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The Employee’s Handbook: Implied-in-Fact Employment Contracts

The Arizona Employee Protection Act more accurately protects employers. It requires that all employment contracts which restrict the right of a party to terminate an employment relationship be in writing and signed by the party to be charged, meaning that an employer’s word has no legal force without an accompanying document.

Contractual employment rights can still be found outside the four corners of the employment contract, but only when certain factors are present. There must be a written policy or statement that is signed by the employer, and the surrounding facts must be such that it was reasonable for the employee to have the expectation that the policy would be followed by the employer. Primarily, these implied-in-fact contracts are found in employer policy statements and personnel handbooks. The key is that if the employer’s signature is anywhere in the potentially-voluminous document, then an implied-in-fact contract term might be found elsewhere in the same document.

Arizona courts have found implied-in-fact terms in an employer’s policy statements regarding job security or employee disciplinary procedures, such as those contained in personnel manuals or memoranda. See, e.g., Leikvold v. Valley View Cmty. Hosp., 141 Ariz. 544, 546, 688 P.2d 170, 172 (1984); Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025 (Ariz., 1985). The test used for finding implied-in-fact contract terms is whether the language instills reasonable expectations of job security or gives employees a reason to rely on representations in the manual. Leikvold, 141 Ariz. at 548, 688 P.2d 170. Evidence relevant to this factual determination includes the language used in the personnel manual as well as the employer’s course of conduct and oral representations regarding it. Wagenseller at 383.

Another relevant factor in determining whether the employee had reason to rely on the employer’s representation is the presence or absence of language that the statements in the document should not be relied upon by the employee. The question is whether the language of limitation is clear and conspicuous.

For example, in Loffa v. Intel Corp., the employee signed a one-page form entitled “Employee Agreement” that contained a statement in paragraph five that read, in part, “This Agreement … does not in any way restrict my right or the right of INTEL to terminate my employment.” Loffa v. Intel Corp., 153 Ariz. 539, 738 P.2d 1146 (Ariz. App., 1987). The court held that this language did not prevent the disciplinary procedures referenced in other materials given to new employees from being considered part of the employment agreement.

In Jeski v. American Exp. Co., language in the personnel manual providing that employment “can be terminated at any time by either the Company or yourself,” was inconsistent with other language in the manual purporting to make a number of assurances of fair treatment, personal respect, and job security. Jeski v. American Exp. Co., 708 P.2d 110, 147 Ariz. 19 (Ariz. App., 1985).

Employment law is a complex field with legal and procedural hurdles that may make it difficult for you to assert your rights without an attorney’s help. If you have suffered an adverse employment action, please contact the Prescott Law Group at (928) 445-1909. We will fight for you.


More information:

The Arizona Employee Protection Act, A.R.S. § 23-1501(A)(2)