Employee Handbooks: A Cautionary Tale

Employee handbook on desk, papers strewn aboutout

Employee handbooks can provide important legal protection for employers. However, imprecise drafting or inattentiveness to legal requirements can undermine the effectiveness of a handbook or create unintended effects.

In Chambers v. Catholic Charities of Shiawassee & Genesee Counties, the defendant employer learned this lesson the hard way. The employer initially obtained dismissal of the lawsuit on the basis that the parties had entered into arbitration agreements. But in reviewing the case, the Michigan Court of Appeals noted that although the employees each signed an alleged arbitration agreement, the document in question was located within an employee handbook and contained a disclaimer stating: “The provisions of this arbitration procedure does not create any contract of employment, express or otherwise, and does not, in any way, alter the ‘at-will’ employment relationship between the parties.” Based on the language of the disclaimer and the presence of the purported agreement within the handbook, the Court of Appeals held that the arbitration provision was not an enforceable agreement, and thus, the lawsuit could proceed in the trial court. Notably, had the employer issued arbitration agreements separate and apart from the employee handbook, and without the disclaimer, the arbitration mechanism would have been binding.

Chambers underscores the importance of carefully considering whether a purported obligation belongs in an employee handbook or a standalone agreement. This case is also a reminder that an employee handbook, without more, does not rise to the level of a legal contract. Whereas anti-discrimination policies, dress codes, and leave of absence rules belong in handbooks, other requirements – including arbitration clauses, shortened statutes of limitations paragraphs, and post-employment non-competition and non­-solicitation provisions – are unlikely to be enforceable unless contained within a separate agreement.

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