Application of Employment-at-Will Doctrine

When a pharmacist is terminated, the nature of her employment contract comes into question.

ISSUE OF THE CASE

When a pharmacist receives an offer of employment in a letter from a prospective employer that outlines a variety of terms of employment, does that constitute a contract of employment negating the traditional rule applicable in that state that most employment relationships are employment-at-will?

FACTS OF THE CASE

A physician in a Southwestern state sent a letter to a pharmacist who had been discussing the possibility of employment at a community clinic. The letter had several relevant provisions. First, it said “on behalf of (the family practice) we look forward to having you join us. You will be a welcomed addition to the clinic and the community. This offer is pending final contract review and approval.” Second, it stated “this letter will act as a binding agreement between (the family practice) and (the pharmacist) until final contract negotiations are complete. By signing this letter you acknowledge acceptance of the opportunity as well as recognize all recruiting efforts for this position will be terminated and no other pharmacists will be considered. Please sign below and immediately fax to…” The pharmacist did countersign this letter and transmitted the document back to the family practice. For purposes of this legal action both parties agreed that the document was authentic.

About 11 months after starting employment, the pharmacist filed suit against the family practice clinic for terminating her, alleging breach of the employment agreement and seeking contract-based damages plus an award equal to the value of services provided and damages for “detrimental reliance,” ie, an order from the court that the other party perform its obligations under the contract.

The pharmacist moved for summary judgment, asking the judge to rule that there was no material fact at issue that indicated a need for a jury trial. Often a motion for summary judgment is motivated by a desire to avoid the time and expense of a trial when one is not necessary. In response to that motion by the pharmacist, the clinic argued that the pharmacist was an at-will employee and, as a result, could be terminated at any time for any reason or even for no stated reason.

The trial court granted the plaintiff pharmacist’s motion for summary judgment on the issue of liability. That was followed 18 months later by a trial without a jury on the issue of the amount of damages owed. The judgment was that the clinic owed the pharmacist $16,000 for post-employment lost wages, $4000 for relocation expenses, $6000 for attorney’s fees, and $5000 in attorney’s fees for appeal—a total of $31,000.

The employer clinic filed an appeal with a state appellate court seeking review of the summary judgment decision of the trial court.

THE COURT'S RULING

The appellate court ruled that the written agreement exchanged by the parties in the letter did not overcome the presumption in state law that the employment relationship was an employment-at-will relationship. As a result, either party could terminate the relationship at any time for any reason without liability for lost wages. The court did allow the pharmacist to recover the relocation expenses, but disallowed the award of attorney’s fees, sending the case back for a new trial on that issue within the case.

THE COURT'S REASONING

The law of the state in the area of employment contains a strong presumption of employment-at-will relationships. This presumption can only be overcome by the employer unequivocally indicating “a definite intent to be bound not to terminate the employee except under clearly specified circumstances.” While the pharmacist contended that the employer intended to “make a binding contract of employment…for no less than a year,” the court pointed out that “absent a specific agreement to the contrary, employment may be terminated by the employer or the employee for good cause, bad cause, or no cause at all.”

Citing prior cases, the court pointed to this language as not overcoming the employment-at-will presumption: As long as you’re doing your job you will not be terminated unless there is “good reason or good cause to fire you.” Past annual renewals of the employment relationship were not an unequivocal indication of the employer’s intent to be bound for a certain period of time. In this case, the pharmacist pointed to this wording—“$ 100,000 annual salary” plus “1 week paid vacation 1st year, 2 weeks the 2nd”—as indicating that the employment relationship was to run for at least 2 years. The court disagreed, ruling that the terms included in the letter were “insufficient to overcome the presumption” that it was an at-will employment relationship.

Adding to the significance of this case discussion is the fact that 43 of the 50 states follow the employment-at-will doctrine. While interpretations may vary slightly from jurisdiction to jurisdiction, a familiarity with this important concept is important.

Dr. Fink is professor of pharmacy law and policy at the University of Kentucky College of Pharmacy, Lexington.