Legal Memorandum: Employee Manuals as Implied-in-Fact Contracts

Issue: Whether the terms of an employee manual can be used to allege that an employee may only be removed for cause and after notice and an opportunity to be heard, and a breach of that contract.

Under Utah law, “the terms of an employee manual can operate as implied-in-fact contract terms … fixing the terms of the employee relationship.”  Johnson v. Morton Thiokol, Inc., 818 P.2d 997, 1000 (Utah 1991) (citing Berube v. Fashion Centre, Ltd., 771 P.2d 1033 (Utah 1989)).  The Utah Supreme Court recognized, “an implied contract may ‘arise from a variety of sources, including the conduct of the parties, announced personnel policies, practices of that particular trade or industry, or other circumstances.'”  Canfield v. Layton City, 122 P.3d 622, 626 (Utah 2005) (citation omitted).  The employer’s oral statements also can rebut a presumption of at-will employment.  “In addition to a promise for a specified employment term or a for-cause requirement for termination, an employer can, for example, agree to use a certain procedure for firing employees or promise not to fire employees for a certain reason, thereby modifying the employee’s at-will status.”  Sanderson v. First Sec. Leasing Co., 844 P.2d 303, 307 (Utah 1992).  “[T]he continued performance of the employee’s duties is adequate consideration for such an implied contract provision.”  Johnson, 818 P.2d at 1000-01.  Such an employment contract is unilateral; the flexibility of the employment relationship is affected.  Id. at 1002.  “The employee’s retention of employment constitutes acceptance of the offer of a unilateral contract; by continuing to stay on the job, although free to leave, the employment supplies the necessary consideration for the offer.”  Id.  (holding there was no […]