Is Your Employee Handbook a Contract of Employment? Well, Does it Have a Disclaimer?

Employee handbooks come in all shapes and sizes. For example, some employers have policies that create a probationary period for employees during the initial few months of employment. Some employers have progressive discipline policies. Some grant formal appeal rights to employees who are disciplined or terminated. And some set forth terms of compensation, benefits, and time-off.

Is your handbook a contract of employment or a compilation of discretionary policy statements? The answer depends on whether your handbook has a disclaimer telling employees that they are at-will and cannot rely on the handbook as a contract.

We recognize that there is case law rejecting an employee handbook as a contract, with several such cases cited by the appellees. In each of these cases, however, there was specific language within the handbook claiming that the handbook was not a contract, and clearly showing no intent to be bound by it.… In the present case, there is no language within the handbook either claiming that it could be changed at the employer’s discretion or that it did not form a contract.

This issue really is as simple as whether your handbook says, or more accurately doesn’t say, that it’s a contract. So, dust off your employee handbooks, flip to either the front or the back, at scan for a policy that looks something like this:

Employees of the Company are not hired for any specific term. Accordingly, their employment relationships with the Company are “at will” relationships. Employment at will means that employees are free to resign from their positions at any time, with or without cause, upon oral or written notice to the Company. Similarly, the Company may end the employment relationship with any employee or change an employee’s status (for example, modify a position, promote or demote an employee, adjust compensation, etc.), with or without cause, for any reason or no reason, subject only to applicable laws (such as the laws against discrimination), upon oral or written notice to the employee. The decision to stay or to leave, whether it is the employee’s decision or the decision of the Company, is in the sole discretion of the party making that decision.

The Company does not intend that anything in this Handbook constitute an employment contract or an offer of an employment contract, express or implied, or that this Handbook be in any way deemed by any person, including the Company or any employee, to create any legally binding rights to continuing employment or to specific terms or conditions of employment.

No persons other than the President of the Company can enter into an agreement for employment for a specified period of time, or make any agreement or representation contrary to this employment at will policy. Further, any such agreement must be in writing and signed by either the President.

Without language like this, you are leaving yourself open to a claim that your handbook is a contract, and a handbook that is a binding contract might be worse than no handbook at all.