Bad Offer Letter Voids Employment “At-Will”

On November 28, 2011, a Maryland corporation called Systems Assessment and Research, Inc. (“SAR”) learned a (hard) valuable lesson about the consequences of over-drafting — or having typos in — contract provisions. 

Perricci v. Systems Assessment and Research, Inc., 2011 U.S. Dist. LEXIS 135985, involved an offer letter prepared by SAR to its potential employee.  The letter stated:

“You may not terminate your employment with SAR Corp during your first year, or thereafter on less than thirty (30) working day’s prior notice to the other, except SAR Corp may terminate your services at any time without notice for cause, and you may terminate your services at any time with notice after year one (1). (emphasis added). ”

When the employee was terminated without cause before the one-year mark, she brought a breach of contract claim against SAR in aMaryland federal district court.  SAR sought to dismiss the claim by arguing that that the employment was at-will, and therefore the employee could be terminated at any time with or without cause.  While there is a strong presumption in Maryland that employment is created on an “at-will” basis (meaning, employment can be terminated at any time by either party for any reason), a contract may overcome this presumption if it expressly provides that the employment relationship is for a fixed period of time.

Even though a provision in the letter stated that SAR was an at-will employer, the Court nonetheless found that two other provisions expressly provided for a fixed period of employment, thereby overcoming the at-will presumption.  The first provision stated, “SAR Corp may terminate your services at any time without notice for cause.”  The second provision prevented the employee from terminating her employment with SAR during her first year.  The Court held that these clauses evidenced the parties’ express desire to create a fixed term of employment.  It reasoned that, because the employee was not free to terminate the agreement for one year, the letter agreement could not have created an at-will employment relationship for the first year.  Taken together, the terms evidenced the parties’ intent that the plaintiff’s employment would only be terminable for cause during the first year.

In seeking dismissal of the claim, SAR argued that the letter was not a valid contract under theMarylandstatute of frauds (which applies to contracts not able to be performed within one year) because SAR did not sign it.  The Court held that even though the letter was signed only by the employee, it was nonetheless enforceable because it was produced on SAR’s letterhead and contained the name of SAR’s President and CEO in print.  Under Maryland law, “It is . . . a sufficient signing, if the name be in print, and in any part of the instrument, provided that the name is recognized and appropriate by the party to be his.”

Therefore, the Court held that the letter created a fixed-term of employment for at least one year, and the employee could have only been terminated for just cause during that year.  Since the employee was terminated without cause during the first year, the Court denied SAR’s motion for summary judgment and allowed the employee proceed with her breach of contract claim against her former employer.

This case illustrates the importance of carefully drafting offer letters to create at will employment and to avoid surplus language (or typos) that can add other limitations.