I. INTRODUCTION
Most Nebraska employers have heard the statement that absent a contractual relationship, their employees are employed at will and may be dismissed for any legal reason or for no reason at all. From time to time however, questions are fielded as to whether this is still the law, in that the “at-will” doctrine has been perceived as either eroding or reinterpreted by court decisions over the last few years. There is some merit to this perception in that there have been several court decisions, including Nebraska court decisions, holding that oral or written promises, employment policies or employment policy manuals can constitute agreements or contacts between an employer and an employee. Understanding the “at-will” doctrine and keeping abreast of the most recent court decisions are keys to taking any action to reinforce the “at-will” nature of employment and lessening the risk of being sued for either wrongful discharge or breach of contract should an employee be terminated.
II. EMPLOYMENT-AT-WILL DOCTRINE
The employment-at-will doctrine is a common law rule that is recognized in Nebraska case law. The general rule may be explained as follows: in the absence of an agreement specifically fixing the term of employment or unless altered by contract, an employee is free to resign and an employer is free to terminate its employees at any time and for any reason. In other words, the employment relationship is “at the will” of either employer or employee. Resignation by or dismissal of employees may be for good cause, bad cause or no cause at all. There is no requirement that prior notice be given to terminate an at-will employment relationship, but again, this is conditioned on the premise that the parties have not entered into any oral or written contractual agreement.
III. LIMITATIONS OF THE EMPLOYMENT-AT-WILL DOCTRINE
A. Implied Contract Theory
There are conditions however, when Nebraska law may limit an employer’s ability to discharge an “at-will” employee. Nebraska courts have recognized “implied contract” rights that govern the employer’s ability to discharge an at-will employee. After examining the facts surrounding employment, where the parties intended a continued relationship, Nebraska courts have required that cause be shown to discharge an employee. Under one such implied contract theory – the “promissory estoppel” doctrine – Nebraska courts have enforced promises of continued employment.
B. Public Policy Exception
The general rule regarding “at-will” employment may be subject to the “violation of public policy” exception. While there is no clear definition as to what may constitute a violation of public policy, there have been a line of cases decided by the Nebraska Supreme Court that give some guidance as to when the exception may apply. These cases have been limited to areas of the law wherein the legislature has indicated a strong public policy interest.
In the case of Ambroz v. Cornhusker Square Ltd., 226 Neb. 899 (1987), the Nebraska Supreme Court held that a security guard was wrongfully terminated when he refused to submit to a polygraph examination. The Nebraska Truth and Deception Examiner’s Act expressly prohibits (with certain exceptions) a prospective employer or current employer from conditioning employment or continued employment of an applicant or employee on submission to a polygraph examination. The Court stated that:
“The right of an employer to terminate employees at will should be restricted to exceptions created by statute or those instances where a very clear mandate of public policy has been violated. This case falls within that rule.”
The following year, in Schriner v. Meginnis Ford Company, 228 Neb. 85 (1988), the Nebraska Supreme Court considered the alleged wrongful termination of an at-will employee who served as a mechanic at Meginnis Ford. The employee had purchased a used car from Meginnis, subsequently suspected odometer fraud, and reported the suspicion to the Attorney General’s Office. After an investigation had concluded there was insufficient evidence of fraud, the employee was terminated. While Nebraska law recognized odometer fraud as a criminal offense, there was no state statute that expressly prohibited the termination of an employee who either alleged or reported such fraud. Regardless, the Nebraska Supreme Court held that the odometer fraud statute was a “clear declaration by the Legislature of important public policy” and, quoting from an Illinois Supreme Court case, further stated “that there is no public policy more basic than the enforcement of a state’s criminal code.” The Court held that an exception to employment-at-will will apply when “an at-will employee acts in good faith and upon reasonable cause in reporting his employer’s violation of the criminal code.”
The Nebraska Court of Appeals considered a public policy exception in the case of Simonsen v. Hendricks Sodding & Landscaping Inc., 5 Neb. App. 263 (1997). Simonsen was an at-will employee who was terminated from employment for refusing to drive a truck with defective brakes. The Appeals Court, in ruling that the employee had been wrongfully terminated, relied upon a Nebraska statute that makes it a misdemeanor offense to drive a truck with defective brakes and also relied on Neb.Rev.Stat. § 48-1114(3) of the Nebraska Fair Employment Practice Act which states that:
It shall be an unlawful employment practice for an employer to discriminate against any of his or her employees . . . because [the employee] has opposed any practice or refused to carry out any action unlawful under federal law or the laws of this state.
As an aside, it is interesting to note that the employer in this case did not have a sufficient number of employees to be subject to the Nebraska Fair Employment Practice Act, yet the Appeals Court used the Act to support its conclusion that the employee’s termination was a violation of public policy, and therefore, was an exception to the employment-at-will doctrine.
