Issues in Employment Law

February 2003

If a hiring is subject to approval from upper management, the contract or application must make the potential employee aware of that fact at that moment and not at a later time.

Employers must be clear and must not mislead employees and potential employees. If a hiring is subject to approval from upper management, the contract or application must make the potential employee aware of that fact at that moment and not at a later time. If the "potential" employee begins work justifiably relying on being paid, he likely has a right to compensation from his employer.

In Hefferman v. Bd. Of Trustees (No. 01-3092), the plaintiff applied for the head basketball coach position at a community college. The plaintiff filled out the application and began working, following the advice of the athletic director. He later signed the contract which stated that all hirings must be approved by the Board. When the plaintiff never got paid, he sued for compensation and fraud. The school claimed that his contract was never approved by the Board and that the work he did as coach over the summer was voluntary. The Seventh Circuit Court of Appeals held that the plaintiff could have justifiably relied on the advice of the athletic director despite the disclaimer in the contract and could receive compensation as damages.

Under the WARN Act, employers are required to give employees 60 days notice for plant closings and mass layoffs.

The WARN Act has a provision known as the "unforeseeable business circumstances exception," which states that the 60 day notice requirement may be reduced or eliminated if the closing is caused by business circumstances not reasonably foreseeable at the time the notice would have been required. Unforeseeable circumstances are generally sudden, dramatic, unexpected and outside the employer's control. The employer must use "commercially reasonable business judgment" in deciding whether notice is required. "Mere possibility" does not require such notice.

In Watson v. Mich. Ind. Holdings, Inc. (No. 01-1136), the employer-supplier's principal client suddenly and unexpectedly terminated a major contract and refused to pay, forcing the employer to close down without notice. The Sixth Circuit Court of Appeals held that although there always existed a possibility that the plant would have to close down due to financial circumstances, the closing must be "probable" and not a "mere possibility" for the employer to be liable for failing to give 60-day notice.