Make Sure Your Handbook is NOT an Employment Contract

Your employee handbook can be interpreted as creating express or implied contracts, says Attorney Allan H. Weitzman; however, disclaimers and receipts can help prevent that from happening.

Employee Handbooks: Every Word Counts

One important thing to remember when it comes to handbooks and whether they create contracts is that state law controls, so you need to check with your state for the details. However, in general, Weitzman says, handbooks may create implied contracts of employment where:

• The handbook sets forth a progressive discipline plan or corrective action procedures.
• The handbook distinguishes between “probationary” and “permanent” employees and provides for discharge of “permanent” employees only after specific preconditions are met (e.g., “written notice and a 30-day opportunity for improvement required before termination because of unsatisfactory work performance”).

Weitzman, a partner in the Boca Raton office of the law firm Proskauer Rose LLP, offered his tips at the SHRM Annual Conference and Exposition in Chicago.

Disclaimers Assist in Preventing the Creation of Implied Contracts

A disclaimer in the handbook (see suggested language below) will help to prevent problems with handbooks being interpreted as contracts, says Weitzman, especially if you:

• Prominently display the disclaimer in the handbook.
• Advise employees that the policies and procedures are not intended to create a contract.
• Obtain a signed receipt upon distribution of the handbook.
• Reserve the right to modify or discontinue the policies and benefits set forth in the handbook at any time, without notice.

Sample Disclaimer

Here’s a sample disclaimer from Weitzman:

There are several things that are important to keep in mind about this handbook. First, it contains only general information and guidelines. It is not intended to be comprehensive or to address all the possible applications of, or exceptions to, the general policies and procedures described. For that reason, if you have any questions concerning eligibility for a particular benefit or the applicability of a policy or practice to you, you should address your specific questions to the Human Resources Department.

Neither this handbook nor any other Company document confers any contractual right, either express or implied, to remain in the Company’s employ. Nor does it guarantee any fixed terms and conditions of your employment. Your employment is not for any specific time and may be terminated at will, with or without cause and without prior notice by the Company, or you may resign for any reason at any time.

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No supervisor or other representative of the Company (except the President, in writing) has the authority to enter into any agreement for employment for any specified period of time or to make any agreement contrary to the above.

Second, the procedures, practices, policies, and benefits described here may be modified or discontinued from time to time.  We will try to inform you of any changes as they occur.

Finally, some of the subjects described here are covered in detail in official policy documents. You should refer to those documents for specific information since this handbook only briefly summarizes those benefits. Please note that the terms of the written insurance policies are controlling.

Sample Receipt for an Employee Handbook

I acknowledge that I have received a copy of XYZ Company’s Employee Handbook. I agree to read it thoroughly, including the statements in the foreword describing the purpose and effect of the Handbook.  I agree that if there is any policy or provision in the Handbook that I do not understand, I will seek clarification from the Human Resources Department.

I understand that XYZ Company is an “at will” employer and as such, employment with XYZ is not for a fixed term or definite period and may be terminated at the will of either party, with or without cause, and without prior notice.

No supervisor or other representative of the company (except the President, in writing) has the authority to enter into any agreement for employment for any specified period of time or to make any agreement contrary to the above.

 In addition, I understand that this Handbook states XYZ’s policies and practices in effect on the date of publication. I understand that nothing contained in the Handbook may be construed as creating a promise of future benefits or a binding contract with XYZ for benefits or for any other purpose.  I also understand that these policies and procedures are continually evaluated and may be amended, modified, or terminated at any time.

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Disclaimers Don’t Solve Every Problem

Finally, says Weitzman, even with a disclaimer, it is important for an employer to follow its handbook policies.

In tomorrow’s Advisor, Weitzman on drug and gun policies, plus an introduction to the all-things-HR-in-one-place website, HR.BLR.com®.