Michigan employers should create and use employee handbooks. Handbooks provide employees with important information about the company and its customs, rules, culture and benefits for employees. Handbooks create clarity for employees and can provide certain protections for employers.
But realizing these and other benefits isn’t as simple as grabbing a template handbook off the internet and changing the company name to your own. The employer/employee relationship is too important, and potentially fraught with risk, to adopt a DIY approach to creating a handbook.
As a recent Michigan Court of Appeals decision demonstrates, each provision of a handbook must be carefully thought through to avoid unintended consequences—such as costly litigation.
Blanket Disclaimers—A Potential Problem in Many Handbooks
In addition to information about a company’s customs, rules, culture and benefits for employees, most handbooks contain language that disclaims that the handbook and any of its stated policies are not to be construed as any type of legally enforceable contract or agreement. This makes sense, since most employees are “at will” and employers want to reserve the right to modify their policies at their discretion.
However, if an employer does include this sort of disclaimer, it’s important that the handbook doesn’t include any provisions that the employer intends to be contractually enforceable, such as an agreement to arbitrate disputes, non-compete agreement and/or non-disclosure agreement. To the extent that an employer intends to bind some or all employees to such agreements, they should be standalone agreements—not included as provisions within a handbook that also contains a blanket contractual disclaimer.
Court of Appeals: A Handbook Disclaimer Makes Your Agreement to Arbitrate Unenforceable
This issue was recently the subject of an unpublished court of appeals opinion in an employment discrimination case.
In the underlying case, two plaintiffs filed a complaint against their employer alleging race-based employment discrimination and retaliation in violation of the Elliott-Larsen Civil Rights Act. The employers filed a motion to dismiss, arguing that the plaintiffs had agreed to arbitrate such disputes pursuant to signed agreements contained in the employer’s “Personnel Policy Manual”.
Plaintiffs argued that they did not intend to be bound by the agreement to arbitrate and, in any event, it was not enforceable against them given that the manual contained a disclaimer which provided: “The provisions of this arbitration procedure does [sic] not create any contract of employment, express or otherwise, and does not, in any way, alter the ‘at-will’ employment relationship.” The employer argued that the arbitration agreement was a separate agreement distinct from the rest of the manual.
The trial court granted the employer’s motion to dismiss, however the court of appeals reversed.
According to the court: “[W]e conclude that the disclaimer in this case was a manifestation of defendants’ intent not to be bound by the arbitration agreements.” The employer’s argument that the agreement to arbitrate was a standalone agreement unaffected by the disclaimer was rejected.
Know What to Put—and Not Put—in an Employee Handbook
If you don’t intend for your employee handbook to be a contract—and in almost all cases you shouldn’t—then don’t include arbitration, non-disclosure, non-compete, non-solicit, or other agreements you want to be able to enforce in your handbook. If you do, and your handbook contains a contractual disclaimer, then there is a good chance such agreements will be deemed unenforceable. Instead of relying on handbook provisions, create separate, standalone agreements.
Your employees are your most important assets, so it’s worth investing in sound employment law practices. If you have any questions about or require assistance with employment law issues, please contact Zana Tomich.
Having worked with Zana for 10 years, I can attest to her professionalism, her pragmatism, and most importantly, her integrity. I always get sound, thoughtful advice and guidance. From routine filings & updates to the highly unexpected, Zana’s there to help, always responding quickly and […]
Read MoreWe highly recommend Dalton & Tomich! As a start-up firm that has rapidly grown across the country in under 5 years, Dalton & Tomich has been integral to our sound, credible, and excellent in standard infrastructure. As we’ve scaled, Zana has been right by our […]
Read MoreAs a professional photographer in the wedding industry, reliable communication is very important to me. Noel was very knowledgeable and quick to respond to all of my questions and not just that, he also gave me suggestions when reviewing and updating my contract. The entire […]
Read MoreZana’s expert guidance has helped us to move forward with clarity and confidence in our business endeavors. She helped us create a new business entity, and a few years later to navigate a tricky buyout—all with a clear path forward for business growth. Her calm […]
Read MoreNoel’s guidance was much appreciated when redrafting my client contract. He was very professional, respectful of my time and potential costs, and was sincere with his advice. I trusted that he had the highest good for my business in mind. I will seek out his […]
Read MoreZana’s expertise in employee law has helped us refine and build a stronger operations and hiring strategy at my company. As a business owner of a small and fast growing company, I very much appreciate Zana’s ability to always step into any situation quickly and […]
Read More