New Minnesota Ruling Affects “At-Will” Defense of Handbook Policies

April 29, 2021
Publication
Inside HR
Handbook
Read time: 3 mins

Employers in Minnesota may have a new reason to review handbooks, based on the recent court case of Hall vs. City of Plainview. This case was brought all the way to the Supreme Court to decide if the city’s handbook disclaimer stating it is not a contract of employment was enough to disqualify the discharged employee from receiving accrued PTO at the time of termination.

Background

Mr. Hall had worked for the city of Plainview and had accumulated 1,800 hours of PTO in a cumulative bank during his 30 years of employment. Prior to his termination, Mr. Hall was given the opportunity to either voluntarily resign or be terminated. The offer from the city’s administrator stated that if he resigned with sufficient notice, they would pay out 500 hours of his accumulated PTO. Mr. Hall refused the offer and was terminated. When he demanded payment of all 1,800 hours of accumulated PTO, the city refused stating he did not provide sufficient notice and had, therefore, forfeited his remaining PTO benefits.

The handbook for Planview begins with a disclaimer included in most handbooks: “The Personnel Policies and Procedures Manual is not intended to create an express or implied contract of employment … These provisions, however, are not intended to alter the relationship between the City as an employer, and an individual employee, as being one which is ‘at-will’, terminable by either at any time for any reason.” Also included in the handbook is the company’s PTO policy, which states that employees are eligible for a payout of a designated portion of accrued PTO if sufficient notice of resignation is provided.

Through the Courts

Mr. Hall sued for breach of contract, violation of the Minnesota Payment of Wages Act, and unjust enrichment (when one party provides work or service to another party without receiving proper compensation or restitution). He claimed that the handbook’s PTO policy indicated a “contract” to pay accrued time upon termination of employment.

Both the District Court and Court of Appeals dismissed the first two claims but upheld the claim for unjust enrichment. Hall appealed and brought the case to the Supreme Court. The Supreme Court reversed the decision on breach of contract. They determined that a handbook may be a contract if:

  1. The terms are definite in form;
  2. The terms are communicated to the employee;
  3. The offer is accepted by the employee; and
  4. Consideration is given.

It was determined that all four conditions were met in this case. It was also determined the disclaimer in the beginning of the handbook was a general statement that only applied to the terms of employment and not the policies included within it. The policies within a handbook indicate a promise of what the employee can expect when employed by the company.

Key Takeaway

While most handbooks include a general “Employment at Will” disclaimer, the Minnesota courts determined it ultimately only refers to the terms of employment and not the policies included within. If specific policies will be affected by termination or other breaks in employment, those should be specifically addressed in the individual policies themselves.

Source: Ogletree Deakins: Minnesota Employer’s Handbook Disclaimer Fails on PTO Policy Under Wage Payment Statute; Deborah Morgan, HR Government Affairs and Business Advisor, MRA – The Management Association