How Do I? …Prevent my employee handbook from being an unintended contract
 

Employee handbooks can be very useful. They explain company policies about important aspects of the job, such as hours of operation, dealing with customers, vacations, and sick days. The last thing you would expect a handbook to be is an employment contract but increasingly employees are suing their employers under a breach of contract theory when employers do not follow procedures in their handbooks.

The problem develops in “at-will” employment arrangements. Most workers are “at will” employees. They are not part of a collective bargaining unit, which would be governed by a contract negotiated with the employer by the union, nor do they have individual contracts of employment.

“At will” employment means just that. Traditionally, both the employer and the employee had the ability to end the employment relationship at anytime and for any reason. Over time, federal and state governments have eroded the at-will doctrine but it still controls most employment relationships except those governed by a contract or when a termination is unlawful. That’s why it’s important that your employee handbook is not an implied contract.

Common examples

Here are two examples of how handbooks get employers into trouble.

--1) ABC Co.’s handbook states that an employee will be terminated for “just cause.” ABC Co. terminates Joan. Joan challenges her termination. ABC Co. claims Joan was an at-will employee who could be terminated at anytime and for any reason. A court could find that the handbook was an implied promise by ABC Co. only to fire employees for just cause and it is reasonable for employees to expect that ABC Co. would live up to the statements in its handbook.

--2) XYZ Co.’s handbook states that managers may not summarily terminate employees but must refer all terminations to the Human Resources Department for review and action. One day, Joan’s manager, Jill, tells her to immediately clean-out her desk and exit the office. HR is unaware of Jill’s actions. A court could find that XYZ Co. did not follow the procedures for termination and Joan had been improperly discharged.

Common-sense precautions

You can minimize the likelihood of a breach of contract claim by:

--Advising employees that your handbook is not a contract but a guide;

--Avoiding any language that sounds like it would be in a contract;

--Not promising, directly or indirectly, any fixed term of employment;

--Reserving the right to change work rules and the terms and conditions of employment anytime; and

--Using a disclaimer.

A disclaimer must be carefully worded. If your workers are at-will employees, clearly state that the employment relationship between you and them is at-will and they may be terminated at anytime for any lawful reason. Don’t bury the disclaimer in a hard to find place but make it prominent. You also don’t want to make it so harsh that you alienate employees.

Contact our office today so we can search your handbook for any hidden problems and help you avoid litigation headaches down the road.