By Eric B. Meyer
In most states, absent a contract of employment, an employee is considered at-will (i.e., he or she can be fired for any reason or no reason at all). Many employers reinforce — in very prominent locations in employee handbooks — that their employees are at-will.
What happens, however, when an employer later promises an employee that she can take 12 months of leave and then return to her job?
Can the employer later renege and rely upon the at-will employment doctrine as a basis not to reinstate? Or is the employer SOL?
The case is Lapidoth v. Telcordia Technologies, Inc. In 1986, Ms. Lapidoth began working for Telcordia. All the while, Telcordia had an at-will employment policy in its Code of Business Ethics.
In 2005, Ms. Lapidoth requested a six-month maternity leave because she was expecting her tenth child. Prior to her nine previous births, Ms. Lapidoth had requested and received extended leave from Telcordia.
Before Ms. Lapidoth’s tenth birth, the company sent her a letter which set forth the conditions of her leave. In that letter, which also referenced the company policy on maternity leave, Telcordia guaranteed Ms. Lapidoth that her job would be waiting for her when the 12 months expired.
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Fast-forward 12 months. Ms. Lapidoth is ready to return. However, the company has filled her position with someone it deemed to be a better fit. Ms. Lapidoth sues claiming that the company breached its contract with her. (She also claimed that Telcordia violated the FMLA, but she lost on that). Telcordia defended by arguing that, because Ms. Lapidoth was at-will, it could fire her for any reason or no reason at all.
Who wins? (I’ll give you a hint; it’s not Telcordia)
New Jersey, where this case was adjudicated, has a line of cases which provide that a contract for employment may arise from a company policy or practice, or from a promise made by the employer directly to the employee. So, in addition to an employment manual, a representation made by the employer directly to the employee may create a contractual right.
In Lapidoth, the Appellate Court found that the company may have promised to reinstate Ms. Lapidoth’s position at the end of her leave:
While defendant’s Code and employment application provided that employment was at-will and that nothing in the Code or any of defendant’s other policies, practices, and procedures created any contractual rights, defendant’s letters relating its policy on maternity leave seemed to contradict those general provisions. …
Whether viewed as a company policy creating contractual rights or a promise made to a particular employee, a reasonable employee could interpret the policy as promising reinstatement. Further, defendant gave plaintiff nine previous maternity leaves and reinstated her employment at the conclusion of all of them. After this history, a reasonable employee could reasonably interpret the policy as promising reinstatement.”
Three lessons for employers
- Avoid creating contractual rights in your handbook, unless you intend to live up to them. Make sure the employee handbook contains a clear statement that employment is at-will and anyone can be fired with or without good cause. Also, if your leave policies are more generous than what the law requires (e.g., you offer up to 18 weeks of FMLA as opposed to 12), that’s fine. But, remember, that’s a contract.
- Avoid creating contractual rights in your communications with employees, unless you intend to live up to them. If you wish to provide an employee with additional time-off benefits, you should clarify in writing any conditions attached to those benefits. Here, if Telcordia had informed Ms. Lapidoth that her job would not be guaranteed to her upon her return to work (especially, if the company hires someone to replace her), then the outcome may have been different.
- Avoid deviating from the handbook. If your handbook says “A”, but you always do “B,” then employees will come to expect “B.” And if you don’t give them “B,” then see you in court.