Chapter 2 - § 2.3 • IMPLIED CONTRACTS

• Jurisdiction: Colorado

§ 2.3 • IMPLIED CONTRACTS

§ 2.3.1—What Is Covered

The Colorado Supreme Court first recognized the implied-contract exception to the employment-at-will doctrine in Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (Colo. 1987). The court held that an employee manual can, under some circumstances, constitute an implied contract with an at-will employee. Specifically, the court held that an at-will employee bringing a wrongful-discharge action can enforce termination procedures in an employee manual by demonstrating that the employer's promulgation of the procedures was an offer, and that the employee's continued employment constituted acceptance of and consideration for those procedures. Id. at 212. See Churchey v. Adolph Coors Co., 759 P.2d 1336, 1348 (Colo. 1988).

Colorado courts have since refined and broadened the implied-contract exception recognized by the court in Keenan. The implied-contract exception has been held to apply not only to termination procedures in employee manuals and handbooks, but also to other policies and procedures in employee handbooks and manuals, to internal documents other than employee manuals and handbooks, to pre-employment offer letters, and to oral statements made by the employer during the employment period.

Practice Pointer
With respect to the implied-contract exception, defense attorneys should scrutinize everything their client writes to ensure that the written material is realistic and not full of idealistic, aspirational statements. Defense attorneys should follow one simple rule: Do not put it in writing unless the client is prepared to do it. In a phrase, less is more. Policies are often aspirational when written, but practical as applied, and the difference between the two will lose cases for the employer.

Employee Handbooks and Manuals

It is beyond dispute by now that the implied-contract exception can apply to virtually any policies or procedures contained in an employee handbook or manual. Since the court's decision in Keenan, the implied-contract exception has been extended to policies in handbooks other than termination procedures.

For example, one court has held that the implied-contract exception applies to the causes or reasons for discharge as well as the procedures for discharge. DeRubis v. Broadmoor Hotel, Inc., 772 P.2d 681, 682 (Colo. App. 1989). In DeRubis, the court held that an at-will employee may bring an action for wrongful discharge based on a grievance procedure, classification for probationary and regular employees, and specification of causes for termination contained in an employee manual. Id. Thus, an at-will employee may bring an action for wrongful discharge based on an employee manual even if it does not contain termination procedures.

Courts also have found that the implied-contract exception applies to statements in an employee handbook promising that the employer will not discriminate on the basis of race, sex, religion, or national origin. Tuttle v. ANR Freight Sys., Inc., 797 P.2d 825, 827-28 (Colo. App. 1990). The courts are split on whether statements in employee handbooks and manuals that vest discretion in employers can constitute an implied contract. Compare Jaynes v. Centura Health Corp., 148 F.3d 241, 249 (Colo. App. 2006) (personnel policy that set forth "guidelines" that "normally" are to be used in dealing with unacceptable employee conduct did not create an implied contract), with Gomez v. Martin Marietta Corp., 50 F.3d 1511, 1516 (10th Cir. 1995) (progressive discipline policy that was not mandated in all cases nevertheless could constitute implied contract to apply progressive discipline). See also Restatement, Employment Law § 2.05 (policy statements made in employment documents that are provided or made reasonably accessible to employees, reasonably read in context, can establish limits on the employer's power to terminate the employment relationship). This could include a statement, distributed to all employees, describing the procedures that a supervisor "should" follow before deciding to terminate employment. Id. at Comment c, Illustration 1.

Internal Documents Other Than Employee Handbooks and Manuals

The implied-contract exception may apply not only to statements in employee handbooks or manuals, but also may apply to nearly any document containing statements by the employer. For example, the court in Allabashi v. Lincoln National Sales Corp. found an implied contract based on termination procedures and policies in documents other than the employee handbook, despite the existence of a disclaimer in the employee handbook. 824 P.2d 1, 3 (Colo. App. 1991).

Practice Pointer
The most troublesome provisions in written materials have been the following: discipline and discharge provisions (particularly promises of progressive discipline), severance-pay policies, and the evaluation and documentation of employee performance. These provisions should be written in a manner that maintains maximum employer flexibility. Instead of guaranteeing certain policies or practices, employers simply should state that the company encourages such practices, but also that the company reserves the right not to apply such policies in particular instances. Instead of distributing written materials to employees stating which policies the employer encourages, employers should distribute the materials only to supervisors.

Preemployment Offer Letters

The implied-contract exception also has been extended to statements in preemployment offer letters. See Dorman v. Petrol Aspen, Inc., 914 P.2d 909 (Colo. 1996); Snoey v. Advanced Forming Tech., Inc., 844 F. Supp. 1394, 1401 (D. Colo. 1994).

Oral Statements

The implied-contract exception has been extended not only to written statements by the...