Employer Handbook Did Not Create Contractual Rights

In Hanifan v Jo-Ann Fabric and Craft, a federal court recently granted summary judgment for a defendant employer, holding that the company handbook did not create a an enforceable contractual prohibition against retaliation for violating the handbooks’ terms.

This decision confirms the narrow circumstances under which an employee handbook creates contractual rights justifying a deviation from New York’s at-will employment rule.

Plaintiff, an “at will” employee, alleged that she was fired in retaliation for making multiple reports to supervisors regarding two employees’ violations of a “code of conduct” that was contained in defendant employer’s employee handbook. The court granted summary judgment to defendant.

The court initially cited the general rule of at-will employment and its very narrow exception:

In New York, it has long been settled that an employment relationship is presumed to be a hiring at will, terminable at any time by either party. … Where employment is at will, there is no contractual limitation on the employer’s freedom to terminate an employee’s employment or to impose or modify any term or condition of that employment. … As a general matter under New York law, a failure by an employer to follow its internal policies cannot form the basis of a breach of contract claim. …

A narrow and exclusive exception to this rule exists: an employer-at-will contractually limits its default freedom where: (1) an express written policy limits that freedom; (2) the employer makes the employee aware of this policy; and (3) the employee detrimentally and reasonably relies on the policy in accepting or continuing employment. … Where these elements are made out, an implied contract exists and the employee may bring a claim for a breach of that contract.

Plaintiff pointed to a combination of defendant’s codes of conduct, her employment offer sheet, her initial interview, her performance evaluations, a poster, and a training video as an implied-in-fact contract that prohibited defendant from retaliating against her for reporting violations of the codes and mandated a thorough investigation of any such reports.

The court nonetheless held that plaintiff failed to offer “sufficient evidence that these communications satisfy the narrow exception to an employer-at-will’s contractual freedom.”

Plaintiff acknowledged that “the policies stated in the Handbook are only guidelines and that she could not rely upon them as creating any rights, contractual or otherwise.” Based on this, the court concluded that plaintiff could not reasonably have relied on the handbooks’ anti-retaliation provisions. Any reliance was also unreasonable in light of defendant’s explicit reservation of the right to unilaterally modify its policies at any time.

The court also observed that requiring employees to do something does not include an obligation not to punish them for doing it:

Moreover, … Defendant informed employees only that they had to report violations of the Codes; not that they would be free from retaliation if they did so. … But language requiring employees to report violations cannot be read to contractually require Defendant not to retaliate if employees did so; Plaintiff has offered no support for her implicit contention that employers cannot require employees to do something and then punish them for doing it. … For the same reason, Defendant’s evaluation of Plaintiff’s performance based on her compliance with Defendant’s policies did not contractually obligate Defendant to refrain from retaliating against her for that compliance.

The court concluded:

[E]ven if all of these communications: (1) explicitly stated that employees would not be retaliated against for reporting violations and that all reports would be investigated; and (2) constituted written policies, Plaintiff cannot reasonably have relied on them. … [T]hese communications all constituted summaries or restatements of the Codes’ non-retaliation and investigation provisions. … [A]ny reliance by Plaintiff on the Codes’ provisions after the 2005 Handbook issued cannot have been reasonable. This renders reliance on mere restatements of those provisions unreasonable as well.

Plaintiff’s reliance on these communications is particularly unreasonable with respect to her claim that Defendant’s termination of her employment constituted contractually forbidden retaliation. The Handbooks and Acknowledgments provided an exclusive means of limiting Defendant’s right to terminate employees for any reason—a contract signed by Defendant’s president—and explicitly told employees they could not to rely on any other oral or written representations purporting to do so.

Therefore, since plaintiff failed to point to a written non-retaliation or investigation policy upon which she reasonably and detrimentally relied, defendant was entitled to summary judgment.

Share This: