type of contract, that employees are employed for an indefinite time, and that the employer retained the unilateral right to change the handbook at any time. The Court found there was no contract and dismissed the claim.
Check with your labor counsel and review your handbook to see if there is any language that could be construed as a contract. Make sure you have some express language stating it is not binding and is not a contract.
Why does this matter for insurance? Some policies will exclude coverage for alleged violations of a written employment contract. If your handbook could be construed as a written contract, you may be uncovered in the event of a lawsuit.
LEGAL JARGON DISCLAIMER: The foregoing is not legal advice. Even if you construe it that way, it’s probably only worth what you paid for it. I am an attorney but am not yours.
Whether you are a Haven client or not, I’m always available to discuss.