Gardi, Haught, Fischer & Bhosale LTD.

Employee Rights: Handling Conflict Between The Policy Manual and The Employee Contract

By Gardi, Haught, Fischer & Bhosale LTD
March 17, 2014

Company policy manuals exist to set forth expectations of all employees in the company.  Employee contracts spell out the tenure and specific requirements of an individual employee in a certain position. However, when it comes to employee dismissal, the two can become easily confused.

There is a legal history of employees referencing the company policy manual as part of the employment contract.  To make such an argument, here are the three most common approaches employees will take.

ARGUMENT 1: The employee contract was ambiguous, requiring reference to the manual to ascertain its meaning. In legal terms, an ambiguous contract is one capable of being understood in more than one sense or an agreement obscure in meaning through indefiniteness of expression or having a double meaning.  A contract is also not considered ambiguous simply because the parties do not agree on its meaning. For example, in the case Mid-City Industrial Supply Company vs. Horowitz (1985) (132 Ill.App.3d 476, 481,  87 Ill. Dec. 279, 283,  476 N.E.2d 1271, 1275), Mid City thought Mr. Horowitz was personally responsible for his company’s debt to their company because of a document he had signed which Mid-City believed was a personal guarantee of payment.  Mr. Horowitz claimed he signed the document in his corporate capacity, which was not a promise for personal payment. Here, the court ruled in favor of Mr. Horowitz since the plaintiff could not demonstrate, among other things, that a personal demand for payment was ever made on Mr. Horowitz and the document in question was an unambiguous guarantee from the defendant.

In a contract or a policy manual, termination language should be unambiguous and leave no room for interpretation. For example, the agreement that states, “this agreement may be terminated or altered by mutual agreement of both parties or terminated with thirty (30) days written notice by either party” is unable to be understood in more than one sense.  Such language adequately defines the intention of both parties and there is no evident reason to vary the meaning of the words.

ARGUMENT 2: The manual was incorporated by reference into the contract.  Per legal precedent, if there is a reference to the company policy manual in the employee contract, it must show such an explicit intention.  For example, the contract may read “the policies of the corporate manual are not to be read narrowly as “terms of a contract” between the employee and the Agency.”  This language, when found in the “employment-at-will” section, applies to all employees. In this case, it can easily be argued that the language denounces the employee manual as having any contractual authority at all.

ARGUMENT3: The manual was part of the binding contract entered into between the company and the employee, so the more specific provisions of the office policy manual should control the situation. In the famous case Duldulao v. Saint Mary (1987), (115 Ill.2d 482, 106 Ill. Dec. 8, 505 N.E.2d 314), four terminated nurses charged the hospital with violating the company policy in the 1971 company regarding “economic separation”. Years later, the employer added disclaimers to their policy in their 1983 corporate manual which stated that “hospital policies are subject to change” and “the employment relationship between the Hospital and any employee may be terminated at any time by the Hospital or the employee with or without notice”.  Since the nurses had accepted their positions under the 1971 corporate policy, they felt their discharges were in violation of their employee contract.  Ultimately, the court concluded that an employee handbook or policy statement might create contractual rights if the contract format contains:

1) a promise clear enough that an employee would reasonably believe that an offer has been made;

2) the dissemination of the statement to the employee in such a manner that the employee is aware of its contents and reasonably believes it to be an offer; and

3) the employee accepts the offer, demonstrated by the commencement and continued work of the employee after learning of the policy statement.

When these three conditions are met, the employee’s continued work constitutes “consideration” for the manual and constitutes a valid contract.

Also, in this case, there was no express employment contract for the nurses; they only had the policy manual to determine control.  Duldulao generally carries no weight in situations where an express employment contract exists.

If you have questions regarding the legality of your corporate policy manual or employee contract, or if you feel you have been wrongfully dismissed given the status of your relationship with your employer, the attorneys at Gardi, Haught, Fischer & Bhosale LTD can offer experienced counsel for your case. Contact us at 847.944.9400.

Request a Consultation


related articles: