What is an Implied Contract in Employment Law?

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What is an Implied Contract in Employment Law?

Like most states, Arizona is an “at-will” employment state, meaning that either an employer or employee may end an employment relationship for almost any reason without notice. The qualifying factor for employers is that employment cannot be terminated because of race, sex, religion, or any other protected classification. An employer’s right to terminate an employee may also be limited if there is an implied contract.

Employment contracts are generally either express or implied. An express contract unambiguously describes an agreement between two parties and is usually — although not always — written. For example, if an employer tells an employee that he will receive a pay increase after working for six months, this is an express contract.

An implied contract is an agreement that the parties have not explicitly entered into, but is discernible by their behavior. An employer may not come out and say that they will only terminate your employment for just cause, but there could be an implied promise to that effect if an employee handbook or offer letter says that employees will only be terminated for just cause or if that has been the practice for that employer over time.

So even in at-will employment situations, an employer may not be able to terminate employees at will if an implied contract exists. Courts have found that employee handbooks and other documents signed by an employee during the hiring process constitute an implied contract and supersede at-will policy. If a court determines that an implied contract was in force and validates a wrongful termination claim, the employee may be entitled to compensation for lost wages or reinstatement.

In implied contract litigation, the employee has the burden of proof to establish the existence of an implied contract. Employers can help mitigate the risk of implied contract litigation by being cognizant of the circumstances under which an implied contract may be created and tailoring their employee documentation accordingly.

Williams Commercial Law Group, L.L.P., has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Williams Commercial Law Group, L.L.P., at (602) 256-9400, and see how we can help you resolve your legal matter.

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