Employment "At-Will" in Nebraska

People often say that Nebraska is an "at will" employment state. That means that the employer and the employee have equal rights to end the employment at any time. Neither party is obligated to give notice or cause for termination. If it is evident that an employee was terminated because of age, race, sex, etc., the employee should contact the Nebraska Equal Opportunity Commission at (402) 471-2024 or (800) 642-6112 or online at http://www.neoc.ne.gov/.  The employee may also want to hire an attorney.

In Nebraska there an exception to the employment-at-will doctrine when an implied contract is formed between an employer and employee, even though there is no express, written instrument setting out the employment relationship.  If an employer makes oral or written representations to employees regarding job security or procedures that will be followed when adverse employment actions are taken these representations may create a contract for employment. 

Nebraska has followed the national trend limiting employment at will.  Oral contracts are recognized in Nebraska.  The law in Nebraska limits discharges that violate public policy and requires employers who promise jobs to deliver them. See, e.g., Mueller v. Union Pac. R.R., 220 Neb. 742, 371 N.W.2d 732 (1985); Jackson v. Morris Commc’ns Corp., 265 Neb. 423, 657 N.W.2d 634 (2003).

In Pick v. Norfolk Anesthesia, P.C., 276 Neb. 511, 755 N.W.2d 382 (2008), the Nebraska Supreme Court considered the claims of nurse anesthetists who worked for Norfolk Anesthesia. They all worked under oral contracts that paid them a salary plus an annual bonus that was paid near the end of the year.  In 2005, the nurse anesthetists all quit.  The employer failed to pay them their bonuses at the end of the year claiming that the bonuses only had to be paid if the nurse anesthetists were still employed at the end of the year.  The nurse anesthetists filed sued.  The claim was based a violation of the Nebraska Wage Payment and Collection Act (NWPCA).  But was also a case about oral contracts. If the oral contracts said that the bonuses had to be paid, then the NWPCA was violated; if not, the NWPCA was not violated.  The NWPCA was also included because it allows the Plaintiff employee to seek attorneys fees. 

The district court found for the plaintiffs. It held that the oral contracts provided that bonuses had to be paid if the company had a profit at the end of the year, which it did.  The district court also found that the oral contracts did not require that the nurse anesthetists remain on staff until the end of the year to get their bonuses.

The supreme court reversed in an opinion written by Chief Justice Heavican. The court applied the “commonsense notion that absent an express agreement otherwise, an employee ordinarily forfeits the right to receive a bonus by resigning before the [year] ends.”  Here, the court said, there was no expressagreement that a bonus would be paid if the employees left before the end of the year. Therefore, since they had resigned in September, they were not entitled to bonuses.

Interpreting Employment Contracts

The unusual thing about the supreme court’s result in Pick is that the district court had found as a factual matter that the oral employment agreement did not require an employee to be working at the end of the year to remain eligible for the bonus.  Because the supreme court did not and could not overrule the factual finding regarding bonuses, the court’s holding rests on how clear the contract was on this point. The court said that because the oral contracts did not expressly counter the legal presumption that one has to work to the end of the year to earn a bonus, the employees lost.  

There are two general views on how courts should address this type of issue in employment contracts. First, the courts can apply the rule it thinks the parties would have agreed to had they thought about it. If working to the end of the year to qualify for a bonus really is a “commonsense” notion, then that is what the parties would have agreed to and, therefore, that is how the court should decide the issue. But this approach means that the courts have to try to determine the parties’ likely intent. That is difficult in most employment contracts because the parties normally have quite different and opposing interests.

Another approach to this issue is called the penalty-default approach. Instead of trying to determine the parties’ intent, the court’s goal in this approach is to encourage the parties to settle the issue themselves. The general idea is to set the default rule against the party who is most likely to know the rule and act to counter it. That is, to “penalize” that party to encourage it to address the issue in the agreement itself and, in so doing, to disclose valuable information to the other party.  In the Pick situation, this would mean setting the rule to disfavor the employer: Employees do not have to work to the end of the year to qualify for a bonus. Employers are repeat actors, they are more likely to know the default rule, they are more likely to be the drafters of the contract, and they are more likely to have legal counsel. If the default is set against the employer, it is likely the employer will know about it and, thus, address it (and counter it) in the employment agreement itself. When this occurs, the court won’t have to guess the parties’ intent—it will know it. And so will both of the parties before any dispute arises.

Again, the penalty-default approach creates incentives for the parties themselves to resolve contested issues, rather than the courts. And, when the parties do that, it makes it less likely the disputes will ever end up in court. 

Pick implies that the Nebraska Supreme Court is going to try to determine what the parties intent was to resolve uncertainty in employment contracts. But Pick doesn’t make a holding on that point. Instead it uses its “commonsense” to insert a provision into an employment contract without any guidance at all about where the provision comes from. 

If you have been fired from your job and you believe the process did not follow the employee manual, you should consider contacting Angela Madathil.  Madathil Law Office specializes in employment law in Nebraska, and offers free consultations.   

Madathil Law office serves clients in Omaha, Lincoln, Lancaster County, Douglas County, Otoe, and Cass County Nebraska.  If you need a Nebraska employment lawyer, consider contacting Angela Y. Madathil and the Madathil Law Firm.  

Contact us at angela@madathil-law.com or by telephone at 402.577.0686.  The firm offers free consultations.  For more information feel free to look at our website www.madathil-law.com.