Most large employers have employee handbooks, those set of policies that explain things like vacation and sick leave, discipline, etc. Employers will often describe how they are “binding” and must be followed. But, legally, they are not binding, at all. They look thorough and professional and provide some comfort to employees in an uncertain world.

They are generally not binding on the employer. They are nothing more than a guideline.  If the employer included a phrase providing they are not contractual, then they will not be binding. And, most, perhaps all employers do include non-binding type language in the handbook.

Alan Demyanovich worked for 20 years for Cadon Plating & Coating, which applies coatings in the automobile industry. Mr. Demyanovich developed heart problems in 1999, but returned to work and worked another ten years. In 2009, his heart condition worsened. He took substantial time off. In February, 2010, he again asked for FMLA leave. His boss believed they did not have enough employees to qualify for FMLA coverage, so he denied the request. He told Mr. Demyanovich that he was a "liability." Later that evening on Feb. 23, the boss told the worker that he was terminated.

One would think that based on timing alone there would be sufficient evidence to deny summary judgment. But, the district court granted summary judgment. The plaintiff appealed and won. The Sixth Circuit found that the stated reasons for the termination, 1) that Mr. Demyanovich was permanently disabled and 2) he was subject to termination because he had he’d been absent beyond the limit allowed by the employer, were not true. 

Regarding the ADA claim, the court found that the only evidence that Cadon could accommodate the worker was Mr. Demyanovich’s own testimony. The lower court apparently believed that the plaintiff needed something more than his own testimony. 

But, said the Sixth Circuit, the employer could not have known on Feb. 23 that Mr. Demyanovich might be permanently disabled. Indeed, said the court, the court should look at his disability at the time of the termination, not at the time of the plaintiff’s deposition. And, in actuality, the evidence suggested that the worker could perform various light-duty positions at Cadon. And, said the court of appeals, the Plaintiff has not actually dropped to a zero point attendance level, as provided in the employer’s own rules. Looking at the evidence from the non-movant’s point of view, as the court must, Mr. Demyanovich still had between one and two points left on the attendance point system. So, he was not actually subject to termination, yet. 

And, added the court, the term "liability" may well constitute direct evidence of intent to interfere with his FMLA eligibility. The Sixth Circuit ignored the lower court’s suggestion that Mr. Demyanovich needed something more than his own testimony regarding ADA accommodation. The higher court simply found there was sufficient evidence from which a reasonable jury could conclude that Cadon could have accommodated the plaintiff’s disability. The plaintiff was performing his duties satisfactorily at the time of the termination. 

See the decision in Demyanovich v. Cadon Plating and Coatings, LLC, No. 13-1015, 2014 WL 1259603 (6th Cir. 3/28/14) here

All the big employers have them: employee handbooks.  They love their handbooks.  Human Resource departments spend so much time and money putting them together.  So, of course, many employees come see me and first thing they say is the Employer did not follow their own policy.  The employee says it like that simple fact should answer all my questions.  But, not following their own employee policies tells me nothing.  Because, most employers do not follow their own handbook when it suits them. 

Employee handbooks are almost never binding on the employer.  This issue arises often when an employee is fired and they complain that they were not written up three times before they were fired.  Sure, many employer policies state that an employee must be written up three times before being fired.  But, almost every employee handbook will also contain a provision that the handbook is not binding on the employer.  That provision renders the handbook non-contractual. 

The confusion arises when the Human Resources office indicates that the manual is binding.  It may be binding informally, but if it has a non-contract type provision, it is not binding legally.

The employee handbook is helpful to the employer regardless of its legal effect.  Every good employer wants to provide opportunity for employees to improve.  The handbook provides a mechanism for employees to improve and to avoid disciplinary issues.  Many employees do improve after a verbal or written counseling.  

There was a brief time when employee handbooks were found to be binding on the employer as a contract.  There were one or two court decisions in the late 1980’s and early 1990’s that found employee handbooks to carry contractual effect under certain circumstances.  Employers then started putting a clause in the handbook that states the handbook is not a contract.  so, today the overwhelming majority of employers have non-binding employee handbooks – despite what you may hear at Human Resource presentations. 

