Recent Case Highlights the Importance of At-Will Disclaimers in Employee Handbooks

by Amelia J. Holstrom

Employers typically have an employee handbook or similar document that sets forth certain expectations, guidelines, and policies for its employees.  When defending employment litigation cases, employee handbooks often become important evidence.  Consequently, it is important that the handbook is carefully drafted and fully complies with the law.  In a recent decision from the United States District Court for the District of Massachusetts, O’Rourke v. Hampshire Council of Governments, et. al, the importance of an at-will disclaimer in the employee handbook was front and center in the decision to deny the employer’s motion to dismiss and allow the case to proceed.

According to the facts as alleged by plaintiff, O’Rourke was hired by the Hampshire Council of Governments and entered into a written employment agreement for the position of Director of Electricity.  The agreement specifically provided that the rules in the personnel manual applied to O’Rourke.  The personnel manual stated that it was a “covenant between the employer and the employee,” that someone in the probationary period could be terminated without cause, and that discharge outside of the probationary period could be for unsatisfactory performance, violation of rules and regulations, or for any serious situation in which discharge was warranted.   The handbook also contained a provision which required that an employee receive written notice of the discharge, including the date, specific reasons, and how to appeal the discharge.  Notably, the handbook did not contain an at-will disclaimer indicating that the employees were employed at will and that employment relationship could be terminated by either party at any time with or without cause or notice.  In 2013, after his probationary period ended, O’Rourke was terminated “not for cause.”

Thereafter, in addition to other claims, O’Rourke filed a lawsuit alleging breach of contract by the council and several individuals who served on the council’s executive committee.  The defendants sought to dismiss the complaint, arguing that O’Rourke did not have an employment contract, and, that, even if he did, it was not breached.  The court disagreed with the defendants, reasoning that statements in the council’s personnel manual could reasonably have led O’Rourke to believe that the council intended to offer him employment that could be terminated only for cause, and that O’Rourke’s continuing to work in the position after receiving the personnel manual constituted acceptance of that offer, creating an implied employment contract between the parties. Accordingly, the court declined to dismiss O’Rourke’s case.

The outcome may have been different had the personnel manual contained an at-will disclaimer. At will disclaimers serve to clarify that the employment relationship is “at will,” meaning it can be terminated by either the employee or the employer at any time, for any reason, with or without cause or notice; and that nothing in the employee handbook or personnel manual creates a contractual relationship between the employer and the employee.  Such disclaimers are key in preventing employees from succeeding on breach of contract claims based on the content of an employee handbook.

The bottom line is that employers should have their employment handbooks reviewed by counsel periodically to ensure that they include effective at-will disclaimers, that all policies are up to date and compliant with current law, and that any and all important or legally required policies are included in the handbook.

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