Warning: “Offer Letters” Are Employment Contracts!

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Offer letters employment contract Alabama Employment Law
Employers should exercise caution when providing new employees with offer letters

Many of my clients use “offer letters” to hire new employees.  Those letters generally inform a new employee about the job they are being offered and the salary they will be paid.  And, those letters ask the employee to sign that they accept the job.  Frequently, my clients are surprised when I tell them that their “offer letter” is a binding employment contract.  “It’s only a letter! We weren’t signing a contract!  There’s no details.”  But, one of the earliest lessons that law students learn is that a contract is created by “offer” and “acceptance.”  That’s exactly what an “offer letter” is.

The creation of an employment contract by an offer letter was one the key issues in Physiotherapy Associates, Inc. v. Deloach, No. 1:16-cv-02014-ACA, 0218 WL 4409349 (N.D. Ala. Sep. 17, 2018).  In that case, James Doug DeLoach signed an offer letter that contained extensive non-competition and non-solicitation requirements:  If DeLoach left his employer, he couldn’t compete or solicit employees.  But, the offer letter said that it was “not intended to create a contract of employment.”

Mr. DeLoach left his employment and went to work for a competitor.  When he was sued for breaching an employment contract, he argued that the offer letter meant what it said — it wasn’t an enforceable employment contract.  United States District court Judge Annemarie Carney Axon was not persuaded.  She found that the non-competition and non-solicitation provisions were enforceable.  Ultimately, Judge Axon ruled in Mr. DeLoach’s favor.  She essentially found that the non-competition and non-solicitation provisions were poorly-drafted.  And, Mr. DeLoach did not breach either of those provisions — as drafted.

Thus, the DeLoach case provides at least two lessons for Alabama employers.  First, if you use offer letters, I strongly recommend that you include language in the letter informing the employee that they will be an “at will” employee.  Otherwise, there is some potential to create an employment contract for a specific term.  Second, carefully review the language of your offer letters.  Don’t just assume that “form” language is going to apply to this employee.  If you have provisions that you want to enforce later, a reviewing Judge will hold your strictly to your own language.

An Employee’s Insistence on Enforcing “Rules” Can Be Insubordination.

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Employees who disregard workplace directives in favor of their interpretation of the “rules” may be insubordinate.

I frequently encounter employees who think that workplace rules make them bulletproof.  Usually, these employees have memorized their employer’s handbook and know it better than the Human Resources staff.  They then insist that any workplace action must be taken in compliance with the “rules.”  And, they think that any action which contradicts the “rules” must be invalid.  One employee recently learned the hard way that his insistence upon the “rules” amounted to insubordination, which justified termination of his employment.  Veasy v. Sheriff of Palm Beach County, No. 17-13174, 2018 WL 3868674 (11th Cir. Aug. 14, 2018).

Wilbur Veasy was employed as a corrections officer by the Palm Beach County Sheriff for 25 years.  Over the course of those 25 years, he was written-up for insubordination six times.  He is African-American.  On February 5, 2013, Mr. Veasy was directed to submit to a random urine drug screen.  In accordance with written policy, Mr. Veasy appeared at the Sheriff’s Internal Affairs Office to submit his urine sample.  But, despite the language of the written policy, the Sheriff’s Office had not accepted urine samples at Internal Affairs for more than four (4) years.  Thus, upon arrival, Mr. Veasy was directed to drive his personal car to a third-party contractor’s office to submit a sample.

Mr. Veasy refused.  He insisted that the Sheriff Department’s policy did not require him to drive his personal vehicle to a testing facility.  Mr. Veasy requested an “official vehicle” to drive to the testing facility.  A sergeant denied Mr. Veasy’s request, and ordered that Mr. Veasy drive to the testing facility.  When Mr. Veasy refused, the matter was referred to the Sheriff.    The Sheriff gave Mr. Veasy two options: either drive to the test site in his personal vehicle or be placed on administrative leave.  Mr. Veasy responded that his “2007 red four door Tacoma is not going,” and the  Sheriff placed him on administrative leave.  Mr. Veasy was ultimately terminated for refusing to comply with a direct order and for refusing to submit to a random drug screen.

