Recent Employment Law Developments in Colorado

• Publication year: 1998
• Pages: 5

27 Colo.Law. 5 Colorado Lawyer 1998.

1998, May, Pg. 5. Recent Employment Law Developments in Colorado

---

5

Vol. 27, No. 3, Pg. 5

The Colorado Lawyer
May 1998
Vol. 27, No. 5 [Page 5]

Articles

Recent Employment Law Developments in Colorado
by John A. Criswell

If there is any area of the law that has recently experienced an explosive increase in litigation in Colorado, it is the general field of employment law. Suits by individual employees against their employers, previously rare, are now common. The result has been pronouncements by Colorado appellate courts on subjects about which they had not previously spoken. These pronouncements have created exceptions to the so-called "at-will" employment doctrine that had not previously been recognized, based on an employer's implied undertakings. In addition, some of those pronouncements, while not themselves creating further exceptions, may act as springboards for the assertion that additional implied obligations must be found to arise from the employment relationship

At this juncture in the development of the law in this field it might be well to pause and reflect on certain analytical and procedural problems that have arisen from the Colorado courts' prior pronouncements and to speculate on what the future may hold. The following comments attempt to summarize some of the problems that may be faced by litigators trying cases based on two of the recently recognized exceptions to the at-will doctrine-employer obligations arising from an implied promise or from promissory estoppel. In addition this article attempts to predict the extent to which the Colorado courts might be expected to recognize that there exists in every employment relationship an implied obligation of good faith and fair dealing.

CLAIMS UNDER CONTINENTAL AIR LINES, INC. V. KEENAN

Perhaps the most significant employment law decision rendered by the Colorado courts in the past three decades is Continental Air Lines, Inc. v. Keenan.1 In that case, the Colorado Supreme Court concluded that the provisions in an employee manual, unilaterally promulgated by an employer, may result in an obligation that is binding on the employer and enforceable by an employee whose employment is otherwise solely at the will of that employer. Certainly, the number of claims that are based on Continental Air Lines exceeds, by far, any other type of common law claim now being asserted by employees.

In Continental Air Lines, the supreme court concluded that, under appropriate circumstances, a promissory statement of an employer may be enforced by an otherwise at-will employee, either under the theory that the promise formed a part of an agreement between the two parties or under the doctrine of promissory estoppel.

It is common, therefore, for the complaint by an employee under the auspices of that opinion to contain allegations supporting a claim under both theories, even though both claims are based on the same factual circumstances. However, the simultaneous trial of the two claims can present both analytical and practical problems, unless both trial counsel and the court have a clear understanding of the legal underpinnings for each of the theories presented, and they anticipate the possible practical pitfalls that may be encountered.

The Employer-Employee Relationship

To appreciate the analytical difficulties that may be presented, a brief consideration of the manner in which the common law classifies the employer-employee relationship is necessary. That relationship is a consensual (or contractual) one. It may be created by the parties' execution of a formal, written agreement. Far more frequently, however, it comes into being by an employer's informal offer to hire the prospective employee and the employee's commencement of work.

This typical scenario has led the courts to conclude that, under the latter circumstances, the parties have entered into a "unilateral," as distinguished from a "bilateral," contract.2 A unilateral contract is one in which only one party, generally the offeror, makes a promise to the other and asks that other party, not for a return promise, but for the actual performance of one or more acts. In that typical circumstance, the performance by the employee, as the offeree, constitutes both an acceptance of the offer made and the consideration for the employer's promise to perform its part of the bargain.3

Under this traditional analysis, therefore, the employee makes no promise to continue to work for any specified period. Hence, unless the employer's promise sets forth a specific time for the employee's performance or otherwise limits its own right to terminate the relationship, either party may withdraw from that relationship for any or no reason without violating any promissory obligation owed to the other.4

In addition, in such an at-will relationship, because the employee has no obligation to continue to work, if the employer offers to amend the original unilateral contract (such as by offering to increase the employee's salary), the employee's continuation in the employment will constitute both an acceptance of and the consideration for that later offer.5 Finally, because such an at-will contract can be fully performed within one year, it is not subject to the statute of frauds.6

Ordinary Contract Principles And Promissory Estoppel

The court in Continental Air Lines did not depart, in any material way, from this traditional analysis. There, an employee manual provided for a hearing, if one was requested, by any managerial employee who was discharged. When the plaintiff was discharged and denied such a hearing, he sued for breach of contract. In its opinion, which resulted in the reversal of a summary judgment for the employer, the supreme court noted that many courts had treated a manual provision, apparently as a matter of law, as "a unilateral offer of employment for which continued service by the employee may constitute consideration and acceptance."7 It also noted that other courts have concluded that such provisions were not contractually binding, but were mere unilateral gratuities.

The Colorado court, however, adopted neither "categorical" rule. Rather, it concluded that "ordinary contract principles" will afford an employee relief if the employee's evidence establishes the requirements set out in Restatement (Second) of Contracts § 24 (1981) for the formation of a contract. Those requirements are that:

-in issuing the manual, the employer manifested a willingness to enter into a bargain in such a way as to justify the employee in believing that an assent to an offer was invited; and

-the employee's initial or continued employment constituted an acceptance of and consideration for that offer.8

However, the court also concluded that such an employee might have an alternate means of making the manual provision binding, "even if the requisites for formation of a contract are not found," by establishing the criteria for the application of the doctrine of promissory estoppel.9 To establish employer liability on this basis, it must be demonstrated that:

-the employer should reasonably have expected that the employee would consider the manual to be a commitment from an employer;

-the employee reasonably relied on the manual; and

-injustice can be avoided only by enforcing the promise contained in the manual.10

Since the opinion in Continental Air Lines was announced, its underlying analysis has been used to determine whether employer promises made in forms other than an employee manual are binding on it; the opinion's reach has not been limited to promises contained in an employee manual.11

Had Continental Air Lines relied only on the traditional concept of unilateral contract, the issues presented in the trial of such a cause would have been relatively simple. By also referring to the theory of promissory estoppel, however, the court invited employees to rely on both types of claims, at least as alternative theories of recovery. This, in turn, has raised the questions considered here.

Applying Promissory Estoppel to an Employer's Promise

As Continental Air Lines indicates, a promissory estoppel claim can be prosecuted only if the employee fails to establish the basis for a contract claim. If a contract is shown to exist, relief at law is available and no equitable relief can be obtained under a promissory estoppel claim.12 This is true even if it is determined that there has been no breach of the existing contract.13

This limitation is explained by reference to the underlying purpose for which the equity courts developed the doctrine of promissory estoppel. That doctrine was devised to allow the enforcement of a promise that would otherwise have been unenforceable under the traditional precepts of the common law of contracts.14 The doctrine developed in the early part of this century and was initially applied only in those situations in which no contract was created because of a failure of the promissor to receive any consideration for the promise made.15 Later, some courts, but not all, extended the doctrine to oral promises that were not enforceable because of the statute of frauds.16 Most courts have refused to extend the doctrine to other circumstances.17

To be enforceable under any theory of promissory estoppel the promise must reflect a promissory intent, and it must be as specific in terms as would be required for a contractual obligation, i.e., it must "provide a basis for determining the existence of a breach and for giving a remedy."18 Finally, the promise is enforceable under the precepts of promissory estoppel only if it is necessary to do so to...