What is an Implied Employment Contract in Arizona?

Like the vast majority of other states, Arizona is an “at-will” employment state. This term means that either the employer or you, the employee, can terminate your employment at any time and for (almost) any reason. Neither you nor your employer must give the other any notice in advance that you intend to end the employment contract (although, as a matter of professional courtesy, you might still consider doing so unless there are compelling reasons why you must leave your job immediately).

The right of an employer to terminate your employment “at will” is not without its limits, however. Your employer cannot, for example, terminate your employment because of your sex, race, ethnicity, or any other “protected” classification. Your employer’s right to terminate you at will may also be limited if you and the employer entered into an “implied contract.”

What is an “Implied Employment Contract”?

Employment contractAs the name suggests, an “implied” contract is the antithesis of an express contract. An express contract is an agreement that two parties clearly and unambiguously entered into and (in most cases) memorialized the terms thereof in a written document. An implied contract, on the other hand, is an agreement that the two parties may not have explicitly intended to enter into, but that is nonetheless present and discernible because of the behaviors or actions of the parties.
For example, an express employment contract exists when your employer says, “[o]nce you work here for one year, you will earn one week’s worth of vacation time.” Although the parties to the contract would (in all likelihood) memorialize this statement in a written document, this express contract exists once your employer makes the statement. After one year of employment, your employer has promised to provide you with vacation time.

An implied contract, however, is discernible only by the actions and behaviors of the parties. For example, your employer may not say that he or she will not fire you unless there is just cause for doing so. Nevertheless, an implied promise not to terminate your employment except for cause may exist if: (1) the employee handbook suggests that employees will only fire for cause; (2) the employer’s practice and habit has been to terminate employees only for cause; or (3) other circumstances would lead a reasonable person to conclude that the employer has promised not to fire the person except for just cause.

Can I Be Terminated if There is an Implied Contract?

implied employment contractIf an implied contract exists that your employer will not terminate you except for cause, then your employer may not be able to terminate you at will. This means that if a court believes a reasonable person in your situation would have believed (based on your employer’s statements and/or behavior and practices) that he or she would not be terminated except for just cause and your employer terminates you without having just cause for doing so, your termination may be wrongful. If your termination is determined to have been wrongful, you may be able to recover financial compensation for your lost wages, any humiliation or embarrassment you suffered, and/or be reinstated to your former position.

The burden would be on you – the wrongfully terminated employee – to introduce sufficient evidence and/or testimony that would establish the existence of an implied contract. While a court may consider your subjective beliefs and understanding, what will ultimately control the court’s decision is whether your beliefs and perceptions are reasonable based on the circumstances.  For more information read the Arizona Senate brief on employment laws.

Employee manuals may contain implicit promises not to terminate without just cause. Also, your employment letter or welcome letter may contain these types of promises. Finally, the company’s own policies and/or history in terminating employees may be sufficient to show that an implied contract existed.