Some Arizona employers may be surprised to learn that their "at-will" employees have employment contracts. The Arizona Employment Protection Act explicitly states that the employment relationship is contractual in nature. This means that even if you do not have a written agreement with an employee, you still have a contract, but it is made up of all the promises, whether verbal or written, exchanged between the parties. These promises can be found in such things as offer letters, handbooks and policies, company practices, manager statements, and even letters from the president.
In the well-known case of Demasse v. ITT Corp., 194 Ariz. 500, 184 P.2d 1138 (1999), the Arizona Supreme Court held that an employer does not have the right to unilaterally change the contractual terms of an employment policy found in an employee handbook. Following Demasse, most employers have been cautious to ensure that their employment handbooks contain a clear disclaimer saying that nothing in the handbook can be construed as a contract. Most handbooks also state in a clear and conspicuous manner that the employee’s employment with the company is at-will and that management reserves the right to issue a new handbook or manual or to deviate from the policies contained in the handbook.
Even with these measures, however, an employee still has a contract and may claim that other policies, letters, memoranda, practices, or statements made by the employer provide the employee with a reasonable expectation of job security thereby overcoming the at-will presumption.
Wise employers take control of the situation by getting all employees to sign a written at-will employment contract. Such a contract does not need to be long or complex. In fact, in most cases, the shorter the better. But a written contract stating that the relationship is at-will eliminates any speculation about the matter.
Regardless of the length of the contract, a few specific terms are vital. For example, similar to employee handbooks, the at-will employment contract should specifically state that the employer has the sole right to modify or change the terms and conditions of employment, including salary, compensation and benefits. The employer and employee should also agree that if a dispute arises, Arizona law will govern how the dispute is resolved —a clause that is vital to Arizona employers with employees in multiple states. Finally, the employer and employee should agree that there are no other promises between them.
Such a contact not only protects the employer from claims based upon unintended promises, it also gives the employee a clear understanding of her relationship with the employer—a benefit most employees welcome, even in an at-will relationship.
For further information on at-will employment or employment contracts, please contact Eric B. Johnson at 602-229-5425 or ejohnson@quarles.com or your Quarles & Brady attorney.