Employment-at-Will and Contract Disclaimers
Most employers that publish employee handbooks or policy manuals include an employment-at-will disclaimer in a prominent place near the front of the manual. For a nonunion employer, an employment-at-will disclaimer provides some degree of legal defense against terminated employees' claims that they were discharged in violation of an implied employment agreement. In dealing with wrongful discharge complaints, most courts carefully review employee handbook language to make sure that the employer has not created a contract or legally binding agreement with respect to a policy, benefit, or procedure outlined in the manual. Such disclaimers can be general or specific, and their inclusion in a handbook can help insulate an employer from legal liability in a wrongful discharge action.
This chapter discusses how and why employers use contract disclaimer language in their handbooks and policy manuals. Policy materials included in this chapter are as follows:
• At-Will Disclaimer: Standard Provision;
• General Contract Disclaimer: Standard Provision; and
• Employee Acknowledgment Form.
Practical and Legal Considerations
Scope and Purpose
Under the traditional employment-at-will doctrine, employees who are not working for a definite term can be terminated at any time for any reason, absent a written agreement or specific statutory restriction. However, in recent years, courts have significantly narrowed this doctrine by recognizing a number of exceptions to employers' at-will termination rights. For example, courts in many states have upheld wrongful discharge claims filed by workers who claimed that their dismissals violated an implied contract created by an employee handbook or policy manual.
To counteract any potential claim by an employee that a handbook provision, policy, or procedure somehow creates a binding employment agreement, employee handbooks and policy manuals often include several types of disclaimers. Whether specific or general in nature, each disclaimer serves essentially the same purpose: ensuring that no policy, procedure, or provision in the handbook creates an implied or expressed contract between the employer and any worker.
An at-will disclaimer is designed to provide employees with clear notice that their employment is not for a specific term or guaranteed in any way and can be ended—by them or the employer—at any time for any legally permissible reason, with or without notice.
General contract disclaimers usually are broader than at-will disclaimers in that they aim to negate any potential interpretation of a handbook policy, procedure, program, or provision as a binding agreement between the employer and its workers. A typical general disclaimer emphasizes that the handbook's policies and provisions are mere guidelines and are not intended to create any agreement or contract between the employer and its workers. Similar to an at-will disclaimer, general contract disclaimers almost always appear near the front or in the introductory section of a handbook.
In addition to at-will and general contract disclaimers, some employers include other types of disclaimers in their handbooks or policy manuals. One type of disclaimer underscores the employer's right to change, eliminate, or deviate from a specific policy or procedure if circumstances warrant or as management sees fit. Another type—an oral representation disclaimer—aims to make sure that the employer is not bound by any oral assurances of employment. Oral representation disclaimers usually require that any employment agreement binding the employer to specific terms or benefits must be in writing and signed by certain top-level managers—typically, the chief executive officer and the top HR official.
Employee handbooks or manuals that do not contain these disclaimers run greater risk of generating an implied contract claim. Courts in most jurisdictions agree that clear and conspicuous at-will disclaimers in a handbook bars an employee from claiming that handbook provisions create a binding employment agreement or contract.
Disclaimer Location
Most employers insert disclaimers in several places in a handbook or policy manual. An at-will disclaimer usually appears in prominent type near the front of a handbook or in a conspicuous location in the introductory section of a manual. Employers normally print disclaimers in a large, distinctive typeface or surround them with a heavy, black boxed-in border. In some cases, these notices are set off on a single page of the manual.
In addition to appearing in the introductory materials, disclaimer provisions frequently are included in other parts of a handbook, particularly in those sections most likely to give rise to an implied contract claim. For example, at-will disclaimer language often is found in provisions outlining:
• dispute resolution procedures,
• discharge or termination procedures, and
• work rules and disciplinary procedures.
Many employers include an at-will disclaimer on employment applications. Such disclaimers also can be placed on acknowledgment forms that workers are required to sign as an indication that they have received and read a handbook or policy manual. The inclusion of an at-will disclaimer on an application or acknowledgment form provides an employer with additional protection against potential claims by employees that they were not informed or aware of the at-will nature of their employment.
Legal Pointers
Most courts agree that disclaimer language in an employee handbook or policy manual protects an employer from liability against an employee's claim that certain handbook provisions create a binding employment agreement. A statement stressing the noncontractual, nonbinding nature of the handbook's policy provisions and terms, accompanied by a reservation of management's right to change any of the handbook's policies, procedures, benefits, or language at any time without further notice, usually provides an employer with an adequate defense against an employee's contract claim.
