In a recent state court decision the court evaluated whether the employer’s employee handbook created an implied contract, and if it did, could the implied contract be enforced? Contracts can be explicit or can be implied. Explicit contracts, for example, are paper contracts which when signed by the parties to the contract are enforceable. In other words, paper contracts if broken can be the subject of a lawsuit and the court can force the breaching party to fulfill their promises. A paper contract is an explicit agreement binding the parties. On the other hand, if there is not a paper contract, can an employee for example argue that a contract still exists and is binding on the employer? The answer is yes in some situations.
When employers create employment documents which include promises to employees, there may not be an explicit (paper) contract, but a court scrutinizing the facts and circumstances could conclude that an implied contract exists. And yes implied contracts can be enforceable in court.
A tribal employer’s handbook or personnel manual could be the source of promises made by the employer which may, or may not, be honored by a particular management decision. Accordingly, in reviewing your employee handbook or policy and procedure manual, is there language tribal employers should include, and is there language tribal employers should remove, to avoid inadvertently creating an enforceable implied contract? The answer is yes.
What handbook language will help?
Consider including language in your handbook which clearly communicates that the tribal employer does not intend to create an enforceable agreement by defining the terms and conditions of employment in the handbook. That language might look like the following:
These policies are not intended to be contractual in nature, nor should they be interpreted as strict rules for employer responses to individual activity. The appropriate response to each unique situation may differ. For example, some circumstances may call for immediate action, either in the way of written warning or termination, depending upon the frequency or severity of the offense.
Here is another version of disclaimer language:
This handbook, or any other manual distributed by the ABC Tribe, does not constitute a contract of employment or change the at-will employment relationship. Only the Tribal Administrator has the authority to enter into any written agreement contrary to the foregoing or any agreement for employment. The policies of the ABC Tribe are subject to change at any time as business conditions and other factors may require. In addition to the policies outlined in this handbook, employees may be subject to various department-specific standard operating procedures.
Now that we have addressed some of the disclaimer language which tribal employers should consider including in handbooks to minimize the argument that the tribal employer has created a binding employment agreement with employees, is there language tribal employers should remove to reach the same objective? Yes.
What handbook language should be removed?
Think about the promises tribal employers make in employee handbooks. On the one hand, moral employers pledge to employees a safe working environment, clearly defined expectations and consistent application of the rules. Moral employers should make and keep these promises. On the other hand, can employers unintentionally make promises which create an implied contract with employees, and as a consequence, no longer have the flexibility to maintain a productive work environment? If the answer is yes, where do tribal employers overextend themselves with promises made through tribal policy?
One of the prime examples of creating an implied contract with employees which limits tribal employer flexibility is through a rigid progressive discipline policy. Progressive discipline is a good idea as it gives employees multiple opportunities to follow the rules and multiple opportunities to improve employee performance, before termination of employment. If the tribal employer defines its relationship with employees as at-will, can a progressive discipline policy unintentionally dilute the at-will standard and create an implied contract with employees? Yes.
Progressive discipline policies which declare that employers “shall” provide a written warning and shall provide pre-termination suspensions to employees are unintentionally handcuffing themselves. Instead compare the flexibility of the following progressive discipline policy which does not handcuff the employer:
The best disciplinary measure is the one that is not necessary. The Tribe prefers to utilize good management and fair supervision to support its employees. When discipline is necessary, the Tribe uses discipline of a progressive nature. Therefore, the Tribe uses verbal warning, written warning, suspensions and terminations in a manner that fits the Tribe’s needs. The Tribe, at its sole discretion, is entitled to utilize discipline that is appropriate for the circumstances presented. This policy does not modify or change the at-will relationship.
In this more flexible example of a progressive discipline policy, the employer will likely utilize the benefits of progression (giving employees multiple opportunities to succeed) but if an employee is violent at work or steals from his employer, the employer needs its policies to provide the flexibility necessary to manage to those specific circumstances.
Another example of creating an implied contract is in providing rights to employees which are not defined in the law. Whether the FLSA, FMLA, NLRA and ADEA apply to tribal employers is an open question which generates more than one correct answer for tribal employers. Some tribal employers follow these and other federal employment laws, but some tribal employers reject the direct application of these laws. In those instances where tribal employers reject the direct application of federal employment laws, those tribal employers sometimes make a contradictory promise to employees with the inclusion of those laws in their handbooks. Tribal leadership, with the benefit of numerous insightful voices (Human Resources, Tribal Administrators, Lawyers) should address this issue, evaluate the range of options available and make the best choice for their tribe.
Yet another example includes referring to workers as “permanent employees” the day the worker emerges from the introductory or probationary period. Permanent employees can steal your money because permanent employees are permanent. Employers characterize workers as permanent to distinguish the worker from probationary or temporary status, but the unintended consequence of that language is the implied contract of employment forever. Instead of using the adjective “permanent” to define workers consider using regular full-time employees as a substitute.
Recommendations: Include disclaimer language in a conspicuous place in the handbook and consider requiring employees to sign their names under that disclaimer acknowledging receipt and consent. Moreover review your handbooks to determine if the tribal employer is making promises which the tribal employer does not intend to make. Modify that language, tell your employees about the modified language, get your employees to consent to the changes in writing and move forward.