In Carey v. 24 Hour Fitness, USA, Inc., No. 10-20945, (5th Cir. 1/25/12),we have another caes regarding an arbitration clause in an employee handbook.  But, this time, the court of appeals found that the arbitration clause was not binding. The cause prohibited entering into any class actions based on the Fair Labor Standards act.  The employee, John Carey, however, did enter into an FLSA class action. 24 Hour Fitness sought to stay the class action and force arbitration.  The district court denied the stay and found the arbitration agreement to be illusory.  The Fifth Circuit sustained the lower court.

Under Texas contract law, an agreement which allows one party to unilaterally make changes to the agreement retroactively is considered illusory.  Such an agreement is not a genuine agreement.  In this case, the Fifth Circuit found that 24 Hour Fitness retained the right to amend the employee handbook, including the arbitration clause, at any time with no limit.  The court fiound the 24 Hour Fitness arbitration agreement different from that in other cases, in which the handbook was subject to change, but not if any complaint had already been lodged. 

The arbitration agreement in the 24 Hour Fitness case allowed the employer to "revise, delete, and add to" the employee handbook at any time.  There was no limit on its ability to do so.  the agreement, thus, applied to the employee but allowed the employer to slip out of it if it chose.  This failure to make the agreement truly binding rendered the agreement "illusory,: said the court.

24 Hour Fitness argued that it did not have an express ability to make changes retroactively.  But, noted the court, Texas law presumes retroactive application if the agreement is silent on the subject.  See the opinion here

The Fifth Circuit has overruled similar arguments made here by the plaintiff in other cases.  It seems that the law of arbitration agreements is still evolving. 

This decision also reflects the challenge of using employee handbooks.  Employee handbooks benefit employers because they prescribe procedures for counseling or terminating employees.  Such procedures make it far easier for employers to win claims for unemployment benefits.  But, employee handbooks can become contracts – meaning the failure to follow discipline procedures in the book may give rise to breach of contract claims by an employee.  The employer then responds with clauses providing that the employee handbook is not a contract and can be changed at any time.  So, how does the employer insert an arbitration clause without making the rest of the handbook a contract?  This decision suggests that the employer should at least make it clear that it can change the handbook, but such changes would not apply to any pending claims of discrimination or FLSA violations. 

But, in the end, it is hard to eat your cake and eat it too.  There are limits to how much we can squeeze into any one contract. 

The matter has been litigated for a month.  Criminal defense lawyers and others would gather and watch the motion for new trial filed in the case of Kathleen Pierce.  She was convicted of embezzlement last January.  But, her lawyer challenged the District Attorney’s unheard of warrant served during the trial.  The DA believed that Ms. Pierce’s lawyer, Tony Reyes, was using documents which were "stolen" from Ms. Pierce’s employer.  The Assistant DA prosecuting the case asked to see the documents.  Mr. Reyes said she would see them as the case progressed, because he would use some of them as evidence.  The DA became convinced the documents were stolen from Ms. Pierce’s employer.  Ms. Pierce was on trial for embezzling from her employer. 

The Assistant DA procured a search warrant and served it on Mr. Reyes while the jury was out of the court room.  The search warrant accused Mr. Reyes of participating in some crime.  The DA physically siezed the papers from Mr. Reyes’ briefcase.  Ms. Pierce was convicted.  Mr. Reyes filed a motion asking for a new trial, saying the incident upset him so much that he could not effectively represent Ms. Pierce after the siezure.  The judge finally agreed after a month of testimony.  Judge Ray Angelini overturned the conviction.  See San Antonio Express News report

It is very unusual for a DA to search a defense attorney’s personal possessions during a trial.  The incident has galvanized the local criminal defense bar.  The several days of testimony filled the court room with defense lawyers and others watching the proceedings.  

And, the legal issue is were the documents actually stolen from her employer?  Mere possession of an employer’s documents do not make them stolen.  Many employers have policies against taking work records home.  But, many employers do not observe that policy.  Often, such policies are ignored.  If so, then work records may be taken home.  

The DA says hey were stolen.  But, were they really stolen? What an employer say about its policies is important.  More important is what the employer actually does. 

In a recent decision, the US Sixth Circuit Court of Appeals found that an arbitration policy referenced in an employee handbook was not binding on the employee.  In Hergenreder v. Bickford Senior Living Group, LLC, No. 10-1474 (6th Cir. 6/8/2011), the employee was a nurse who suffered from cancer shortly after starting to work for Bickford.  She attempted to sue after she was terminated.  The employer claimed the arbitration policy applied and the federal district court agreed.  But, now the appellate court has reversed and has allowed Ms. Hergenreder’s case to proceed. See decision.  