NOTE: An employer should keep in mind that an at-will disclaimer in its policy handbook or manual only provides protection against contractual claims based on handbook or policy provisions. A handbook disclaimer generally provides no protection against wrongful discharge or other contractual claims based on a collective bargaining agreement; an individual employment contract; a state, federal, or local law; or a public policy.
Employers should carefully review handbooks, benefit plan documents, and other publications to make sure they contain no language that might be interpreted as promising job security or other employment, benefit, or procedural commitments. In addition, an employer might want to include general disclaimer language in all appropriate sections that might give rise to a wrongful discharge claim.
To be effective, the courts generally insist that a disclaimer meet certain criteria:
• Clear and unambiguous. A clear and unambiguous disclaimer is one that cannot be misunderstood and is consistent with the rest of the handbook's provisions. For example, a common handbook inconsistency occurs when a disciplinary policy indicates that the employer follows certain disciplinary procedures, while the disclaimer says the employer does not necessarily follow the disciplinary procedures in certain termination situations. To avoid such conflicts, an employer should include language in its handbook stating that the steps in a disciplinary procedure are discretionary and reserving management's right to deviate from the disciplinary procedure as circumstances warrant.
• Well-communicated or prominently displayed. To communicate a disclaimer effectively, an employer must make sure that the language is so prominently displayed that employees cannot claim that they failed to notice it. Employers usually set disclaimers off from other provisions or language in the handbook by using special boldface or capitalized type, placing a disclaimer on a separate page, or framing it in a border to distinguish it off from other text in the handbook. Taking such steps ensures that disclaimer language is conspicuous and noticed by any individual leafing through the manual.
To reinforce the defense provided by disclaimer language, many employers require workers to sign an acknowledgment form indicating that they have received the handbook or policy manual and agree to abide by its terms and provisions. These receipt or acknowledgment forms often specifically address the at-will nature of the employment relationship and other legal issues covered by disclaimer language. Some employers include these acknowledgment forms as a tear-out section or page in a handbook's introductory section.
Contract disclaimers provide the most protection when they are included in the original version of a handbook or policy manual that is distributed to employees. An employer that wishes to insert disclaimer language in a previously published manual or handbook should, at a minimum, clearly communicate the change and its impact to workers. Particularly when a disclaimer affects employees' benefits or other substantive rights, a number of courts have held that employers are obliged to provide workers with reasonable notice of the impact of the new disclaimer or restrictive language. Moreover, courts in a few states have ruled that employers must provide workers with additional legal “consideration”—that is, something of value—before new disclaimer language or other modifications to a handbook are legally effective. To provide this consideration, some employers time the introduction of new disclaimer language or other handbook modifications to coincide with the granting of a general pay or benefit increase.
Policy Pointers
Items an employers should consider in developing handbook disclaimers include:
• At-will disclaimers. An employer should make sure that its handbook or policy manual includes a clear statement that each worker's employment is at will, not governed by any oral or written contract, and terminable by either the employer or the employee at any time, with or without cause or notice. This at-will disclaimer should be printed in a prominent typeface at the beginning of the handbook and possibly in other relevant sections of the manual. Many employers also include at-will disclaimer language on their employment application forms and on the acknowledgment forms that employees sign on receiving the handbook or policy manual.
• Modification rights. Employee handbooks should include provisions that explicitly recognize the employer's right to change, add, eliminate, or otherwise deviate from any of the handbook's policies or procedures at any time. Some employers include a statement that reserves management's right to issue new policies or a new handbook and specifies that any new policies or procedures supersede any previously issued verbal or written policies.
• Restrictive or ambiguous language. Employers should review their handbooks to make sure they do not contain restrictive policy language, such as “must,” “will,” or “in all cases,” that could bind management to an action or procedure that it might not want to follow in a particular situation. A handbook also should avoid language commonly found in collective bargaining agreements—for example, “reinstatement or recall rights,” “probationary period,” “just cause”—that could be interpreted as creating an employment contract.
• Acknowledgment forms. Employers should require all workers to sign and date forms acknowledging that they have received and read the handbook. Many employers include general contract disclaimer language on these acknowledgment forms. When issuing a revised handbook that contains policy or procedure changes, an employer should not rely on previously signed acknowledgment forms. Instead, management should have workers sign new forms certifying that they have received the revised handbook and read and understood its contents.
