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Handbooks: What the Courts Consider

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in Employment Law,Human Resources

When weighing the evidence in a lawsuit involving employee handbooks, courts consider many factors:

Employee’s reasonable expectations. While the disclaimer may declare that the employment relationship is strictly at-will and nothing in the handbook should be considered a contract, judges tend to look at the reasonable expectations of the employee involved. For instance, in Derrig v. Wal-Mart, the court noted that the employee understood what the rules were in the handbook and was familiar with the system of progressive discipline described in it. The court decided it was reasonable for the employee to expect that the company would abide by its own rules.

Conspicuous disclaimer. When the handbook contains a disclaimer, where is it located? Would a typical employee see it? In one case a U.S. District Court in Colorado ruled that the company may have created a contract in its employee handbook because the disclaimer was buried among unrelated paragraphs under the uninformative heading “Introduction.” Fejes v. Gilpin Ventures, d/b/a the Gilpin Hotel Casino, 960 F. Supp. 1487 (D. Colo. 1997)

Clarity of disclaimer and receipt. In the Fejes case above, the wording on the receipt was unintelligible, with whole phrases missing. That’s confusing and unenforceable, the U.S. District Court ruled.

Who’s covered by each provision. A pharmaceutical company employed a therapeutic specialist who worked from his home. While the therapist was on FMLA leave for surgery, the company replaced him. The therapist sued. In court, the company argued that the therapist was not eligible for FMLA leave because the company did not employ 50 workers within 75 miles of his worksite. An appellate court ruled for the therapist, finding the company was bound by its handbook, which granted FMLA leave to all employees who worked 1,250 hours in the prior 12 months. The employer could not selectively eliminate the therapist from that provision after the fact. Peters v. Gilead Sciences, Inc., No. 06-4290 (7th Cir. 2008)

Oral promises. Even a carefully worded disclaimer can lose its effect if a company executive tells the employees that they will be terminated only for cause, or that their jobs are secure—and then he discharges them for some minor infraction.

Consideration. When a company replaces its handbook with a version that changes the terms of employment—such as eliminating a seniority system that employees have relied on—some courts expect the company to have provided some “consideration”: that is, some additional benefit, payment or privilege other than continued employment to compensate employees for the loss. Courts take a dim view of unilateral changes. 

Good faith and fair dealing. Although the handbook may say employees are hired on an at-will basis, courts in some states basically ask whether what happened was fair. Finding an implied covenant of good faith and fair dealing, the court may award damages for outrageously unfair employment decisions. 

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