Implied Employment Contracts

Most employees in the United States work at will, which means they can quit at any time for any reason, and they can be fired at any time for any reason that is not illegal. (An at-will employee may not be fired for discriminatory reasons, or in retaliation for reporting dangerous working conditions, illegal activity, or sexual harassment, for example.)

An employee's at-will status can be changed by an employment contract that limits the employer's right to fire. For example, if an employment agreement states that the employee will be fired only for good cause, then the employee no longer works at will. An employment contract can be written, oral, or implied. This article covers implied contracts: contracts that are neither written nor explicitly stated, but come into existence because of the employer's statements and actions.

What Is an Implied Contract?

An implied contract is an agreement that has not been reduced to writing or stated out loud, but is instead implied from the actions and statements of the parties. In the employment context, an employee who wants to prove that an implied contract exists must be able to point to policies, actions, statements, and practices that led the employee to reasonably believe he or she would be fired only for good cause. For example, an employee might rely on:

• a long history with the company, during which the employee received regular promotions, raises, and positive performance reviews
• statements by managers that the employee's job would be secure or that he or she would not be fired except for good cause
• promises of permanent or long-term employment, and
• policies that place some limits on the employer's right to fire, such as mandatory progressive discipline policies that reserve firing only for certain types of misconduct, policies providing that new employees will become "permanent" after serving a probationary period, or policies promising regular promotions and raises as long as performance meets a certain standard.

Not every state recognized implied employment contracts, and not every state looks at all (or only) the factors listed above.

If You Signed an At-Will Agreement

Most courts find that an employee who has agreed, in writing, that employment is at will cannot later claim to have had an implied employment contract limiting the employer's right to fire. If you have signed a job application, offer letter, handbook acknowledgment form, or any other document agreeing that you are an at-will employee, you will not be able to pursue an implied contract claim against your employer.

Getting Legal Help

State laws differ on whether and how employees can prove an implied contract. Even in those states that allow implied contract claims, the law changes often as courts hand down new decisions interpreting the rules. An experienced employment lawyer can help you assess your situation and decide whether you have a valid implied contract claim.