How Reasonable Is "Reasonable"? the Search for a Satisfactory Approach to Employment Handbooks

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ABSTRACT

Although courts, in considering the enforceability of employment handbooks, have relied on a single source of principles, contract law, their inconsistent approaches have produced inequitable and irreconcilable results. This Note argues that courts should abandon their dependence on contract law when analyzing handbook claims and instead adopt an employment-based approach that balances the needs of employers with the realistic expectations of employees. Accordingly, this Note proposes three rules for analyzing the legitimacy of handbook modifications: (1) employers should always be permitted to unilaterally modify handbooks; (2) employers must provide employees reasonable notice, defined as a length of time set by the type and importance of the promise made in a handbook, before modifying a handbook; and (3) handbook disclaimers should be ignored, as they often have inequitable results for employees and employers alike.

INTRODUCTION

Employment at will is the default rule in American employment, (1) permitting either the employer or employee to terminate their relationship at any time for "good reason, bad reason, or no reason at all." (2) Yet courts have increasingly chipped away at the presumption of at-will employment, in particular due to its often harsh and unfair impact upon employees. (3) A notable example of this trend is the so-called "handbook exception" to the at-will doctrine, under which employers who issue handbooks to their employees may create enforceable, implied contracts that negate the presumption of at-will employment. (4) Quite commonly, employers provide their workforce such manuals--detailing the policies and procedures of the company, which may include everything from dismissal procedures to compensation rates--but no written contract. In the absence of an express agreement, employees are sometimes left without a remedy when a dispute over the work relationship arises. In such situations, the handbook is often the primary, or only, source of contractual terms. (5) Recognizing the possibility that handbooks can impose binding obligations upon the employer--for implicit or explicit promises made in the handbook--thus helps ensure a degree of fundamental fairness in the relationship between employer and employees. (6)

But the evolution of handbook jurisprudence has generated much disagreement. Not only do courts differ widely in the effect they grant employment handbooks--some still do not recognize them as legally binding upon the employer at all (7)--they vary greatly in the legal framework within which they analyze the issue. (8) For example, many courts rely exclusively on what they regard as traditional contract law, whereas others base their results on public policy. (9) The result is a hodgepodge of various results and analytical methods: often courts achieve the "right" result for doctrinally questionable reasons, (10) even though others achieve decidedly unfair or impractical results for technically correct reasons. (11)

To comprehend the enormity of the confusion for courts, employers, and employees, consider the following example: "Tim" is an at-will employee with no written contract. He received a handbook in his first week on the job, in which all employees were guaranteed a minimum of three weeks of paid vacation per year, albeit by means of a fairly elaborate compensation scheme tied to seniority rights. This system had long been company policy and was one of the main reasons Tim took the job. The handbook, however, contained a disclaimer near its end, stating that nothing in the handbook regarding compensation should be considered an offer. Six months later, Tim's employer provides a modified handbook stating that employees will no longer receive any paid vacation, although vacation time presently accrued may still be used. After Tim's employer does not pay him for his next vacation, he sues for the amount he would have received under the terms of the original handbook. …