When Is Your Employee Handbook a Contract?

John T. Melcon

Many employers attempt to write their employee handbooks to avoid creating contractual obligations toward workers. But as the City of Plainview, Minnesota, recently discovered, this isn’t always easy to accomplish. The handbook contained a disclaimer stating that it was “not intended to create an express or implied contract of employment” and warning that its policies “should not be construed as contract terms.” The City relied on this language after it fired a longtime employee and refused to pay out any of his 1,778.73 hours of accrued paid time off (roughly equivalent to 45 weeks’ vacation).

The ensuing dispute eventually reached the Minnesota Supreme Court in Hall v. City of Plainview, which concluded—in a 5-2 decision—that the handbook’s one-page paid time off policy was clear and specific enough to establish the City’s obligations and that the general disclaimers in the handbook’s introduction were too ambiguous to prevent those obligations from constituting a unilateral contract.

The majority acknowledged that its decision was “fact specific” and that courts across the country have reached varying results in other handbook cases (sometimes because of differing state laws). Still, the decision serves as a reminder that handbook drafting requires careful attention to detail, and boilerplate provisions may not always have their intended effect.