Chapter 2 - § 2.1 • EXPRESS CONTRACTS

• Jurisdiction: Colorado

§ 2.1 • EXPRESS CONTRACTS

§ 2.1.1—Contracts For A Specific Term

The parties' intent generally will determine whether a particular employment contract is guaranteed for a specific term, or whether it is indefinite in duration and terminable at will.¹ In Dorman v. Petrol Aspen, Inc., the Colorado Supreme Court held that an offer letter "was fairly susceptible to the interpretation" that it provided for employment for a specific term where it specified the employee's compensation for the first two years and five months, stated that the parties would negotiate about salary in the future, and provided for a stock option that could be exercised only during a one-year period of time in the future. 914 P.2d 909, 914 (Colo. 1996). The court held that, as a result of the ambiguities in that document, which constituted a contract of employment, the plaintiff was entitled to present extrinsic evidence of the parties' intent concerning the employment term. Id. at 915. The Colorado Court of Appeals earlier had held that a trial court erred in not allowing the jury to decide whether employment was for a definite term or was at will where the employment contract provided a guarantee of a specified salary through a specific date. Lee v. Great Empire Broadcasting, Inc., 794 P.2d 1032, 1035 (Colo. App. 1989).

Applying Dorman, the Tenth Circuit in Giannola v. Aspen/Pitkin County Housing Authority, 165 F. App'x 661 (10th Cir. Feb. 7, 2006) (unpublished opinion), reversed a grant of summary judgment in favor of the employer. According to the court, genuine issues of material fact existed regarding whether the written job description given to the plaintiff, coupled with the statements that were made to her regarding the length of her employment, constituted sufficient evidence of a five-year contract of employment. Id. at 665.²

Practice Pointer
The plaintiff's lawyer should examine every document that could support a claim for breach of an express contract. In light of the Dorman and Giannola decisions, such documents include offer letters, stock option plans, job descriptions, and other documents that could support a finding that the parties had intended employment for a specific term. Those documents do not necessarily need to specify that term, and the representations do not necessarily need to have been made in writing to be enforceable. The plaintiff's attorney should be especially vigilant for employer representations made to induce the employee to leave another job. Juries and judges probably will find liability more often for misrepresentations of present fact than for those involving the employer's intentions, and more often for breaches occurring early in the employment relationship than for those occurring later.
Defense attorneys should counsel their clients to include sufficient at-will employment disclaimers in the offer letter, employee handbook, bonus plans, and other policies, and train managers not to make promises regarding career progression or future employment.

§ 2.1.2—Breach Of Contract To Pay Compensation Or To Provide Work

An ex-employee is not obligated to mitigate damages where the employer has breached an agreement to pay the employee a specified amount of money if it did not exercise its option to extend the term of employment. Cherry v. A-P-A Sports, Inc., 662 P.2d 200, 202 (Colo. App. 1983). In Drews v. Denver Recycling Co., the Colorado Court of Appeals held that an employer cannot limit the amount of damages for breach of a contract for specific compensation by attempting to rescind its decision to discharge the employee or by offering to rehire the employee. 727 P.2d 1121, 1123-24 (Colo. App. 1986). In that case, the trial court found that the employer had discharged the employee without cause and that his employment contract provided for specified compensation if he were discharged without cause. Id. at 1123.

As a general rule, "an employer has no duty to provide an opportunity for its employee to work, so long as the employer pays the employee the agreed-upon salary." Van Steenhouse v. Jacor Broadcasting of Colorado, Inc., 958 P.2d 464 (Colo. 1998). However, this duty can be inferred depending upon the circumstances under which the employment agreement was made or the nature of the employment itself. For example, when the anticipated nonmonetary benefits to the employee are a material part of the advantage to be received from employment, an implied promise to provide work will be inferred. The anticipated benefits may be, among other things, "the acquisition of skill or reputation by the employee," or the opportunity to earn performance bonuses. Id. at 467; Montemayor v. Jacor Communications, Inc., 64 P.3d 916, 920-21 (Colo. App. 2002) (employment agreement implied a promise to provide plaintiff with executive-level work).

Where an agreement contains no express provision making a salesperson personally liable for commissions paid in excess of commissions earned, the employer can recover those excess commissions only out of future commission payments. Badger v. Nu-Tone Prods. Co., 425 P.2d 698 (Colo. 1967). Clear and unambiguous language to the effect that the excess of advances over commissions earned shall be a debt of the employee, however, will create personal liability. Nu-Tone Prods. Co. v. Markham, 481 P.2d 719, 720 (Colo. 1971).

Practice Pointer
Because of the Dorman decision, typical offer letters that refer to beginning and future salary range, long-range planning and responsibilities, and future participation in a stock-option program may create an express contract of employment. Defense counsel should, therefore, advise their clients to be very careful about the language they use in their offer

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