Chapter 22 - § 22.2 • AT-WILL EMPLOYMENT AND ITS EXCEPTIONS

• Jurisdiction: Colorado

§ 22.2 • AT-WILL EMPLOYMENT AND ITS EXCEPTIONS

§ 22.2.1-At-Will Employment

The traditional rule in Colorado is that, absent an agreement stating otherwise, the relationship between an employer and employee is "at-will," meaning that, absent a specific term of employment, either the employer or the employee may terminate the relationship at any time, with or without notice or cause.¹ Obviously, this doctrine provides both the employer and employee great flexibility.

Over the last several decades, Colorado has recognized several exceptions to the "at-will" doctrine, permitting employees to sue on a variety of "wrongful discharge" theories. Wrongful discharge claims most often are brought on theories of breach of an express or implied contract, promissory estoppel, or discharge in violation of public policy.² Under contract or promissory estoppel theories, former employees may claim that their former employer breached the underlying employment agreement, or that their former employer broke promises it had made to them when it discharged the employee. Such alleged promises may include statements made in employee handbooks, employment applications, or other written policy manuals and materials. In some instances, former employees may allege that they were wrongfully discharged in violation of public policy because they refused to do something illegal on the employer's behalf, or because they exercised a protected right.³ In addition, they may allege other tort claims, such as intentional infliction of emotional distress or misrepresentation.

Although the "at-will" doctrine has not been completely supplanted by a "for cause" standard, Colorado employers will find it difficult to defend wrongful discharge suits on the theory that they have unbridled discretion to let employees go without cause. Jurors tend to be unsympathetic to an employer that discharged an employee as a mere exercise of its "at-will" right. As a practical matter, Colorado employers should be ready to demonstrate sound business reasons for terminating an employee.

§ 22.2.2-At-Will Exception: Implied Contracts and Promissory Estoppel

In Continental Air Lines, Inc. v. Keenan,⁴ the Colorado Supreme Court held that the presumption of at-will employment is rebuttable under certain circumstances, particularly when an employer promulgates termination policies that suggest the employee is not employed at the will of the company. In the wake of Keenan, countless employees have sued their former employers under a theory of breach of contract for allegedly failing to follow an employee termination (or other) policy.⁵ According to Keenan, an employee may pursue relief under two possible theories: an implied contract or promissory estoppel.⁶ Under the implied contract theory, an employee normally claims to be entitled to relief because the employer, by promulgating certain termination procedures, allegedly was making an offer to the employee of continuing employment, and the employee's initial or continued employment constituted acceptance of and consideration for those procedures, thereby forming a contract of employment between the employer and employee.⁷ Alternatively, under a promissory estoppel theory, an employee may be entitled to relief if he or she can demonstrate that the employer reasonably should have expected the employee to consider the employee discipline or termination policy as a commitment from the employer to follow those procedures, that the employee reasonably relied on those procedures to his or her detriment, and that injustice can be avoided only by enforcement of the procedures.⁸ As a result, it is vital that Colorado employers review the wording of their employee handbooks to avoid language implying that the company must follow a certain procedure or process before discharging an employee, or that any reason must exist before the company can effect a termination or other discipline. Likewise, employers should delete other references in personnel materials that imply that an employee is not employed at the will of the company, such as referring to employees as "permanent."

Generally, Colorado's three-year statute of limitations applies to such claims.⁹ For civil actions filed on or after July 1, 2004, emotional distress damages are recoverable only if specifically authorized by the alleged employment contract.¹⁰ As to damages available to a prevailing plaintiff on a promissory estoppel claim, the law is unclear. The Colorado Supreme Court has held that in promissory estoppel cases, "full-scale enforcement by normal [contract] remedies is appropriate."¹¹ However, in an earlier decision, the Colorado Supreme Court stated that "promissory estoppel is not defined totally in terms of contract principles" and remedies "may be limited as justice requires."¹² Whether emotional distress damages are available to a prevailing plaintiff in a promissory estoppel case has not yet been addressed.

One of the best defenses against a wrongful discharge claim based on a theory of implied contract or promissory estoppel is an express, written disclaimer stating that the employee handbook, and any other policy statements by the employer, such as employment applications or procedure rules, do not change the employee's at-will status. Such clear and conspicuous disclaimers can show that an employer did not intend to create a contract, and that the employee could not reasonably rely on statements of the employer as an enforceable contract or promise.¹³ Carefully drafted...