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Employment At-Will: Iowa

Employment At-Will requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Authors: Stuart R. Buttrick, Susan W. Kline and Angela Morales, Faegre Baker Daniels LLP

Summary

  • Employment relationships in Iowa are presumed to be at-will, meaning the employment relationship can be terminated by either party, at any time, with or without cause. See The At-Will Relationship.
  • Iowa recognizes limited exceptions to the at-will presumption, including written and verbal contracts and public policy exceptions. See Employment At-Will Exceptions.
  • At-will employees in Iowa challenging a discharge may file claims against their employers under tort theories, including intentional infliction of emotional distress and defamation, so long as the plaintiff-employee is able to satisfy an evidentiary burden. See Tort Considerations.

The At-Will Relationship

Under Iowa law, employment is presumed to be at-will. Berry v. Liberty Holdings, Inc., +803 N.W.2d 106 (Iowa 2011). This means that, absent an exception to the at-will doctrine, employment relationships in Iowa are terminable by either party at "any time, for any reason, or for no reason at all." Fitzgerald v. Salsbury Chem., Inc., +613 N.W.2d 275 (Iowa 2000).

Employment At-Will Exceptions

Written Contracts

Employers and employees can contractually alter the at-will relationship. Thus, employers should use care to avoid inadvertently creating a contract.

In general, contracts require an offer and acceptance. Anderson v. Douglas & Lomason Co., +540 N.W.2d 277 (Iowa 1995). Offers must be certain with respect to the terms of the contract, including the promise being made by the employer and what the recipient of the offer must provide in exchange.

Permanent or "lifetime" contracts are interpreted as indefinite and terminable at will in the absence of some consideration in addition to the services to be rendered. Kabe's Restaurant, Ltd. v. Kinter, +538 N.W.2d 281 (Iowa 1995).

Iowa's Statute of Frauds requires all employment agreements to be in writing if they are not capable of being fully performed within one year from the date the contract was executed by both parties. +Iowa Code § 622.32.

Implied Contracts

Employee handbooks. Under Iowa law, employers are bound by guarantees in handbooks and policies that promise termination will occur only for cause or other specified circumstances.

In order for promises in a handbook or policy to create a contract:

  • The handbook/policy must be sufficiently definite in its terms to create an offer;
  • The handbook/policy must be communicated to the employee and accepted by the employee to create acceptance of the offer; and
  • The employee provides consideration by, for example, continuing to work.

Anderson v. Douglas & Lomason Co., +540 N.W.2d 277 (Iowa 1995); Thompson v. City of Des Moines, +564 N.W.2d 839 (Iowa 1997).

Regarding the second element, or the communication requirement, the Iowa Supreme Court has held that an employee who received the employee handbook but did not read it was not barred from relying on the handbook to establish an implied contract. Anderson v. Douglas & Lomason Co., +540 N.W.2d 277 (Iowa 1995).

The key to determining whether a contract has been created is whether a reasonable employee upon reading the handbook would believe he or she had been guaranteed certain protections by the employer. Jones v. Lake Park Care Ctr., Inc., +569 N.W.2d 369 (Iowa 1997).

The text used in a handbook or policy should be discretionary, using language, such as "may" instead of mandatory language, such as "must" or "shall" and should indicate that the employer may deviate from the procedures if it sees fit. Thompson v. City of Des Moines, +564 N.W.2d 839 (Iowa 1997). For example, progressive discipline and other disciplinary policies should not require that specific action be taken for certain events, but rather should make clear that the policy constitutes mere guidelines and is provided for information purposes.

Disclaimers. In order to minimize contract claims, it is very important that employee handbooks and policies include a disclaimer. In examining whether a disclaimer is sufficient to prevent a handbook from creating a contract, courts consider the disclaimer's language and context to determine whether a reasonable employee who reads the disclaimer would understand the employer has not agreed to be bound by the provisions of the handbook.

Thus, a disclaimer should clearly state:

  • The handbook does not create any contractual rights; and
  • The disclaimer applies to the entire handbook.

The placement of the disclaimer should be prominent and clearly emphasize it applies to all policies/procedures in the handbook by, for example, placing a disclaimer with bold, all-caps text at the beginning of the handbook. The disclaimer should not be buried in the handbook.

