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Nevada Supreme Court Holds that Employees Do NOT Automatically Revert to At-Will Employment After the Expiration of an Employment Contract

Volume 3, Issue 3
April 5, 2004

For the first time, the Nevada Supreme Court considered the issue of whether an employee who continues to work for an employer after the expiration of a contract of employment automatically reverts back to an at-will employment status. The Court concluded that when an employee and employer continue an employment relationship after the time period contained in a written employment contract, the original contract is presumed to renew automatically under the same terms and conditions, with the exception of the contract's duration, until either party properly modifies or terminates the contract.

The case involved Alpheus Bruton, the former general manager of the Stagecoach Casino and Hotel in Beatty, Nevada. Bruton had a two year written employment contract, which included provisions for monthly bonuses, vacation time and a sixty-day termination notice. While his contract expired in 1994, Burton continued to work for the Stagecoach as the general manger until his employment separation in 1996 after an argument with the Stagecoach owner, Edward Ringle. Bruton sued on a variety of legal theories, including breach of contract.

The Stagecoach argued that Bruton lacked any factual basis for his breach of contract claim because his contract had expired in 1994 and his employment reverted back to at-will immediately upon expiration of the contract. To the contrary, the Nevada Supreme Court found that when an employment contract for a definite term expires and the employee continues to render the same type of services, it is presumed that the employee is serving under a new (implied) contract having the same terms and conditions as the original one. The Court, however, also determined that the presumption may be rebutted by evidence that the terms and conditions of employment were changed or that the parties understood that the terms of the old contract were not to apply to continued employment.

This decision is very important to all employers that utilize employment contracts. In order to avoid a presumption that an expired contract's terms cover continued employment, employers must specifically address this issue in its future employment contracts. For employees under existing contracts, employers should take steps to make sure that just before the expiration of an employment contract, the covered employee is notified of the terms under which continued employment will be based.

Ringle v. Bruton, No. 38931, 120 Nev. Adv. Op. 14 (Apr. 1, 2004).

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.