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Employers often take steps to motivate employees, aiming to boost performance and morale. But these actions can sometimes bind employers to promises they didn’t intend to make, creating implied employment contracts. 

To avoid this, it is important to understand how implied contracts can arise, which is critical for employers seeking to manage their workforce effectively without exposing themselves to unnecessary legal risks. 

Understanding Implied Contracts 

Most jobs are governed by an at-will standard. This means either the employer or the employee can terminate the employment relationship at any time, for any reason (or no reason at all), as long as it’s not an illegal reason (e.g., discrimination or retaliation). 

However, an implied contract can supersede at-will employment. Unlike explicit written contracts, an implied contract is formed based on the actions, behaviors, or statements of an employer that lead the employee to reasonably believe their job security is assured or that they will receive specific benefits or treatment. 

Implied contracts are often unintentional. They are formed when an employer makes promises or assurances, whether verbally or through written communications like emails, employee handbooks, or performance reviews, that lead employees to believe they have certain job protections or benefits. While the employer may not have intended to create a binding agreement, courts may enforce these expectations if they are deemed to constitute an implied contract. 

Common Actions that Create Implied Contracts 

When employers are trying to motivate employees, they can make certain statements or take actions that, while seemingly harmless, lead to the formation of an implied contract. Here are some of the most common ways this can happen: 

Overly Enthusiastic Promises of Job Security 

A common example of implied contract creation occurs when an employer, to motivate an employee or recognize exceptional performance, makes statements that suggest long-term job security. Phrases like, “You’re going to have a long career here,” or “As long as you keep up the good work, your job is safe,” could be intended as encouragement but can be interpreted by the employee as a promise of continued employment. 

In these instances, the employer’s attempt to reassure the employee of their value inadvertently created an implied contract and changed the at-will employment relationship. If the employer later decides to terminate that employee, the employee can claim they had an implied contract based on the earlier assurances, potentially giving rise to a wrongful termination lawsuit. 

Regular Verbal or Written Praise Without Clarification 

Praise and positive feedback are essential for employee motivation, but they should be handled carefully. Regular praise that suggests continued employment or advancement can sometimes be construed as a promise. For example, telling an employee that they are “on track for a promotion” or “guaranteed a bonus” without clarifying that such rewards are contingent on specific performance metrics and company discretion can lead to claims of implied contracts. 

Offering Incentives with Ambiguous Terms 

Many employers offer performance incentives, such as bonuses, raises, or promotions, as a means to motivate their workforce. However, if these incentives are presented ambiguously or without proper legal framing, they can be interpreted as implied contracts.