Are Employment Handbooks Legally Binding?

Does your employment handbook contain specific language indicating that it should not be considered a contract? If it does not, then your company handbook potentially could be considered a legally binding document between employer and employee.  While rare, an employee handbook can inadvertently create a contract in certain instances. Legally, the key factor in determining whether a company handbook constitutes a contract is if the employer has issued a guarantee to the employee or if the employee promises anything to the employer. 

Employment handbooks and their enforceability are important when it comes to dealing with employee discipline or termination. Certain small words like “must” “shall,” or “will” can make a big difference when interpreting the intent of an employee handbook.  

Handbooks can have very serious ramifications for employers.  An employee might see information in the handbook regarding performance improvement plans and mistakenly believe that he or she is entitled to “notice and cure” (a specific written notice of ineffectiveness and an opportunity to correct it) before the employee will be terminated.  But there is no employment contract with a notice and cure provision and the employer does not consider the company handbook to be a legally binding document. Nevertheless, if the handbook does not specifically state that it is not a contract and/or is not legally binding, the employer could be subjected to a wrongful termination lawsuit.

What Have the Courts Said About Employment Handbooks? 

In Staschiak v. Certified Logistics Inc., a commercial truck driver sued his employer for breach of contract; the contract in question was the employment handbook.  Based on information in the handbook, Mr. Staschiak believed he was entitled to receive 30% of the gross income received for his loads, $15 per hour layover pay, and that 70% of his health insurance costs would be paid by his employer, Certified Logistics, Inc.  Mr. Staschiak filed a lawsuit claiming breach of contract against his employer.  

Certified Logistics argued that the lawsuit was invalid because the employee handbook was not a legally binding contract.  However, the court agreed with Mr. Staschiak that the company handbook was indeed a binding contract, finding that there was significant evidence such that a reasonable person would believe in the promises made by the document. The employment handbook distributed by Certified Logistics did not contain any specific language stating that it was not a contract nor did it allow any wiggle room whereby the employer could make revisions. 

This case teaches employers that adding a few sentences to your company handbook to clarify your intent can be important. Without such language, an employer is vulnerable to lawsuits that allege the employee handbook is a legally binding contract.  

The employment attorneys at Simon | Paschal, PLLC can review your employee handbook and clarify your true intent. Without proper and clear language, employees could believe the company handbook constitutes a legally binding contract ascribing them specific benefits or granting them certain guarantees. Contact us today for information or assistance.

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