Mr. Veasy sued for race discrimination.  The Eleventh Circuit assumed that he could prove a basic (prima facie) case of discrimination.  But, Mr. Veasy could not rebut the Sheriff’s legitimate nondiscriminatory reason for termination:  insubordination.  Mr. Veasy tried to argue that he had not actually violated a work rule.  After all, the Sheriff’s written policy said to arrive at Internal Affairs ready to submit a sample, and he did just that.  The Eleventh Circuit was not persuaded.  The issue was not whether Mr. Veasy violated the written rule, but whether he was insubordinate when he refused two direct orders to travel to the third-party contractor’s office.  The Eleventh Circuit found he was insubordinate, and affirmed dismissal of his discrimination claim.

Overzealous employers might be tempted to read Veazy to permit them to terminate an employee for insubordination any time the employee refuses a direct order.  To quote Lee Corso:  “Not so fast, my friend.”  There are numerous factors that need to be considered before any employee is terminated.  Probably, the most important factor is treatment of other similar employees who refuse direct orders.  So, if an employer only terminates insubordinate employees in a protected class, then the termination might be impermissible.  Veazy is more of a cautionary tale for employees to be careful about their insistence on work rules.

 

 

3 Alabama Laws That Provide Protection For Whistleblowers

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Man with Red Whistle in Office
Man with Red Whistle in Office

Many employees like to complain about their work environment.  In large part, Alabama law provides no protections to employees who complain about work conditions, because Alabama is an employment-at-will state.  This means that, in the absence of an employment contract, employees can generally be fired for a good reason, a bad reason or no reason at all.

Nevertheless, Alabama provides at least three statutes which limit the ability of employers to terminate employees who make reports about work conditions:

  1. Alabama Code Section 25-5-11.1 prevents employers from terminating employees who file written notices of safety violations.
  2. Alabama Code Section 25-8-57 protects employees who oppose or report violations of Alabama’s Child Labor Laws.
  3. Alabama Code Section 36-26A-3 prohibits adverse actions against a limited set of governmental employees who report wrongdoing by their supervisors.

While Alabama law provides very little protection for employees, there are numerous federal laws that do protect employees.  Therefore, you should consult your attorney before disciplining an employee who complains about their work environment.

Alabama Supreme Court Allows “At Will” Employee to Sue Based Upon Promises Made During Interview Process.

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Fraud

The Alabama Supreme Court recently upheld an award of $600,000 in compensatory damages to an “at will” employee who sued his employer for fraud. See Farmers Insurance Exchange v. Morris, No. 1121091, 2016 WL 661671 (Ala. Feb. 12, 2016). In Morris, the employee was working as an independent insurance agent at his father’s insurance agency. He wanted to continue working for his father, but also join Farmers Insurance Company as an agent. He repeatedly asked Farmers representatives if he could work for both his father and Farmers. He was told that such a relationship was permissible. Although there was conflicting evidence, the jury found that the employee was ultimately terminated by Farmers because of a conflict of interest policy which actually prohibited the employee from working for both Farmers and his father.

The employee argued that Farmers fraudulently induced him into giving up business with his father’s agency — business which Farmers retained after termination. A crucial element of fraud is detrimental reliance — the recipient of a promise takes detrimental action in reliance on the promise. In this case, the employee claimed that he detrimentally relied upon Farmers’ promise that there was no conflict of interest.

Farmers argued that the employee was an “at will” employee of Farmers, who could be terminated from employment at any time. As a result, he could not rely upon his belief that he would continue to work at Farmers and receive payment from Farmers in the future. The Alabama Supreme Court rejected that argument: “When an employee leaves one job for another based on a representation by the new employer regarding the new job that is not true at the time it is made, the new employer cannot hide behind the fact that Alabama law enforces or reads into the new employment contract an ‘at will’ clause to avoid the consequences of its fraud.”

The key lesson for employers is to attempt to learn all of the promises made to potential employees in the course of interviews. This can be a difficult task, but the key is documentation. In the course of interviews, executives need to make comprehensive notes of the questions asked by applicants and the answers given by the executive. With that documentation, employers can better defend potential claims for fraud based upon the interview process.