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OK to reference handbook in employment contract

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in HR Management,Human Resources

Employee handbooks aren’t contracts. In fact, to preserve at-will employment status, we usually recommend including a disclaimer that specifically states: “This handbook does not constitute a contract.”

But some key employees do work under the terms of employment contracts, and occasionally it may make sense to incorporate your employee handbook rules into those agreements. Referring to the handbook makes its terms and conditions binding on your contracted workers.

Recent case: Sandy was the chief executive officer of a company that he had founded, which was eventually purchased by investors.

His employment contract provided for termination for cause, in which case he would not receive a severance payment. The agreement incorporated the company handbook rules, which included prohibitions on sexual harassment.

The company fired Sandy for cause after several affairs with subordinates came to light.

He sued, arguing he should receive severance payments and that the handbook rules didn’t apply. The court disagreed concluding that Sandy’s affairs breached the contract, cutting off possible severance payments. (Duncan v. Woodlawn, No. 08-14-00025, Court of Appeals of Texas, 2015)

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