FEATURE ARTICLE
Here's a Disclaimer about Employee Manuals
The State Supreme Court recently ruled out the use of disclaimers
as a way to negate past promises in personnel policy manuals
BY JAMES D. WASCHER
It may be necessary for park and forest preserve districts to revise or even replace their employee manuals or other written personnel policies.
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Ever since the Illinois Supreme Court ruled in 1987
that employee manuals and other personnel policy statements can create enforceable contract rights, attorneys
for park and forest preserve districts have urged their
clients to include a disclaimer explaining that these
documents are not intended to be contracts.
However, in a decision released on February 19 of
this year, the Illinois Supreme Court declared that an
employer cannot negate contractual promises in a personnel policy manual or other similar document already
in existence simply by unilaterally adding a disclaimer
to that document. Instead, the Supreme Court ruled
that the employer must offer its employees "consideration," i.e., something of value to the employee or detrimental to the employer, in order to modify their prior
contract. Unless consideration is furnished in exchange
for employee acceptance of new disclaimer language,
only employees hired after distribution of the revised
policy statement would be bound by the disclaimer,
according to the court's decision.
The Supreme Court's ruling in Doyle v. Holy Cross
Hospital stated, that, "Employers who choose to set forth
policies in employee handbooks and manuals as an inducement to attracting and retaining a skilled and loyal
work force cannot disregard those obligations at a later
time, simply because the employer later perceives them
to be inconvenient or burdensome."
This decision applies only to promises in existing
employee handbooks that are clear and definite enough
to form a contract, and not to manuals or any parts of
them that do not make such promises, or that reserve
to the district the option to change the policies stated
in the manual.
In the Doyle case, the defendant hospital's original
employee handbook stated that the hospital was "committed to providing a working environment where employees feel secure in their job." The handbook, which
was issued in 1971, also promised that, in order to "ensure that economic separation [discharge of an employee
for economic reasons] is handled in an objective, structured, and consistent way," certain specified "policies will
be followed in determining which employees will be affected."
The Supreme Court's 1987 decision in Duldulao v. St.
Mary of Nazareth Hospital Center recognized for the first
time that an employee manual can create contractual
rights, if (1) it contains a promise clear enough that an
employee would reasonably believe that the employer is
making an offer, (2) the manual is distributed to the employee in such a manner that he or she is aware of it and
reasonably believes it to be an offer, and (3) the employee
accepts the offer by commencing or continuing to work
after receiving the manual. This rule also applies to other
communications from an employer, including hiring letters and stand-alone policies such as a written prohibition against sexual harassment in the workplace.
In Doyle, the Supreme Court held that Holy Cross
Hospital's 1971 employee handbook passed each of these
tests, noting in particular "the stated purpose of the policy,
which was to promote stability in the work force and provide some assurance of continuity in employment." In
the same case, the Appellate Court had found that the
hospitals economic separation policy "can be understood
to convey a clear offer by Holy Cross to relinquish the
right to terminate [employees] at will."
Illinois law presumes that an employee who is hired
without a fixed term is employed at will and can be terminated at any time, for any reason that does not violate
July/August 1999 / 19
FEATURE ARTICLE
The danger of the Doyle decision is that a veteran park district employee could make a breach of contract claim against the district based upon a personnel policy manual that has long since been superceded, but that also contained contractual promises without a disclaimer.
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such statutes as the Illinois Human Rights Act, Title VII
of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act or the Americans with Disabilities
Act. However, an employee may overcome the presumption of at-will employment by demonstrating the existence of a contract with his or her employer.
After the Supreme Court ruled in the Duldulao case
that an employee handbook or other personnel policy
statement could create an employment contract, park
and forest preserve districts and other employers began
adding disclaimers to their policy statements, emphasizing that they were not intended to create contractual
rights.
In fact, the employer in the Doyle case had added a
disclaimer to its employee handbook in 1983, four years
prior to the Supreme Court's decision in Duldulao, stating that the policies contained in the handbook were
"subject to change from time to time and are not intended to constitute nor do they constitute an implied
or express contract or guarantee of employment for any
period of time."
