Answer: When the no-definite term employment agreement contains a “for-cause” termination provision.
As employers head into the spring hiring season they are reminded of the Maryland Court of Appeals’ decision that recently re-examined the contours of Maryland’s firmly established doctrine of at-will employment and avoid an unintended lifetime employment contract or continuous for-cause relationship that was never intended.
In last summer’s decision, Spacesaver Systems, Inc. v. Adam (Md. Ct. App., No. 98 Aug. 27, 2014), the Maryland Court of Appeals confronted the question of whether a written contract containing a for-cause provision but no definite term of employment constituted an at-will contract, a lifetime contract, or something else. After laying out the fundamentals of Maryland employment law, the Court opted for the “something else” category classifying the situation as “continuous for-cause” employment. Explaining that while the absence of any duration suggested an at-will employment relationship, the for-cause provision negated an at-will employment contract.
As a result of the Adam Court’s decision, employers should review their employment agreement forms to make sure that the agreement forms actually establish the employment relationship that is intended. If an employer intends to provide for termination with and without cause, and related benefits only in the case of the latter, the employer must make the distinction clear. If at-will employment is intended your attorney can assist in properly documenting the relationship. Indeed, the Court of Appeals made this point particularly clear stating, “[employer’s] corporate attorney could easily have kept Adam’s employment at-will by inserting an at-will provision in the Employment Agreement, or making sure that no for-cause provision made its way into the contract.”
Employers, as you head into the spring hiring season review your employment documents, including your employment handbooks, to ensure that your documents establish the employment relationships you intend and that your documents are consistent with current law. Carelessness, in this area could result in significant unintended and expensive consequences.
If you have any questions about this Employer Alert, please contact Timmerman, Beaulieu, Hinkle & Esworthy attorney, Jim Timmerman, the author or this alert, or the attorney with whom you usually work for your employment law questions.
About the Author
Jim Timmerman is a founding partner of Timmerman, Beaulieu, Hinkle & Esworthy, LLC. Jim’s practice focuses on complex business and commercial litigation, including the defense of companies in labor and employment matters, in the federal and state courts of Maryland. He can be contacted at (410) 649-4440 or via email at firstname.lastname@example.org.