The purported arbitration clause was contained in a dispute resolution clause.  In one brief sentence, the employee handbook said there was a dispute resolution clause and the employee should look at it sometime.  The employee handbook itself never mentioned arbitration.  The dispute resolution policy did indeed include an arbitration agreement.  The policy stated that agreement to the dispute resolution clause was a condition of employment.  But, found the Sixth Circuit, the employee nowhere acknowledged that she had been notified of the contents of the dispute resolution clause.  The employer could not show that the employee was aware of the policy or that she had agreed to it in any way. 

And, of course, like many employee handbooks, it contained language stating that the handbook was not contractual.  As Workplace Prof points out, many employers want the contractual benefits of a binding arbitration agreement.  The handbook appeals to employees because it provides a predictable, understandable framework for their employment relationship.  But, a binding employee handbook would present many problems for an employer.  So, they seek to avoid any contractual aspects.  See Workplace Prof blog.  It is hard to have your cake and eat it too….

Employee handbooks are not binding on a Texas employer.  The typical employee handbook says the employer will not fire someone until that person has been verbally warned, and then warned in writing a few times.  Or, the handbook may say that an employee will not be demoted or fired without a good reason.  Once upon a time, such handbooks were found to be binding upon the employer.  Employers soon learned, however, that they could avoid the binding nature entirely if they simply state in the handbook that it is not binding and that the policies can be changed anytime. 

So, yes, these days, almost every employer, probably 99.9% now state somewhere in their handbook that it is not binding.  So, yes, an eleven year employee can now be fired with no warning simply because a new manager wants to downsize the office. 

I have previously talked about employee handbooks here and here

In most private sector jobs, if you were suspended 17 times by your employer, you would be out of a job.  But, Officer Lee Rakun is still appealing his latest suspension from the San Antonio Police Department.  See San Antonio Express-News story.  In fact, Officer Rakun received his first suspension within a year of starting with the police force.  The SAPD has an active union and a strong Collective Bargaining Agreement (CBA).  So, that helps explain Officer Rakun’s tenacity.

The advantage of CBA’s is that they typically require some form of "good cause" for termination.  An employee can only be fired for good cause.  Without a CBA, the rest of us are subject to Texas’ "at will" employment.  "At will" employment means the employer can terminate anyone for any reason (other than discrimination and a few other exceptions).  The employee handbook so many of us have at our jobs say an employee will be fired for certain infractions.  But, employee handbooks are not binding and they are often violated by the employer. 

So, the next time you are fired for "excessive absences" or because after 14 years of no errors, you are accused of failing to account for one $15 expense, think about unions and Officer Rakun’s appeal of his 17th suspension.  

 Employee handbooks are not enforceable.  They have not been enforceable since the early 1990’s.  In the early 1990’s, after a few court decisions, Texas employers realized they had to include a disclaimer in each handbook stating that the handbook is not a contract.  Employers wanted employe handbooks to not bind the employers.  Much of what makes a good handbook does not make for a good contract from the employer’s perspective.  There were one or two cases in the late 1980’s in which employees successfully argued that they had not been warned three times prior to termination, as required in the employee handbook.  So, their terminations were overturned.  Employers responded with clauses making the handbook not binding and not contractual. 

Then comes this movement to send disagreements to arbitration.  Employers thought arbitration would be cheaper and faster than lawsuits.  So, they sought to make arbitration the default forum for disagreements in the workplace.  But, how do you have a binding arbitration in an employee handbook that has a disclaimer?  That is, how does one make a non-binding handbook binding, sort of, sometimes, maybe?

Easy.  Include a phrase that sets the arbitration clause apart from the rest of the handbook, so that only the arbitration clause is binding.  This is what has lead to the Hatton v. D.R. Horton case.  See report.  The Texas Supreme Court has asked the parties to provide briefing on the issue, which usually means the court will consider the issue.  The Texas Supreme Court has been very supportive of large corporations and employers for many years.  And, the movement to take disagreements to arbitration, for everything from buying a car to workplace complaints is still strong.   So, the chances of success for the employee in Hatton v. D.R. Horton are slim indeed.