• Review procedures. A handbook's disclaimer language, along with other pertinent provisions, should be reviewed every time an employer issues new rules or policies. Employers also should establish and adhere to a regular review procedure for ensuring the timeliness, accuracy, and legal compliance of all policy statements in a handbook. If major changes are needed, they should be incorporated into a revised version of the handbook, not issued as employee bulletins or management memos.
Model Policies
This section includes two model disclaimer statements that employers can adapt for use in a handbook or policy manual.
• At-Will Disclaimer: Standard Provision. In addition to specifying the at-will nature of the employment relationship, this provision stresses that only the organization's chief executive officer and top human resource manager are authorized to enter into a written employment agreement with any individual. It appears in capitalized form to emphasize the special formatting provided in most employee handbooks.
• General Contract Disclaimer: Standard Provision. This general disclaimer specifies that the handbook's policies and procedures are not intended to create any kind of employment agreement or guarantee. Like the at-will disclaimer, it is capitalized.
At-Will Disclaimer: Standard Provision
NO POLICY OR PROVISION IN THIS HANDBOOK IS INTENDED TO CREATE A CONTRACT BINDING THE EMPLOYEE OR THE EMPLOYER TO AN AGREEMENT OF EMPLOYMENT FOR A SPECIFIC PERIOD OF TIME. A WORKER'S EMPLOYMENT CAN BE TERMINATED BY EITHER THE EMPLOYEE OR THE EMPLOYER AT ANY TIME, FOR ANY REASON, WITH OR WITHOUT NOTICE. NO REPRESENTATIVE OR AGENT OF THE EMPLOYER, OTHER THAN THE CHIEF EXECUTIVE OFFICER AND THE HR VICE PRESIDENT, CAN AUTHORIZE OR SIGN AN EMPLOYMENT AGREEMENT CONTRARY TO THE ABOVE TERMS OR OTHERWISE MAKE ANY BINDING OFFER OF EMPLOYMENT FOR A SPECIFIC TERM.
General Contract Disclaimer: Standard Provision
THE POLICIES AND PROCEDURES IN THIS HANDBOOK ARE DESIGNED TO SERVE AS GUIDELINES FOR MANAGEMENT ACTION. THEY ARE NOT INTENDED TO CREATE ANY CONTRACT OR BINDING AGREEMENT BETWEEN THE EMPLOYER AND ANY EMPLOYEE. ALL POLICIES AND PROCEDURES OUTLINED IN THIS HANDBOOK ARE SUBJECT TO CHANGE OR MODIFICATION AT THE EMPLOYER'S DISCRETION AT ANY TIME THAT PARTICULAR CIRCUMSTANCES WARRANT.
THIS HANDBOOK IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. NO PROVISION OR PORTION OF THE HANDBOOK CONSTITUTES AN IMPLIED OR EXPRESSED CONTRACT, GUARANTEE, OR ASSURANCE OF EMPLOYMENT OR ANY RIGHT TO AN EMPLOYMENT-RELATED BENEFIT OR PROCEDURE. EMPLOYER RESERVES THE RIGHT TO CHANGE, MODIFY, ELIMINATE, OR DEVIATE FROM ANY POLICY OR PROCEDURE IN THIS HANDBOOK AT ANY TIME AND TO HIRE, TRANSFER, PROMOTE, DISCIPLINE, TERMINATE, AND OTHERWISE MANAGE ITS EMPLOYEES AS IT DEEMS APPROPRIATE. IF YOU HAVE QUESTIONS CONCERNING THESE GUIDELINES, PLEASE CONSULT WITH YOUR SUPERVISOR OR AN HR REPRESENTATIVE.
Policy Support Document
This section includes an acknowledgment form that an employer can have employees sign when they receive a copy of the organization's employee handbook or policy manual.
Employee Acknowledgment Form
I, ____, hereby acknowledge that I have received a copy of EMPLOYER's employee handbook, which provides guidelines on the policies, procedures, and programs affecting my employment with this organization. I understand that EMPLOYER can, at its sole discretion, modify, eliminate, revise, or deviate from the guidelines and information in this handbook as circumstances or situations warrant.
I also understand that any changes made by EMPLOYER with respect to its policies, procedures, or programs can supersede, modify, or eliminate any of the policies, procedures, or programs outlined in this handbook. I accept responsibility for familiarizing myself with the information in this handbook and will seek verification or clarification of its terms or guidance where necessary.
Furthermore, I acknowledge that this handbook is neither a contract of employment nor a legal document and nothing in the handbook creates an express or implied contract of employment. I understand that I should consult my supervisor or a representative of the HR department if I have any questions that are not answered in this handbook.
(Signed)______
Date __