Subsequently, two Nebraska Supreme Court cases further explored the public policy exception. Malone v. American Business Information, 262 Neb. 733 (2001) and Jackson v. Morris Communications Corp., 265 Neb. 423 (2003) involved employees who had been terminated for exercising rights respectively under the Nebraska Wage Payment and Collection Act and the Nebraska Workers’ Compensation Act. While neither of the Acts expressly prohibited an employer from terminating an employee exercising rights under the Acts, the Court considered the public policy exception issue in each case and reached opposite conclusions. In Malone, the Court held that:
“the Nebraska Wage Payment and Collection Act does not represent a ‘very clear mandate of public policy’ which would warrant recognition of an exception to the employment-at-will doctrine . . . The act is primarily remedial in nature, providing specific procedures for the enforcement of substantive rights to compensation for work performed which arise not from the statute but from the employment relation itself . . . [T]he act contains no criminal penalties nor any specific provision restricting the employer’s common-law right to discharge an at-will employee. Thus, while the act provides Malone with a remedy to collect any compensation which [the employer] may owe her, it does not ‘declare . . . an important public policy with such clarity as to provide a basis for a civil action for wrongful discharge.’"
In Jackson, the Court distinguished the Nebraska Worker’s Compensation Act and found it to be a “clear mandate of public policy” that was been consistently “liberally construed” and that provides monetary relief to injured employees without having to prove employer negligence or employer fault.
The reasoning used in these two rulings brought about opposite results and thus makes it difficult to predict which statutory laws may or may not be held as a “clear mandate of public policy” that constitutes an exception to the employment-at-will doctrine.
Under the public policy exception recognized in Jackson, an employee may claim damages for wrongful discharge when the motivation for the firing contravenes public policy. More recently, the Nebraska Supreme Court extended the public policy exception to also include retaliatory demotion. In Trosper v. Bag N’ Save 273 Neb. 855 (2007), an employee working as a deli manager at the time she suffered a work-related injury, was subsequently demoted to deli clerk after reporting her injury, resulting in a decrease in annual salary. Trosper brought action against her employer, alleging that she was demoted as a result of her pursuit of the workers’ compensation claim. The Nebraska Supreme Court held that a cause of action for retaliatory demotion exists when an employer demotes an employee for filing a workers’ compensation claim, reasoning that “If we fail to recognize a claim for retaliatory demotion, it would create an incentive for employers to merely demote, rather than discharge employees who exercise their rights."
IV. IMPLICATIONS OF EMPLOYMENT POLICY MANUALS
An Employment Policy Manual (or other document such as an employee handbook, personnel handbook or a collection of personnel policies or employer statements) has been used as the foundation in employment litigation to allege that an express and implied contract has been formed to limit an employer’s decision to terminate an employee without cause. Absent contractual employment agreements, most employers consider such documents as guides that present disciplinary policy, office procedures, evaluation procedures, grounds for employee termination, descriptions of benefits and statutory employment issues. While Nebraska courts have shown some reluctance to alter an employment-at-will relationship, representations or promises that an employer may make in such handbooks, manuals or policies may be considered contractual agreements if an employee relies on such representations or promises to their detriment. Such documents comprise a component or evidence of an employment contract and, should relevant facts be present to support the evidence, the documents may create limitations on an employer’s right to discharge an employee.
Therefore, the utmost care should be taken when drafting employment policies or procedure or provisions that will be contained in an employee handbook or manual, in order to avoid the possibility that such documents may be interpreted by a court as the creation of an implied contract or to raise the issue of promissory estoppel.
For this reason, legal counsel has often recommended that an employer insert a well-drafted express, written “disclaimer” provision in employment policies, procedures, manuals or handbooks. Such disclaimers are usually drafted to inform employees that the document does not form an employment contract in order to limit the scope and potential liability arising from any representations made.
It should be noted however, that contractual liability arising from an employee handbook has been imposed even where a disclaimer was present. A poorly-drafted, inconsistent or ambiguous disclaimer may lead to litigation and ultimate liability. A “faulty” disclaimer has been reviewed by the courts and Nebraska common law could be used to hold an employer liable under the implied contract doctrine for creating an employment contract.
When an employer has written policies or procedures or utilizes an employee manual or handbook, Nebraska courts have held that the employer should follow these provisions, unless there is an express provision stating that the employer may exercise its discretion in implementing the policies or procedures, handbook or manual.
V. CONCLUSION
All employee policies, procedures, manuals or handbooks should be reviewed by your financial institution’s employment law counsel prior to implementation.
When drafting such documents, there are several points that should be considered: