Employment may be governed by a contract or, if none exists, basic rules of law. These basic rules have existed for centuries and provide an understanding of what will happen without a contract.
At-Will Employment Default and Exceptions
Unless there is an employment contract or agreement, employment in Minnesota is “at-will.” This means that either the employer or the employee may terminate the employment relationship at any time and for no reason at all. Until terminated by the employer or the employee, the length of employment is indefinite. There are three exceptions to the at-will rule:
- where there is independent consideration, or an independent promise or action, beyond employment services given by the employee, a contract may be created limiting termination of employment only to circumstances where there is good cause,
- where one person promises something to another , that promise induces the other to take some action in reliance on the promise, and a decision not to enforce the promise would harm the other party, the promise will be enforced, and
- where the termination provisions in an employee manual are specific and definite enough to form a certain type of contract, a unilateral contract, the terms of the employment will no longer be at-will. Termination is for good cause if the employee does not comply with the standards of the job performance that the employer established and uniformly applied.
Employers and employees are free to decide that they do not want to be governed by the standard at-will rule, and contract or agree to something else. Employers and employees are free to agree to terms of employment including length and circumstances permitting termination of employment. Where there is an employment contract, whether written or oral, basic rules of contract law apply. These applicable basic contract rules include how to determine whether a contract has been created and whether it has been breached, or broken.
Basic written contracts can control the employment relationship, including length of the relationship and basis for termination of the relationship. Oral promises can do the same. Some employers and employees agree orally to these terms prior to employment, and some do so in writing signed by both the employer and the employee.
Inferring a Contract
There are other ways, however, that an employment contract may be formed. Sometimes employment handbooks or manuals are considered employment contracts. If an employment manual given to an employee is specific and definite enough, it may constitute an offer to enter particular type of contract, called a “unilateral contract.” An employee’s continued performance will then constitute acceptance of that offer and a contract is formed. If there was a previous contract with different terms, the employee’s continued performance constituting acceptance of the employer’s offer in the employment manual will modify the original contract. An employer’s general statements regarding policy, however, are not sufficient to create a contract.
Contract by Expectation
Additionally, when employees are also part-owners of a close corporation or a corporation that is not publicly traded, an employee may have a legitimate expectation of employment that is not terminable at-will. The conduct of the parties or owners as their relationship continues may also create this expectation, making the employment no longer terminable at-will.