Recent Change to Employment-At-Will Doctrine

In Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579 (1980), the Michigan Supreme Court was in the vanguard of a nationwide experiment in which courts, under varying theories, extended job security to nonunionized employees. Toussaint stood for the proposition that the presumption of at-will employment may be overcome by evidence of oral or written assurances by the employer that an employee's job will not be terminated absent just cause. The Michigan Supreme Court's landmark decision in Toussaint, became the national trend which exemplifies an implied contract theory of employment.

Following Toussaint, the Michigan Supreme Court rendered decisions in Rowe v Montgomery Ward (1991) and in Rood v General Dynamics Corp. (1993) which attenuated the Toussaint decision. Now, as a result of these decisions, oral representations must clearly indicate an intention on the part of the employer to terminate only for cause, and such representations must not be contrary to any specific written policy contained in any policy manual or benefits package provided by the employer.

Further, even if an oral contract existed at the time of hiring which limited terms for termination, that employee could later become an employee-at-will by signing an employee-at-will agreement and the employee can be terminated for doing any of the things previously accepted by the employer. For instance, in Scholz v Montgomery Ward & Co., 437 Mich 83 (1991), an employee was assured when hired that she would not have to work on Sundays. Once she signed an employee-at-will agreement, her employer was able to terminate her for refusing to work on Sundays.

Despite employment-at-will status, an employer cannot terminate an employee in violation of civil rights laws, such as the Elliott-Larsen Civil Rights Act, Michigan Handicapper's Civil Rights Act, and the Michigan Whistleblower's Act.

The most recent change to the employment-at-will doctrine involves claims of fraudulent misrepresentation. In Clement-Rowe v Michigan Health Care Corp., 212 Mich App 503 (1995), the Court recognized a cause of action in fraud when an employer reassured an out-of-town prospective employee that sufficient funds had been allocated for her new position. She relied on the misrepresentations, accepted the job and moved. A month later, the employer terminated her position due to a severe financial crisis, the Court held the employee stated cause of action in fraud and also in silent fraud since the employer had a duty to disclose his known economic instability.

While the majority of states continue to respect the viability of implied contracts at employment, a growing minority of states are beginning to circumvent the Toussaint rule, strictly enforcing employment-at-will agreements. Clement – Rowe represents this trend.