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Court Affirms Importance of Correct Employee Handbook Policies

August 3, 2022

By Michael Burns, courtesy of SBAM Approved Partner ASE

ASE conducts many employee handbook reviews throughout the year. The first component of that review is to look at important and necessary compliance policy statements that should be in every employee handbook. Last month the Michigan Court of Appeals ruled against an employer that did not follow its employee handbook policies properly. The Court pointed to the importance not only of having an employee handbook but to set up the policies properly in order to achieve the true intent of what the employer wants from its handbook policies.

In the case of Tamara Chambers and Annette Smith V Catholic Charities of Shiawassee and Genesee Counties and Vicky Schultz the Plaintiffs brought an employment discrimination case against Catholic Charities and their supervisor Ms. Schultz for race-based employment discrimination. Catholic Charities and Ms. Schulze moved for and got a dismissalat the lower court because their handbook (at this organization calling it a Personnel Policy Manual), which Plaintiffs acknowledged receiving, included a binding arbitration agreement. Both parties in fact signed the arbitration agreement that was included in the employee handbook. This is important to know.

The Plaintiffs appealed and the Michigan Appeals Court found against the employer because of the way it set up a couple important handbook policies. What happened? The employer had a clear agreement to arbitrate claims in its handbook. However, the handbook also had a contract disclaimer term stating that the policy provisions in the handbook do not constitute any contractual relationship between employer and employee nor do they contractually bind either party to any particular policy. This type of disclaimer term is in many employee handbooks. The purpose is to allow the employer the right to change its policies unilaterally and at its discretion without arguing that the policies promised at the point of employment can be changed when the employer deems it necessary.

Catholic Charities’ employee handbook included a disclaimer stating it did not form an employment contract and “… provisions of this arbitration procedure does not create any contract of employment, express or otherwise, and does not, in any way, alter the ‘at-will’ employment relationship between the parties.”

The Appeals Court held that this disclaimer statement in the handbook “evidenced an intent not to be bound.” And in turn the Court concluded that the disclaimer had to be read as to preclude the parties “not to be bound by the arbitration agreement” included in the handbook.

This case is an important reminder that 1. Courts do consider employee handbooks (Personnel Manuals) and their policies important. 2. Employers need to understand that what goes in the handbook will usually assist them, but if not done correctly can work against them. 3. If your handbook contains a contractual disclaimer clause, usually included in the “Purpose of this Handbook” or “About this Handbook” policy statement near or at the front of the handbook and sometimes part of the handbook Acknowledgement statement at the end. This term means no policy or statement in the handbook document can be considered a formal promise or agreement. That is why the Acknowledgment statement starts with “I have read and understand…” and should not use the word agree if the contractual disclaimer term is in the handbook.

If an employer has a program or policy that it requires a specific agreement on, it should have that policy or program in a document that is agreed to separately from the handbook. These types of separate agreements would definitely include one for binding Arbitration. Other policies employers may want to put the imprimatur of formal agreement to are Confidentiality Agreements, Proprietary or Intellectual Property, and Limitation of Action terms to name just a few.

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