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What Does it Mean to Have an Implied Employment Contract?

Apr 29, 2022 | Employment Law

In California labor law, a “implied employment contract” is an agreement between you and your employer that is developed via both parties’ behavior rather than through paper.

The “at-will” rule states that unless an employer and employee have agreed otherwise, either party may end the employment relationship at any moment, for any reason or no reason.  However, if your employer fires you despite an implicit contract for continuous employment, you may be able to claim for damages under California’s wrongful termination laws.

In California, What Does it Mean to Have an Implied Employment Contract?

An implied contract is a legally binding agreement that is made by the actions of the contracting parties rather than being written down.

In the context of employment law, an implicit contract often refers to an agreement between the employer and the employee not to fire the employee without cause. Employees who do not have an employment contract or a collective bargaining agreement in California face the risk of being fired at any time, regardless of whether there is a legitimate reason. This is referred to as the “at-will” employment policy.

An implicit employment contract, on the other hand, is an exemption to the at-will employment rule. (Wrongful termination in violation of public policy is another exemption.) If you can establish that your employer’s previous actions generated an implied contract not to terminate employment without cause, you can claim for wrongful termination if you lose your job in a way that violates that contract’s provisions.

How do I Show that my Employer and I Have an Implied Contract?

The conduct of your employer, that is, its actions, creates an implied contract. As a result, evidence of your employer’s behavior is the best approach to prove the existence of an implicit contract between you and your employer. California courts are obliged to consider all of the conditions of the employee-employer relationship when determining whether or not an implied employment agreement exists.

The following are some of the most important factors to consider when determining whether you and your employer had an implicit employment contract:

  • The general personnel policies and procedures of your employer
  • The amount of time you had spent working for that company.
  • Employer actions or statements ensuring you that you will be employed in the future
  • Practices in the field in which you were employed.

What Damages Can I Recover in a Wrongful Termination Lawsuit Based on an Implied Contract?

If you sue your former employer for wrongful termination under the implied employment contract basis, your damages will usually be restricted to the implied contract’s worth. As a result, the damages for a breach of an implied employment agreement will be as follows:

  • The amount you would have earned from your employment up until the day you received your court judgement, including the worth of any benefits and potential wage rises
  • The present value of the amount you would have earned from your employer (including benefits and pay increases) from the date of your court verdict for as long as the employment might reasonably have been expected to continue
  • The amount you may have made in the same time period from other jobs that were substantially similar.

Many employees who are suing their employers for breach of implicit employment contracts are surprised by the last item on the list above. Plaintiffs in contract litigation in California must “mitigate damages,” which means they must try to recoup the money they lost because the other party to the contract broke their promise.

That means that, in wrongful termination cases based on an implied contract basis, your damages may be reduced by the amount you could have earned in another job after you were dismissed, if your employer can establish that:

  • You had the opportunity to work in a job that was very comparable to your previous one.
  • You were unable to find and keep such a work.

More Info and Deadlines

The statute of limitations for launching a wrongful termination action based on a breach of an implicit employment contract is two years from the date of termination. This may appear to be an interminable period. However, before to filing a lawsuit, you must conduct research and gather information to ensure that you can provide the strongest possible case.

If you believe you have a case against a former employer for breach of implied employment contract, you should contact a wrongful termination lawyer as soon as possible in order to discuss your options and begin gathering evidence for your case. Feel free to give our office a call to schedule a consultation for your case at 310-933-5171.