The Supreme Court in Doyle declared that the 1983
disclaimer clause was a modification of the employment
contract formed by the 1971 employee manual and therefore required "consideration to be valid and enforceable."
However, the court found that, "in adding the disclaimer
to the handbook, the defendant provided nothing of value
to the plaintiffs and did not itself incur any disadvantage. In fact, the opposite occurred: the plaintiffs suffered a detriment — the loss of rights previously granted
to them by the handbook - while the defendant gained
a corresponding benefit."
The employer in Doyle argued that the plaintiffs' continued employment after its 1983 modification of the
employee handbook constituted sufficient consideration
for that modification. The Supreme Court rejected this
contention, adopting the rationale of the Appellate Court,
which had declared that:
If, as Holy Cross argues, plaintiffs' continued work
amounts to acceptance and consideration for the "loss"
of their right under the economic-separation policy,
then the only way plaintiffs could preserve and enforce
their contractual rights would have been to quit working after Holy Cross unilaterally issued the disclaimer.
This would make the promise by Holy Cross not to
terminate, except under the terms of the economic-separation policy, illusory. The illusion (and the irony)
is apparent: to preserve their right under the economic-separation policy the plaintiffs would be forced to quit.
In dissenting from the Supreme Court's decision in
the Doyle case, Justice James D. Heiple predicted that
the ruling would "create[ ] new chaos in the workplace."
In particular, Justice Heiple cautioned that, under the
court's holding, "a large employer could now have literally hundreds of separate employment contracts, depending on the date when particular employees were hired and
the particular language contained in the handbook at the
time of each individual hiring."
In other words, the danger of the Doyle decision is that a
veteran park district employee could make a breach of contract claim against the district based upon a personnel policy
manual that has long since been superceded, but that also
contained contractual promises without a disclaimer.
Park and forest preserve districts therefore should request
an attorney who is experienced in employment law to review any employee manual or other personnel policy statements that the district has in place, as well as handbooks
and policies that may have been superceded, to determine
whether any or all of these documents created contractual
rights for the district's employees. It may then be necessary
for the district to revise or even replace its employee manual
or other written personnel policies.
In preparing or revising an employee handbook or other
personnel policy statements, park and forest preserve districts should follow several simple rules.
• Avoid making promises. Under the Supreme
Court's decision in the Duldulao case, an employee manual
or other personnel policy statement creates an employment
contract only if its contains "a promise clear enough that
an employee would reasonably believe that an offer has
been made." It is therefore advisable to avoid use of terms
that unequivocally require the park or forest preserve district to follow a particular course of action, without the
use of any qualifying phrase or other language allowing
the district to exercise its discretion.
For example, in the Doyle case, the employee handbook
offered employees job security by promising to handle certain terminations "in an objective, structured, and consistent way," pursuant to certain policies that "will be followed" In the opinion of the Supreme Court, this language left the employer without any discretion to terminate an employee other than in the manner specifically set
forth in the handbook.
In contrast, the Appellate Court has ruled that an employee manual did not create contractual rights where it
used the term "'includes' when introducing the list of the
types of termination" that could end an employee's job,
because this "indicates that other types of termination might
exist. Further, the manual also clearly stated that the employee 'may be dismissed for certain enumerated reasons,
which similarly does not specifically preclude dismissal for
any number of other reasons."
Accordingly, park and forest preserve districts should not
use mandatory or absolute terms such as "shall," "will,"
"must," "always" and "only," especially when discussing the
conditions and procedures for discharge and other discipline, as well as employee benefits that are not otherwise
required by law. Instead, the district should qualify its references to these matters by using words such as "may" or
"including."
20 / Illinois Parks and Recreation
HERE'S A DISCLAIMER ABOUT EMPLOYEE MANUALS
Districts also should not use words such as "rights" or
"obligations" in describing benefits or policies, and instead should say something like "it is the District's current practice to...." Above all, personnel policy statements
should not refer to any employee, or class of employees,
as being "permanent," and should not state that the district will discharge an employee only for good cause, reasonable cause or just cause, or only after using progressive discipline.
