January 29, 2023

in one recent Alabama casethe Alabama Supreme Court held that an employee handbook containing language specifying mandatory dismissal/termination procedures for employees was specific enough to establish a unilateral contract between an employer and its “voluntary” employee.

The opinion builds on previous Supreme Court jurisprudence on when manuals can become binding contracts with employees, and cautions employers about the importance of carefully examining the language of their employment policies and procedures.

details of the case

In this case, the employee was hired as an “at will” employee in 2007 and was given a copy of his employer’s manual upon hiring. The handbook detailed step-by-step dismissal procedures that the employer would follow before terminating an employee, including a written notice, a “decision hearing” that the employee and a representative could attend, and a final review of the decision by the employee the mayor of the employer city and the employee’s right of appeal.

In 2015, the employer found that the plaintiff employee had violated several provisions of the handbook and terminated his employment, allegedly failing to follow the handbook’s dismissal procedures. The employee sued for breach of contract over the employer’s alleged failure to follow the dismissal procedure, but the court granted the employer’s motion for summary judgment.

The Handbook: A Binding Contract

On appeal, the Alabama Supreme Court first reiterated that it is established law in Alabama that the employment of an employee hired “at will” may be terminated by either the employer or the employee “with or without cause or justification,” meaning: one good reason, wrong reason, or no reason at all”. Nevertheless, the court found that it “recognized that an employee handbook may constitute a binding contract obliging an employer to meet certain conditions precedent for the dismissal of an employee”. The court repeated its earlier three-part test to determine whether a handbook constitutes a contract:

  • The language in the manual must be specific enough to represent an offer,

  • The offer must have been communicated to the employee by the time the handbook is issued, and

  • The employee must have accepted the employer’s offer by either accepting or retaining employment after the employee’s general awareness of the employer’s offer (language of the manual). Factors two (2) and three (3) are often not contested and were not contested in this complaint.

Regarding the manual in question, the Supreme Court found that the “ubiquitous” use of “must” in the manual when describing the dismissal procedures shows that they should be binding on the employer.

The Court noted that the mandatory meaning of ‘shall’ was ‘made clear’ by a comparison with the frequent use of ‘may’ in the Handbook when describing other procedures or policies. The court argued that the use of mandatory versus permissive, arbitrary language shows that the employer made a conscious choice to make some provisions of the handbook, particularly the dismissal procedures, binding on the employer.

The court further concluded that “An employee confronted with such exhaustive, mandatory language could reasonably believe that so long as he operated within the guidelines set out in the Handbook, he would not be terminated until all procedures outlined in the Handbook would be followed.’” The Court therefore ruled that the discharge procedures were specific enough to constitute a contract offer.

The employer put forward several arguments which were rejected by the Supreme Court. First, the court said the employee’s status as “any” was “irrelevant” to whether the employer was required to follow its termination procedures because the cause of termination is different from the means of termination.

Second, the employer referred to the “disclaimer” of a contract language in the manual. The court recognized that a disclaimer in a handbook stating that it did not create any contract would nullify the worker’s rights, but the handbook’s limited disclaimer rejected a contract only “for a specified period of time.” The wording was therefore not broad enough to dispute the employee’s contract argument.

Finally, the employee argued that his manual was not a contract because it contained language that said the employer retained the freedom to change policies and procedures. However, the Supreme Court found that the employer’s right to change its procedures differed from the wording, which expressly reserves the right to deviate from its procedures – which the court had previously found sufficient to reach the conclusion arrived at that all alleged promises in the manual were “illusory”. and could not constitute an enforceable contract – and thus the employer’s reserved right to change procedures did not make the promise in the handbook to follow existing procedures an unenforceable contract.

The court reversed the summary judgment in favor of the employer and remanded the case to the trial court to determine whether the employer actually violated the manual’s dismissal procedures.

The Alabama Supreme Court’s reasoning in this case is a helpful warning to employers of the consequences of failure to comply with mandatory/mandatory employment policies and procedures communicated to workers in manuals, even for otherwise “voluntary” workers. It is also a reminder that employers should review any current or future employment handbooks/manuals in detail to ensure their language accurately reflects the employer’s intent, and particularly if it is a policy where the employer is the wants/needs to retain necessary discretion Possibility to deviate from this under certain circumstances.

The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.

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