All employment relationships are contractual, whether or not a contract is ever reduced to writing. There are various types of employment contracts. Some are considered implied contracts created by offer letters presented to potential employees. Some are created by the language in an employee handbook. When specific statements and/or policies found in an employee handbook have been communicated to an employee, an implied contract may result if the language is specific enough to constitute an offer under Alabama contract law.
Collective bargaining agreements and union contracts are also examples. Even an at-will employment relationship is a contractual one, where either the employer or employee is free to end the employment relationship at any time and for any reason, as long as it is not illegal.
In some situations, the parties choose to draft an individual written employment agreement. Although Alabama is an employment-at-will state, and there is a strong presumption in favor of the at-will standard, Alabama courts can enforce written or implied contracts based on a clear and specific promise of employment for a certain duration.
What are contracts of employment?
An employer and employee can enter into either an express or
implied agreement that modifies the "at-will" employment relationship presumed by Alabama law. An express agreement is usually written and sets forth the specific terms of the employment relationship. An implied agreement can be created by representations made to the employee which constitute an offer of employment. In Alabama, to be enforceable, an employment contract must be in writing,
unless it is capable of being performed within a year.
An employment contract can limit the employer's ability to terminate the employee for any reason. It can also limit the employer's ability to discharge the employee at any time. Usually, these contracts will set forth specific types of events or circumstances justifying termination.
Lifetime Employment Contracts and Contracts for a Specific Duration
In some cases, employers will guarantee employment. One common example is a tenured professor position. In order to create an employment contract that is not terminable "at will," there must be an offer for lifetime employment or for employment for a specific period of time, there must be substantial consideration, independent of the service(s) to be performed by the employee, and authority by the promissor to actually bind the employer. Contracts that are intended to last for an employee's lifetime do not need to be in writing because it is possible that the employee may die within a year of executing the contract.
Contracts Created by Employee Handbooks
Alabama Courts have determined in case law that certain statements included in Employee Handbooks can constitute an actual or implied contract that modifies the at-will status of an employee. If the language in an employment policy or handbook (or any other official document) is specific enough to constitute an offer communicated to the employee, that offer of employee is accepted when the employee continues to work after receiving the offer. The offer is considered communicated to the employee when handbook or policies containing the offer are issued to the employee.
These are just some general issues relating to employment contracts. If you have any further questions, or need an employment attorney to review or draft an employment contract, please contact us.