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Wisconsin Appellate Court Holds Management Policy Does Not Negate At-Will Employment Relationship

At-will employment is the default rule in Wisconsin. Employers may terminate for any reason or no reason at all.  However, that relationship can be overridden by contract, in some cases inadvertently, through employee policies and other post-employment agreements. In a case that came as good news for employers, last week, the Wisconsin Court of Appeals affirmed that it would not read a policy as overriding the employment at-will relationship unless the policy evidenced an intent to do so.

Employment AgreementThe facts of the case go like this: A healthcare group and physician entered an employment agreement containing an at-will provision that allowed the employer to terminate “at any time” and “without cause” so long as certain notice and other conditions were met. Years later, the employer issued a management policy delineating guidelines for investigating patient complaints about physicians. 

Over a three year period, the employer received complaints from three patients who reported the physician had touched them in a sexual manner. After receiving the third complaint, the employer terminated pursuant to the at-will provision of the employment agreement. The employer followed some, but not all of the management policy guidelines before terminating. 

The physician sued for breach of contract and breach of the duty of good faith and fair dealing, arguing the management policy overrode the at-will employment relationship and granted him contractual pre-termination rights. The employer moved for summary judgment on grounds that the at-will provision of the employment agreement precluded the physician's claims.  The circuit court denied the motion, and the case proceeded to trial. The jury found in favor of the physician, awarding $2.2 million in damages. The employer appealed the summary judgment decision.

The court of appeals saw things differently than the circuit court.  It squarely rejected the physician's argument that the management policy modified the at-will employment relationship, applying Wisconsin's “only when” rule.  Under that rule, an employment policy alters the at-will relationship only when it “contains express provisions from which it can reasonably be inferred that the parties intended to bind each other to a different employment relationship.” The court held the management policy did not reflect such an intent because (1) neither party signed it, (2) it did not reference the at-will provision of the employment agreement, and (3) it used permissive language that did not obligate the employer to take any particular action. For example, it stated the employer “may take corrective action,” such as “termination, no action at all, and anything in between, including whatever action . . . investigators deem appropriate.”

This case reaffirms that Wisconsin courts will not grant employees contractual protections the employer does not intend to grant. That said, it also serves as a reminder that policies, handbooks, manuals, and the like must be carefully drafted to avoid creating new contractual rights. Provisions to avoid include mandatory progressive discipline and other mandatory procedures.

Please contact Elizabeth Odian, who has offices in Milwaukee and Appleton, with any questions about your employee contracts and policies.