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EmploymentPolicy and Procedure Manual

Drafter Beware – Employment Handbooks as Binding Contracts, Part 2 of 3: “Competing Considerations in Massachusetts Case Law”

By December 28, 2010No Comments

There is much debate, especially in the courts, as to whether an employment policy manual is enforceable as a contract.  The Massachusetts Appeals Court commented in Ferguson v. Host International, 53 Mass. App. Ct. 96, 103 (2001), that “[i]t would be unfair to allow an employer to distribute a policy manual that make the workforce believe that certain promises have been made and then to allow the employer to renege on those promises.”  However, the story does not end with Ferguson.  The Supreme Judicial Court (SJC) in Jackson v. Action for Boston Community Development 403 Mass. 8, 15-16 (1988) identified six factors in determining that the employer’s handbook did notcreate an implied contract.  It considered:  (1) the fact that the employer retained the right to modify unilaterally the manual’s terms; (2) that the manual provided that it was for “guidance” as to the employer’s policies; (3) that there was no negotiation between the employer and the employee regarding the terms of the manual; (4) that the manual stated no term of employment; (5) the employer called no special attention to the manual; and (6) the employee did not sign or manifest his assent to the manual or acknowledge that he understood its terms. 

Subsequently, the SJC clarified that the “Jackson Factors” are neither exclusive nor a rigid standard.  The courts appear to agree that the analysis is fact intensive and requires a case by review.  In Weber v. Community Teamwork, Inc.  434 Mass. 761, 780 (2001) the court announced that “[w]here an employee signs a personnel policy, negotiates specific terms as a condition of beginning or continuing employment, or where an employer calls special attention to the policy, a finding that the terms of the policy form the basis of an implied contract may be justified.” Weber v. Community Teamwork, Inc.  434 Mass. 761, 780(2001) citing O’Brien v. New England Telephone  and Telegraph Co., at 692-693 and Jackson v. Action for Boston Community Dev., Inc., 403 Mass. 8, 15. (1988).

The debate highlighted in these cases makes it clear that drafting clear, concise personnel policies is critical.  It allows employers flexibility to effectively and safely manage their workforce, to maximize productivity and efficiency and to promote good workplace morale.  For employees, bright-line rules promote clarity and fairness.  They make expectations as to (mis)conduct transparent, they illuminate procedures for workplace grievances and they promote the even handed enforcement of work-place rules.

In our next segment of this blog series, Part 3, we discuss the trends in this practice area and whether a disclaimer, expressly stating that a policy is not a contract, is sufficient to avoid enforceability of such manuals.