Wednesday, August 5, 2009

The importance of handbook disclaimers

Employee handbooks come in all shapes and sizes. For example, some employers have different policies that cover exempt versus non-exempt employees. Some employers have policies that create a probationary period for employees during the initial few months of employment. Some employers have progressive discipline policies. And some even grant formal appeal rights to employees who are disciplined or terminated.

In Fennessey v. Mount Carmel Health System (Franklin Cty. Ct. App. 7/30/2009) [PDF], a terminated nurse claimed that each of these policies set forth in Mount Carmel’s employee handbook either created an implied contract of employment, or consisted of a definitive promise on which she reasonably relied thereby binding her employer.

Thankfully for Mount Carmel, its handbook contained two items that no employee handbook should be without – an at-will employment disclaimer, and a signed acknowledgement by the employee affirming her at-will status. The disclaimer stated:
110.1 Employment At Will 
An employee of Mount Carmel Health System is an employee at will. The employee or Mount Carmel Health System can terminate the employment relationship at any time for any reason. No statement in this manual will be interpreted or applied as a contract of employment.
The signed acknowledgement stated:
I recognize Mount Carmel Health System has the right to change provisions in this manual and other policies…. I understand that no representative of Mount Carmel Health System has the authority to make an agreement contrary to the provisions of this manual. 
I recognize this manual does not constitute a contract of employment. I understand that, at any time, for any reason, I can separate my employment relationship and that Mount Carmel Health System has the same right regarding my employment status.
Based on these two statements, the appellate court affirmed the trial court’s dismissal of Fennessey’s promissory estoppel and breach of implied contract claims.

This case not only illustrates the vital importance of disclaimers and acknowledgements in handbooks, but also the need that certain critical language appear in all handbooks
  1. A specific statement that employment is at-will, without exception.
  2. An explanation, in plain English, of what at-will employment means.
  3. A statement that no one can create a contract contradictory to the provisions of the handbook.
  4. A statement that that handbook is merely a unilateral statement of rules and policies which creates no rights or obligations.
  5. A statement that the handbook is not a contract and not intended to create an express or implied contract.
  6. A statement that the employer has the unilateral right to amend, revise, or eliminate policies and procedures as needed.
  7. A statement that employees should not rely on any statement in the handbook as binding on the company.