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Silence on Employment Contract After Expiration Did Not Imply Renewal

    Client Alerts
  • February 19, 2020

Many written employment agreements contain automatic renewal provisions that apply at the end of the contract’s term if either party does not provide notice of intent not to renew. When an employment agreement is silent on what happens following expiration of its term, does that agreement renew by implication? According to a recent decision by the North Carolina Court of Appeals, absent clear indication of intent to renew, the employer is not bound by the terms of the expired contract.

In Carrington v. Carolina Day School, Inc., a basketball coach at the school worked under a series of annual contracts signed in October that expired the following June. After expiration of the latest agreement in June 2018, the coach continued certain offseason activities on behalf of the school, alleging that he assumed that the agreement would be renewed for the next season. In October, shortly before the season began, the school informed the plaintiff of its decision not to offer a contract for the upcoming year. He sued, claiming among other things that the school breached an implied contract based on its silence following the expiration of the last agreement in June.

The Court of Appeals affirmed dismissal of the suit on the basis that it failed to state a claim recognized under North Carolina law. The plaintiff knew that the annual contracts had been offered each previous year in October, meaning that the school’s failure to communicate its intent not to renew the previous June did not imply that it had decided to offer him employment for that following season. In addition, the employment agreement was terminable at-will, meaning that even if there was an implied contract in place, the school would have had the right to terminate the plaintiff’s employment at any time thereafter.

In some circumstances, an employer’s actions following expiration of the term of an employment contract can imply continuing employment under the same terms as those contained in that agreement. Employers that use written contracts should clearly set forth the effect of expiration of any term in that agreement, as well as steps that must be taken for its renewal.