Labor and Employment

Employee Handbooks and At-Will Employment

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 Most people don't think about their employment status, but unless there's a contract or collective bargaining agreement, you're employed at-will.

At-will employment means either an employer or employee can end employment at anytime, for most any reason. A common question is whether an employee handbook changes that status and if it acts as a contract.

Employee Handbook Policies and Contract Rights

It's possible that employee handbook terms change at-will status by creating a contract. An at-will employee may gain some protection against firing without good cause based on handbook terms.

Generally, without a clear and prominent disclaimer, statements in an employee handbook implying terminations are based on good cause are enforceable, even when employment is otherwise at-will.

Court Case Clarifies Handbook Clauses

In a leading case, the court ruled that where an employee handbook purported to grant job security to employees, the employer had to honor that promise. The employee handbook listed several types of terminations:

  • Layoff
  • Discharge due to performance
  • Disciplinary discharge
  • Retirement
  • Resignation

The handbook did not state that employees could be dismissed without cause. Another key policy stated in the handbook was the goal to retain employees with efficient and effective job performance.

The court reasoned that interpretation of such clauses needed to be in line with reasonable employee expectations. An employer can't set out enticing promises without intending to live up to them. An employer's belief on the enforceability of the promise doesn't matter.

Generally, provisions in employee handbooks are interpreted as contractual terms if a reasonable employee would believe that they were promises. Employees are not required to prove that they read the handbook and relied on its terms. Courts tend to imply reliance so that all employees are treated the same way.

Handbook Disclaimers Negate Contract Status

Employers can use disclaimers to avoid this situation. If employees sign explicit disclaimers that employment is at-will, courts typically find that handbooks don't create long-term employment contracts.

The form and placement of a handbook disclaimer is important. For example, a court is likely to enforce a handbook term on firing someone only for good cause if a contrary disclaimer is placed at the end of the handbook. However, a clear and prominent disclaimer does support an employer's intent not to create a contract when the handbook does not make express promises.

Know Your Status and Your Handbook

Both sides should be clear on employment status, and the meaning of the employee handbook.

Take time to know, follow and understand which handbook terms means greater workplace success and fewer problems help both you and your employer have equal clarity on what the information in the handbook means.

Don't forget, a labor and employment law attorney can help draft the right handbook for your business, or help apply it if a dispute does come up.

Questions for Your Attorney

  • Is at-will status all or nothing? Can a handbook have the force of a contract on only certain issues, such as a disciplinary policy?
  • I'm an at-will employee and my employer just issued a new handbook. It has so many rules and policies, how can it not be viewed as a contract?
  • Does it mean anything for an at-will employee if an employer doesn't follow handbook procedures?
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