Employment Contracts

A principal area of litigation has been employment handbooks. The New Jersey Supreme Court held in Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. 284, modified, 101 N.J. 10 (1985), that representations made in employee handbooks are enforceable in certain circumstances:

“[w]hen an employer of a substantial number of employees circulates a manual that, when fairly read, provides that certain benefits are an incident of the employment (including, especially, job security provisions), the judiciary, instead of “grudgingly” conceding the enforceability of those provisions . . . should construe them in accordance with the reasonable expectations of the employees.”

Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. at 297-98.

In so holding, the Woolley court did not make an exception to the doctrine of employment at will in situations where there is an employee handbook, but instead recognized “basic contract principles concerning acceptance of unilateral contracts.” McQuitty v. General Dynamics Corp., 204 N.J. Super. 514, 520 (App.Div. 1985).

The meaning and effect of handbook’s provisions and the circumstances under which handbooks were prepared and distributed are crucial factors to consider in determining whether or not their provisions will be enforced. Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. at 302-04.

Distribution a Key Factor in Enforceability

The extent to which the handbook is distributed is an especially important factor in determining whether it should be considered binding. General distribution of the handbook, “forms a basis for the legal presumptions that (1) the employer intended to be bound and (2) employees were generally aware of and could have reasonably relied upon the manual’s terms.” Alito, N.J. Employment Law (2d ed.), §1:6-1, at 16 (1999).
“The Woolley court found that a presumption of reliance arises and the manual’s provisions become binding at the moment the manual is distributed to the general work force.” Labus v. Navistar Int’l Trans. Corp., 740 F.Supp. 1053, 1062 (D.N.J. 1990).

Conversely, if an employee handbook has not been generally distributed, it cannot form the basis of a Woolley claim, because employees cannot show that they actually relied on their provisions. Alito, N.J. Employment Law (2d ed.), §1:6-1, at 16 (1999).

“Clear and Explicit Language a Key Factor in Enforceability
The court in Woolley found that the language regarding job security was “explicit and clear,” and that comprehensive provisions regarding termination and discipline were set out.” Woolley v. Hoffmann-LaRoche, Inc.¸99 N.J. 284, 306, modified, 101 N.J. 10 (1985).

Contrast this with the following language, which was found to be too vague to establish a promise of promotion:

The policy of Prentice-Hall is that all management personnel be supportive of employee efforts both to improve in their present jobs, and to be promoted to jobs of greater responsibility.

Available jobs will be posted on bulletin boards in accordance with Prentice-Hall’s policy. Employees who apply will be considered on the basis of their skills and abilities.

Where prior experience in any department has given an employee knowledge and familiarity with the character and procedures which are required in the performance of the higher level job, the department head may give preference to such applicant.

Levinson v. Prentice-Hall, Inc., 1988 WL 76383, p.1 (D.N.J. 1988), aff’d in part and rev’d in part, in other grounds, 868 F.2d 588 (3d Cir. 1989).

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Restrictive Covenants for Physicians in New Jersey and New York

New Jersey and New York are both “employment-at-will” states. Without a contract restricting termination (such as a collective bargaining agreement), an employer has the right to discharge an employee at any time for any reason. An employer may fire an employee for “no reason” – or even for a reason that might seem arbitrary and unfair — and the employee is equally free to quit at any time without being required to explain or defend that decision.

Exceptions to At Will Employment

There are a few exceptions to “employment-at-will” in New Jersey and New York. The most significant of these are laws which prohibit discrimination based upon race, creed, national origin, age, handicap, gender, sexual orientation or marital status. For physicians in New York, Public Health Law ‘ 2801-b provides protection of hospital privileges.

“It shall be an improper practice for the governing body of a hospital to . . . deny or withhold from a physician . . . staff membership or professional privileges in a hospital, or to exclude or expel a physician . . . from staff membership in a hospital or curtail, terminate or diminish in any way a physician’s . . . professional privileges in a hospital, without stating the reasons there for, or if the reasons stated are unrelated to standards of patient care, patient welfare, the objectives of the institution or the character or competency of the applicant.”

Employment is presumed to be at will. Though the employment relationship is still considered to be contractual, the “at will” relationship may be terminated at any time by either party. Parties may restrict the right to terminate either by providing that the employment is for a “definite term” or by limiting the circumstances under which the employer may terminate the employee (e.g., for “cause”).

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