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Labor and Employment Law

Still Causing Problems: Employee Handbooks and At-Will Employment

 For many employers, employee handbooks are used to detail what is expected of employees without binding employers to follow any particular policy. It is the "have your cake and eat it" approach which is part of a larger strategy to maintain at will employment. Problems arise however when employers include policies that may be interpreted as creating a legitimate expectation of just cause employment.

In Walsh v. Kraft Foods Global, Inc., the Michigan court of appeals rescued the employer from a jury verdict of over $1.2 million dollars [an enhanced version of this opinion is available to subscribers]. When the plaintiff was hired, he signed an employment application which contained the typical at will disclaimer. He was promoted to district sales manager and hired numerous sales representatives who signed similar disclaimers. As a district sales manager, he was given a resource guide that contained a progressive system of discipline for sales representatives.

After being terminated, the plaintiff filed a lawsuit asserting he had a just cause contract or at least a legitimated expectation for just cause employment based upon the provisions in the employee handbook dealing with issue resolution and arbitration as well as the district sales manger's guide. The employer was unsuccessful in its motion for summary disposition before trial and motions for a directed verdict  or Judgment NOV. The jury based its verdict on the issue resolution policy and the resource guide.

The court of appeals reversed the denial of the motions for a directed verdict and JNOV and vacated the judgment. The court found that there was not contract for a definite period of time nor for just cause. With respect to the issue resolution policy in the employee handbook, the court stated that no promise existed because the handbook contained a specific disclaimer stating it did not constitute a contractual obligation of any kind with any employee. The court also noted that the employer retained the discretion not to apply its policies to any individual employee. With respect to guide, the court noted it did not apply to sales managers and only guided district managers regarding how to discipline their employees.

The case highlights the danger of including policies that employers do want to be binding such as confidentiality, non-compete, and arbitration in a document which the employer has proclaimed not to be a contract and the confusion which the inclusion can create with respect to the issue of at will employment. While the employer prevailed, it did so only after the expense of a trial and an appeal.
The courts will take employers at their word when they say an employee handbook is not a contract. Efforts to enforce an arbitration procedure set forth in an employee handbook with the disclaimer of not being a contract may not be enforced. Employers should make sure that those policies they want to be binding are presented in a format to be binding and not in the employee handbook.

 For additional Labor and Employment law insights from John Holmquist, visit the Michigan Employment Law Connection.

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