Many employers make it a practice to periodically update their employee manuals and policies. But where do you stand if an employee objects to a new policy? In a recent case, a California Court of Appeal rejected a worker’s attempt to challenge a provision that was added to an employee handbook. More importantly, the court affirmed the right of employers to unilaterally change their policy manuals. We’ll look at this case and offer some suggestions on what to do when you decide to revise your employee handbook or policies.
Employee Signs Arbitration Agreement
When Scott Specialty Gases Inc. hired Gabriel Martinez as a gas mixer at its Fremont plant, he was given an employee handbook together with a separate document requiring binding arbitration of employment disputes. Martinez signed an acknowledgment for the handbook, which specifically said he agreed to arbitration and understood that Scott retained the right to modify its handbook and policies.
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Employee Handbook Revised
About six months later, Scott updated its employee manual, incorporating the mandatory arbitration provision into the handbook itself instead of having a stand-alone document. Martinez refused to sign an acknowledgment of the new handbook’s provisions and told the plant manager he didn’t agree with the arbitration policy.
Martinez was terminated three months later. He then turned around and sued Scott, claiming he was fired for refusing to work in violation of workplace safety rules. Scott argued that the lawsuit should be dismissed because when Martinez was first hired he agreed that all employment disputes would be arbitrated. The trial court sided with Scott and said the case should be sent to arbitration.
Worker Claims Arbitration Requirement Invalid
Martinez appealed, contending that he didn’t have to arbitrate because Scott invalidated the original arbitration provision by issuing a new employee handbook that superseded the old manual and policies. And because he refused to sign an acknowledgment of the updated employee handbook containing the arbitration clause, he said he wasn’t bound by the arbitration policy.
Court Says Consent Not Required
The court ruled that the original arbitration agreement hadn’t been revoked, but had remained in effect even after Scott distributed the updated handbook. What’s more, the court rejected Martinez’s claim that the arbitration policy contained in the new handbook couldn’t take effect unless he agreed to it. If Martinez were correct, the court pointed out, other policies in the handbook—such as health care coverage, vacation time and retirement benefits—would also have lapsed when he refused to sign the acknowledgment.
Guidelines For Changing Handbooks And Policies
This case makes clear that you can update your employee handbooks and policies without your workers’ consent, so long as vested rights such as retirement benefits aren’t affected.
Policy changes will generally be less vulnerable to legal challenge if you take these precautions:
- Notify workers. Be sure to give employees written notice of modifications to your policies and, if appropriate, advance notice before they take effect.
- Document notification by written acknowledgment. Have all new employees sign a statement verifying that they’ve received and understood the policies and agree to abide by them and any new or revised policies. When you make changes, ask existing employees to sign a new acknowledgment to show they had notice. If they refuse, note in the person’s file that they were given a copy of the new policy.
- Keep arbitration agreements separate. Although the employer won in this case, incorporating the arbitration agreement into an employee handbook can create legal problems. Mandatory arbitration provisions, confidentiality agreements and statements concerning at-will status should always be in stand-alone documents, not simply included in an employee handbook. That’s because your employee manual should state that it is not intended to create a contract and you reserve the right to change your policies at any time. Such disclaimers don’t belong in documents like arbitration agreements that are meant to create a binding agreement.