In short, the language of an employee manual or personnel policy statement should be as flexible as possible,
so that no court could reasonably interpret the document as requiring the district to take a specific course of
action.
• Use a disclaimer. The courts have recognized that,
even when an employee manual otherwise appears to
make a promise clear enough to constitute a contractual
obligation, an employer may negate that promise by including language in the document that disclaims any
intention to form a contract. Suggested language for a
disclaimer is contained in the sidebar below.
The courts agree that, in order to negate the formation of a contract, a disclaimer must be set apart and
easily noticed, not hidden. For example, in one case, the
Appellate Court refused to enforce a disclaimer that the
employer had placed on the 38th page of a 39-page manual,
in a section entitled "Revisions." The following methods for making a disclaimer conspicuous have been either accepted or suggested by the Appellate Court:
• Place the disclaimer at the front of the employee
manual.
• Use the heading or title "Disclaimer."
• Print the disclaimer in capital letters.
• Use boldface or italics to highlight the language of
the disclaimer.
Even after the Supreme Court's decision in Doyle, a
park or forest preserve district can alter or eliminate a
contractual right in an existing employee manual by inserting a disclaimer. However, this change would be binding upon current employees only if the district offers them
consideration in return. One commentator has suggested
"giving employees a small cash payment as consideration."
However, in view of the fact that such a change in
policy could cause current employees to revert to at-will
status, a court might not consider a small cash payment
to be adequate consideration for the change. Alternatively, the district could offer a larger cash payment, or a
substantial new employee benefit. Employees hired after
the district inserts a disclaimer into its employee handbook would not need to receive consideration.
• Obtain the employee's acknowledgment.
Whenever a park or forest preserve district issues a new
or revised employee manual, each employee should be
required to sign a form acknowledging that nothing contained in the manual creates an enforceable contract, that
the manual is subject to change by the district unilaterally at any time, and that the employee understands that
he or she is employed at will by the district and can terminate his or her employment, or be terminated by the district, at any time. If the district furnishes consideration
for any changes that it makes in its personnel policies, the
acknowledgment also should reflect the employees agreement that the consideration is adequate.
Employee manuals are excellent tools for communicating important park and forest preserve district policies,
including prohibitions against workplace harassment and
requiring compliance with the Americans with Disabilities Act and the Drug Free Workplace Act. Court decisions such as Duldulao and Doyle should not discourage
park and forest preserve districts from adopting and circulating employee manuals, as long as they are prepared
with care and attention to their legal implications.
JAMES D. WASCHER
is an attorney with the law firm of Friedman & Holtz, P.C., which is genera! counsel to
15 park districts in the Chicago metropolitan area.
DISCLAIMER
THIS PERSONNEL POLICY MANUAL IS NOT AN EMPLOYMENT CONTRACT. NOTHING CONTAINED IN THIS
MANUAL, OR ANY WRITTEN OR ORAL STATEMENT CONTRADICTING, MODIFYING, INTERPRETING, EXPLAINING
OR CLARIFYING ANY PROVISION OF THE MANUAL, IS INTENDED TO CREATE, OR SHALL CREATE, ANY EXPRESS
OR IMPLIED CONTRACTUAL OBLIGATIONS THAT ARE
BINDING UPON EITHER THE PARK DISTRICT OR YOU.
THIS MANUAL IS INTENDED TO PROVIDE YOU WITH INFORMATION ABOUT PARK DISTRICT POLICIES AND
PRACTICES THAT ARE CURRENTLY IN FORCE. THESE
POLICIES AND PRACTICES ARE SUBJECT TO CHANGE
BY THE PARK DISTRICT UNILATERALLY AT ANY TIME,
WITHOUT PRIOR NOTICE TO YOU. AS AN AT-WILL EMPLOYEE OF THE PARK DISTRICT, YOU MAY TERMINATE
YOUR EMPLOYMENT AT ANY TIME, WITH OR WITHOUT
CAUSE OR NOTICE, AND THE PARK DISTRICT RETAINS
THE SAME RIGHT.
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