Be Careful What You Ask For In Employee Handbooks, You Just Might Get It

It seems like I”ve been writing alot about labor issues recently, but this particular case interested me. And it poses an interesting dilemma seeing as how what this case involves is a typical practice.

A Texas employer disseminated an employee handbook and a separate arbitration policy. Sent over email, the employee handbook attempted to bind employees to resolve disputes through arbitration by referencing the separate arbitration policy and including a hyperlink within the handbook. In order to avoid creating an employment contract, the handbook stated “this Handbook is not a contract of employment,” and “[t]he Handbook shall not bind the Company to employ any individual,” and “all employment is “At-Will”…mean[ing] that your employment can be terminated at any time by you, OR the Company, with or without cause, and/or with or without notice.” There was also language stating, “[p]olicies are not to be interpreted as a promise by the Company that any particular situation will be handled in the express manner set forth in the text.”  Typical right? I”ve seen plenty of resources recommending this language be used. However, it didn”t exactly agree with the Dallas Court of Appeals.  When Rao  later  sued the company, and the company requested the case be moved  to arbitration, the Court ultimately found that the employee handbook was unenforceable. Consequently, so too was the agreement to arbitrate.

Why you ask? Well, because the employee handbook did not constitute  a valid contract between Mr. Rao and his employer. I will spare you a dissertation on contract law (lucky you) but suffice it to say that in order to have a valid contract you must casino pa natet have an offer made. An example would be an offer to paint my fence for so and so dollars. Logically,that means you must have someone who makes the offer (an offeror) and someone who accepts (an offeree). Both offeror and offeree must have mutual obligations. In the example I made the offeror (me) and the offeree (the one I”m asking to paint my fence) would be mutually obligated. I am obligated to pay the person who completely paints my fence, and the fence painter is obligated to paint my fence in order to get paid.

The problem with the employee handbook in this case is that the employer and employee were not mutually obligated. The employee was obligated to arbitrate however, the Court found that the language quoted above allowed the employer to avoid arbitration. The employer could change terms at its discretion, or terminate the relationship at any point in which arbitration might not be conducive.

But what I find the most interesting is that the language/disclaimers I quoted above are VERY typical. Alot of people put them in handbooks and policies for protection. The first sentence maintains the employers ability to terminate employees for almost any and almost every circumstance. It also keeps policies from being interpreted as a contract guaranteeing employment. The second sentence keeps the organization from being held liable should those responsible for carrying out policies fail to do so as laid out officially in company documents or handbooks. That”s important because employees suing for wrongful termination will  often cite the mishandling of (or failure to adhere to) company policies as a ground. So it makes sense why both of these “disclaimers” are present. But I would definitely take notice of this case and at least be aware of the possibility for language you include to be interpreted in a way you did not intend.

The other lesson is found in  integrating other documents into a handbook. Here, the separate arbitration policy was held to be “inextricably connected” to the employee handbook. Because the employee handbook was determined to be invalid, so too was the arbitration policy. Even though the policy in and of itself was valid.

I know that this too is a common practice, to reference outside policies and integrate them into one handbook. The very real danger, however, is that the policies will get sucked up into whatever issues an employee handbook might have. No need to run to your handbooks with white-out in tow. But these are definitely issues to be mindful of.

FYI, the case is Weekley Homes L.P. v. Rao, Tex. App., No. 10-570, 3/22/11.