Here's a Disclaimer about Employee 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.

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

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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.

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."

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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.

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