Is an Employee Handbook a Contract?

In Massachusetts, generally employment is at will. That means that an employee can be fired for a good reason, a bad reason, or no reason at all.

The exceptions are where the termination is unlawful because of laws against discrimination or retaliation, or when the termination violates an employment contract.

This is where the employee handbook often comes into play. The employer may have laid out a detailed plan for progressive discipline including verbal and written warnings before termination. It may have provisions for performance improvement plans, or other opportunities for the employee to cure any problems brought to their attention.

The question is whether this language creates a contract legally. If your employer has agreed in a legally binding contract to do all of those things, a termination without warning may be a wrongful termination. If, however, the handbook is just a statement of policy that can be changed or disregarded, it is likely not a contract.

Employment Handbooks That Are Enforced as Contracts

If the language in the handbook is specific and mandatory it may create a contract. For example, the handbook may say the employer "shall" do certain things. Absent language specifically stating that the employer may change or disregard this policy, it could be construed as a contract.

Employment Handbooks That Are Not Enforced as Contracts

Most employment handbooks contain the magic language that makes them policy documents and not contracts. This includes statements like "this is not a contract." It can also include language that clarifies that employment is still "at will," or that the employer can change the policies at any time.

Any employer who has had an employment attorney review their policies will know to include this language. Even those who just download and copy examples from the internet are probably using forms that have this kind of language. This is why in almost all circumstances a court will not enforce a term in an employee handbook as a legally binding contract.

Employment Handbooks That Create Implied Contracts

In contract law, there is such a thing as an implied contract. There are situations where the way the handbook is worded or presented can create an implied contract. This occurs if a court finds it was reasonable for an employee to expect that a binding promise was made.

It is rare for a court to find an implied contract in a handbook in Massachusetts. To protect against this, it is important that employers make very clear in the handbook that it is not a contract and can be changed at anytime. That language in most cases makes it unreasonable for the employee to expect any binding promises have been made.

Can the Employer Disregard the Handbook?

Even if the handbook cannot be enforced as a contract, there are risks to ignoring its provisions.

One is if you are facing a claim for wrongful termination. If the employee makes a very basic initial claim of discrimination, you will have to show a legitimate business reason for the termination. The employee then has the opportunity to try to prove that reason is just a pretext. If you have deviated from your normal procedures, that can be evidence of pretext.

Another risk involves unemployment. If you ever need to challenge an employee's eligibility for benefits because their termination was for a violation of policy, you have to show that the policy was regularly and uniformly enforced.

How Can We Help?

We can help you review an employment handbook to determine what rights it gives to employees.  You can use the button below to schedule a call back from a member of our team, give us a call at  781-784-2322, or fill out our web form  to let us know a little more about your situation.

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10.0Emily E. Smith-Lee