Court Sides with Worker on Handbook Claim

A state appellate court recently ruled in favor of an employee who claimed that his termination violated his employer’s manual and constituted a breach of contract. The Appellate Division of the state district court, finding that it would not have been unreasonable for the employee to regard the employee manual as a binding commitment, upheld a jury verdict against the employer for breach of an implied employment contract. Buttrick v. Intercity Alarms, LLC, No. 08-ADMS-40004, Massachusetts District Court, Appellate Division (June 17, 2009).

Factual Background

From the 1980s through 2004, Jeffrey Buttrick was intermittently employed by Intercity Alarms, LLC. During that time, Intercity Alarms issued at least three versions of its “Employee Reference Manual,” the stated purpose of which was to “inform all employees of the [company’s] current policies and programs.” The section of the manual called “Disciplinary Policy” clarified that the severity of any disciplinary action taken by the company would “in accordance with the following: Verbal Counseling . . . Written Counseling . . . Suspension.”

On January 22, 2004, James Yurasits conducted Buttrick’s annual employee review and issued him a verbal warning, which Buttrick denied receiving. On May 4, 2004, Intercity Alarms fired Buttrick for performance problems. On April 6, 2005, Buttrick sued Intercity Alarms for breach of contract alleging that his termination violated the employee manual’s progressive discipline policy. The jury returned a verdict in Buttrick’s favor in the amount of $41,888. After the judge denied Intercity Alarms’ motions for a judgment notwithstanding the verdict and for a new trial, the company appealed.

Legal Analysis
 
Intercity Alarms argued that the employee manual did not create an implied contract. In deciding this issue, the court first noted that under Massachusetts law, employment is presumed to be “at will” unless an express or implied contract governs the terms and conditions of employment. According to the court, in deciding whether the terms of an employee manual are impliedly part of an employment contract, the “central question remains whether the employee ‘would reasonably conclude that the employer was presenting the manual as a statement of the conditions under which employment could continue’.”

The court found that Intercity Alarms’ 2004 employee manual stated that the employer may unilaterally modify its terms, that the manual serves only as a guide, not an employment contract, and that it failed to state a term of employment. In addition, the court found that Buttrick did not negotiate the manual’s terms. Nonetheless, the court found that it would not be unreasonable for Buttrick to have regarded the manual as a binding commitment.

In arriving at this conclusion, the court took into account the fact that Intercity Alarms’ operations manager had told Buttrick that it was “very necessary” to sign the 2000 manual and that Buttrick was asked to sign the 2004 manual at least three times. Buttrick also testified that he understood himself to be bound by the 2000 manual including its noncompetition clause. Thus, the court affirmed judgment in Buttrick’s favor.

Practical Impact

According to Deborah Hesford DosSantos, a shareholder in Ogletree Deakins’ Boston office: “The decision by the Appellate Division is another in a series of decisions that should serve as a warning to Massachusetts employers that their handbooks need to be written with extreme care. It is not sufficient merely to say – as the employer in this case did – that the handbook can be modified unilaterally and that it does not create a contract. Rather, employers must look carefully at the specific policies they are adopting and be sure that they are willing to live with the consequences of what those policies promise in every single circumstance.”

Note: This article was published in the August 2009 issue of the Massachusetts eAuthority.