Court Decision Highlights The Risks Of Poor Handbook Drafting
Earlier this month the Supreme Court of Minnesota issued an interesting decision concerning two questions employment litigators regularly come across: (1) whether a handbook provision creates an employee contractual right, and (2) whether a general disclaimer in a handbook stating that its provisions are not intended to create a contract defeats a handbook contract claim.
In Hall v. City of Plainview, the employee was fired after 30 years employment by the City. After the City refused to pay his 1,779 accrued PTO [“paid time off”] hours, the employee sued the City for breach of the PTO provisions in the City’s handbook. The City moved to dismiss the employee’s claim contending that the general disclaimer defeated it.
The Court denied the motion, finding that the PTO provisions in the handbook were sufficiently definite to establish a contractual right to the PTO. The Court further held that PTO is a form of compensation and that it was reasonable for the employee to expect that he would be paid the PTO in exchange for the hours that he worked. Finally, the Court held that the broad general disclaimer, which appeared only in the handbook’s introduction, was ambiguous as to its applicability to the specific provisions within the handbook including the subject PTO provisions. As such, the Court remanded to case to the trial court to resolve the ambiguity and determine whether the general disclaimer should be construed to apply to the PTO provisions.
What’s the takeaway for handbook drafters? Generic disclaimers are not enough — specificity is needed, especially with respect to forms of compensation (such as PTO) and grievance, discipline and termination provisions, the application of which can result in grave consequences to employees.