CVS’ Employment Handbook Was Not a Contract, Court Holds

Many employers use handbooks or manuals that provide details and instructions to employees regarding the terms and conditions of employment. Under certain limited circumstances, an employment manual/handbook may the source of contractual rights.

A recent decision, Kunda v. Caremark PhC, L.L.C., No. 14-CV-6125 JFB AYS, 2015 WL 4768817 (E.D.N.Y. Aug. 13, 2015), addresses the issue. In that case, the U.S. District Court for the Eastern District of New York dismissed plaintiff employee’s breach of contract case.

Plaintiff, a CVS Assistant Store Manager, argued that he “was arbitrarily and improperly terminated by CVS because he did not engage in any of the behaviors listed in” defendant’s Employment Handbook. The court agreed with defendant that these allegations could not form the basis of a breach of contract claim as a matter of law, and hence dismissed plaintiff’s complaint under Federal Rule of Civil Procedure 12(b)(6).

New York law provides:

[A] failure by an employer to follow its internal policies cannot form the basis of a breach of contract claim, unless, inter alia, mutual assent to enter into an implied-in-fact contract is shown. … New York recognizes an employee’s action for breach of contract against an employer based on its written policies only if the employer “made the employee aware of its express written policy limiting its right of discharge and … the employee detrimentally relied on that policy in accepting the employment.” (Emphasis added.)

Applying the law, the court held:

Plaintiff clearly fails to satisfy the “difficult pleading burden” required under New York law. Courts applying New York law in similar situations have consistently held that “the explicit disclaimer of a contractual relationship contained on the facing page clearly preserves [the employer’s] right to maintain an at-will employment relationship with plaintiff.” …

Here, it is clear from the allegations of the complaint that plaintiff was an at-will employee. … Since the document at issue expressly does not limit CVS’ actions as an employer regarding any of the contents in the Employment Handbook, plaintiff cannot assert a claim for breach of contract with respect thereto. …

In addition, even if the Employment Handbook did not include the disclaimers preserving the at-will employment relationship, the Court concludes that plaintiff’s breach of contract claim would still fail because the Employment Handbook does not contain an express limitation on CVS’ ability to fire its employees. In order for the Employment Handbook “to become a contract, it would have to contain some specific limitation on [CVS’] right to terminate its employees at-will.” … Here, Section 3 of the Employment Handbook does not set out exclusive avenues for termination, but instead provides a non-exhaustive list of conduct that may warrant termination or discipline. The preamble language in Section 3 states that the list includes “[e]xamples of conduct that generally lead to discipline and termination” but that the list is “not limited to” those specified. In fact, the handbook even acknowledges that “a handbook cannot cover every behavior or act that would be unacceptable” but only “can provide enough examples to make the point.” The handbook cautions employees to realize as they read through the handbook that they “could lose [their] job if [they] disregard or violate any company policy or procedure, whether contained in this handbook or maintained elsewhere.” Accordingly, even in the absence of the “at-will” language, the Court concludes that the Employment Handbook by its explicit terms cannot be interpreted to contain any limitation on CVS’ ability to terminate its employees, and agrees with defendant’s conclusion that “because Plaintiff is unable to demonstrate an express policy limiting CVS’ right to terminate his employment, his breach of contract claim must fail.”

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