In addition, employers should ask new hires to sign a statement containing a prominent disclaimer in which they acknowledge their employment is at-will and that the employee handbook, policies and practices do not create any contractual rights or alter at-will employment status.

Offer letters.The offer letter should clearly state that employment is at-will and can be terminated at any time and for any reason. Offer letters should avoid stating pay in annual terms or otherwise making any statements that suggest any particular duration.

Verbal promises. Whether a verbal representation can become a contractual obligation depends on the facts and circumstances surrounding the statement. Thus, employers should use care to ensure that it is clear that employment is and remains at-will, of indefinite duration and can be terminated at any time.

The Iowa Supreme Court has rejected a claim that a verbal contract was created by statements regarding job security made during the interview or hiring process where the statements expressed expectations that the applicant would enjoy long-term employment and were made to "sell" the company rather than to alter its ability to terminate the employee at will. Thompson v. City of Des Moines, +564 N.W.2d 839 (Iowa 1997).

Implied Covenant of Good Faith and Fair Dealing

Iowa courts have repeatedly rejected claims based on the covenant of good faith and fair dealing exception as it may pertain to employment. French v. Foods, Inc., +495 N.W.2d 768 (Iowa 1993).

Iowa Antidiscrimination Laws

Iowa prohibits employers from refusing to hire or discharging any individual or discriminating against any individual based on certain protected categories. For detailed information regarding Iowa's antidiscrimination laws, see EEO - Discrimination: Iowa.

Public Policy Exceptions

Iowa law recognizes a narrow exception to the at-will employment doctrine where the employee's discharge contravenes the state's clear and well-defined public policy. Fitzgerald v. Salsbury Chemical, Inc., +613 N.W.2d 275 (Iowa 2000).

When employees rely on a statute as a source of public policy to support the claim of wrongful termination in violation of public policy, the cases can generally be categorized as follows:

  • Termination for exercising a statutory right or privilege;
  • Termination for refusing to commit an unlawful act;
  • Termination for performing a statutory obligation; and
  • Termination for reporting a statutory violation.

Jasper v. H. Nizam, Inc., +764 N.W.2d 751 (Iowa 2009).

Public policy wrongful termination claims require the employee to prove:

  • The existence of a clearly defined public policy that protects an activity;
  • The public policy would be undermined by a discharge from employment;
  • The challenged discharge resulted from the employee's protected activity; and
  • There was lack of other justification for the termination.

Lloyd v. Drake Univ., +686 N.W.2d 225 (Iowa 2004).

Tort Considerations

In some situations, an at-will employee may pursue certain tort claims against an employer for allegedly improper conduct in connection with his or her termination. Iowa recognizes the following claims:

Intentional Infliction of Emotional Distress

Claims for intentional infliction of emotional distress under Iowa law require the following elements to be established:

  • The employer engaged in outrageous conduct;
  • The employer intentionally caused, or recklessly disregarded the probability of causing, the plaintiff-employee emotional distress;
  • The employee suffered extreme or severe emotional distress; and
  • The employee's emotional distress was caused by defendant's outrageous conduct.

Taggert v. Drake Univ., +549 N.W.2d 796 (Iowa 1996).

Outrageous conduct must be "so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." Vaughn v. Ag Processing, Inc., +459 N.W.2d 627 (Iowa 1990).

Publishing Statements About Employees to Others

Employers should be cautious in publishing potentially false or damaging statements to others regarding an employee because Iowa law recognizes a common law, or nonstatutory law, claim for defamation.

To establish a defamation claim, an employee must establish:

  • An employer made a statement about the employee;
  • The statement was false;
  • The statement was made with malice;
  • The statement was published to a party other than the employee; and
  • A reasonable person would find the statement to harm the employee's reputation, expose him or her to public hatred, contempt or ridicule or injure the employee in the maintenance of his or her business.

Iowa courts have recognized that an employee may pursue a defamation claim where he or she is under a strong compulsion to self-publish the allegedly false and defamatory statement, such as to publish the asserted reason for his or her discharge to prospective employers. Belcher v. Little, +315 N.W.2d 734 (Iowa 1982).

However, courts have found that an employer may be entitled to assert a qualified privilege for allegedly defamatory statements it makes regarding an employee's discharge. Wright v. Keokuk County Health Ctr., +399 F. Supp. 2d 938 (S.D. Iowa 2005).

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.