Employee Handbook Blog

COURT DECISION HIGHLIGHTS IMPORTANCE OF EMPLOYERS HAVING STAND- ALONE AGREEMENTS WITH EMPLOYEES ON SUCH MATTERS AS NONCOMPETITION, NONSOLICITATION, CONFIDENTIALITY, AND ARBITRATION OF DISPUTES, RATHER THAN INCLUDING THEM IN EMPLOYEE HANDBOOKS (MAY 2013)

Attorney Leslie Lockard
The Law Office of Leslie Lockard, P.C.
P.O. Box 537
Walpole, MA 02081
Tel. 508 850-9800
FAX 508 850-9801
Email: Llockard@leslielockard.com
Website: www.LeslieLockard.com

An April 2013 decision of the Massachusetts federal District Court, Domenichetti v. The Salter School et al, highlights the advisability of employers having stand-alone agreements with employees covering matters that may be particularly important to them, such as required arbitration of disputes, non competition during and after employment, non solicitation of company customers and employees, and non disclosure of company confidential and proprietary information. Employers who instead place such agreements in their employee handbooks-- even if employees sign the agreements as part of signing acknowledgement of the handbook-- may subject themselves to a substantial risk that a court will refuse to enforce the agreement.

Employers generally want maximal discretion in establishing, and from time to time modifying, their employee policies. Because of the many benefits to employers of doing so, employers often set forth their policies in writing in an employee handbook. Employers generally do not intend or want their handbooks to be contractually enforceable by their employees in the same way that a formal employment contract with an individual employee would be. In recent years, however, several Massachusetts state court decisions have deemed certain policies set forth in an employee handbook to be contractually enforceable by the employee, even though this was not the employer’s intent. These court decisions have suggested that a handbook policy may be contractually enforceable by the employee if the wording of the handbook would lead employees to reasonably expect that the employer would follow the policy as stated. To avoid wording that may create unintended employee expectations, employers are very well advised to have the assistance of an employment attorney in drafting and intermittently reviewing and revising an employee handbook.

To minimize the likelihood that a Court will deem their employee handbook to be a contract with their employees, employers often expressly state in their handbook that it is merely a guide and not a contract. For the same reason, employers often emphasize in their handbooks that all employment with the company is “at will”, and that the employer always has the right to change any of its policies or rules at any time.

The employer in the newly decided Salter School case included this type of clarifying terminology in its employee handbook. Close to the end of the 55 page handbook, the employer also included a “Dispute Resolution Policy”. This policy stated that the employer and the employee mutually agreed that they would submit most types of employment related claims, such as claims of employment discrimination, to binding arbitration. On the page following the “Dispute Resolution Policy”, there was an acknowledgement form that the employee signed, acknowledging receipt of the handbook, as well as an understanding that the employer could change any of the policies in the handbook at any time. The second bullet point on the employee acknowledgement form read: “I have read and understand the Dispute Resolution Policy and agree to the resolution of any covered dispute in accordance with that Policy”. After about a year and a half of employment, a Salter School employee filed a complaint in the Massachusetts federal court, alleging that the School had violated the Family and Medical Leave Act by denying her a promotion and demoting her after she sought an FMLA maternity leave. Based on its “Dispute Resolution Policy”, to which the employee had signed assent, the employer filed a motion to compel the employee to submit the dispute to arbitration rather than proceeding with her court complaint.

The court denied the motion, finding that the “Dispute Resolution Policy” was invalid and unenforceable. In so deciding, the judge pointed out that the “Dispute Resolution Policy” was included in a handbook which the employer had expressly stated was not a contract. In addition, the employer had asserted the right to change any of the policies in the handbook at any time, which arguably meant that the employer had not made a binding commitment to submit disputes to arbitration. The judge found that if the wording of the handbook did not oblige the employer to submit disputes to arbitration, a legally enforceable agreement had not been made, and the employee was not obliged to comply with that agreement.

Thus, an employer that had tried to avoid court proceedings by requiring employees to agree to submit claims to arbitration now must defend itself against this employee’s complaint in court.

WHAT SHOULD EMPLOYERS DO IN RESPONSE TO THIS DECISION?


It is generally inadvisable for an employer to include in a handbook-- which it does not intend to be a contract--agreements with employees on matters that are particularly important to the employer that it would want to be able to enforce in court if necessary. These may include:
  • agreements forbidding certain employees from competing with the company during their employment or for a certain period of time after the employee’s departure from the company
  • agreements requiring employees not to solicit the company’s customers or employees
  • agreements requiring that certain types of claims be submitted to arbitration rather than being filed in court
  • agreements requiring employees to keep confidential the employer’s confidential information, trade secrets and other proprietary information.
Employers would be well advised, in light of this new court decision, to consider whether they need stand alone agreements with their employees on any such matters as opposed to simply including them in an employment handbook.





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Contact Info

Attorney Leslie Lockard
The Law Office of Leslie Lockard, P.C.
P.O. Box 537
Walpole, MA 02081
Tel. 508 850-9800
FAX 508 850-9801
Email: Llockard@leslielockard.com
Website: www.LeslieLockard.com