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Watch Your Mouth: Creating Oral Employment Contracts in Colorado

While many employers believe that any contract for employment must be in writing, employment contracts in Colorado can be created orally. Colorado employers should, therefore, be aware of the types of casual or careless comments to an employee that may create an employment contract where none was intended.

Absent an explicit understanding to the contrary, employment in Colorado is presumed to be “at-will,” allowing the employer to terminate the employee at any time and for any non-discriminatory (or no) reason. This at-will presumption may be overcome if an employer makes a statement to an employee that creates a contract for employment.

To create an enforceable oral employment contract under Colorado law, an employer’s statement must: 1) either disclose a promissory intent or be one that the employee could reasonably conclude constituted a commitment by the employer, and 2) even if the statement discloses a promissory intent, it still must be sufficiently definite to allow a court to understand the nature of the obligation undertaken. If the statement is only a ‘vague assurance,’ there can be no contract. Colorado courts have found statements regarding past employer practices, a forecast of an individual’s job progression, and comments such as an employee may work at the company for as long as he wants, to be vague assurances that did not, under the specific facts of the case, create an employment contract.

An oral employment contract must also be for a definite term. If the employment is for an indefinite term, Colorado law would allow either party to terminate the relationship at-will. Colorado courts have found promises of promotion within six to twelve months and statements of “probable” length of employment to be insufficiently definite to create employment contracts.

It is also critical for Colorado employers to understand that an oral agreement can modify a provision of an earlier written document, even if the written document states that any modifications must be in writing. Therefore, even though an employee handbook may clearly state that all employment is at-will, this at-will status can be orally modified by an employer’s later statements that are sufficiently definite to create contractual obligations.

Take Away:

While employers should not be discouraged from offering honest feedback and opinions with respect to an employee’s performance and future job prospects, specific and definite oral promises of continued employment can create an employment contract in Colorado. Employers should avoid making specific promises of employment, particularly with respect to duration.