Does your handbook promise more than you intend? One healthcare powerhouse didn’t think so – but had to fight to prove it! In fact, Merck had to convince the Fourth Circuit Court of Appeals (which includes Maryland and Virginia) to overturn a $555,000 verdict against the company after a jury found that Merck’s policies had the unintended effect of eliminating the presumption of at-will employment.
Specifically, Merck’s policy provided that retaliation “will not be tolerated.” The trial court held that this language could be read to create a contract that overcame the at-will presumption. In other words, Merck’s motion for summary judgment was denied, the case proceeded to trial, and the jury found that Merck fired the employee in retaliation for bringing a whistle-blowing complaint and awarded the employee over half a million dollars.
While the appellate court agreed that a policy statement can create a contract that limits the employer’s right to terminate at-will, it also clarified that an employer can avoid this result by including an effective disclaimer that policy statements are not meant to become part of a contract. Fortunately for Merck, they had used appropriate disclaimers, and the appellate court held no contract was created and the verdict was overturned.
Most employees in the United States are employed on an at-will basis. Employment contracts – either individual or collective (through a union) – can override the at-will status of the employment relationship. As a result, employers are often counseled to confirm or re-affirm an individual’s at-will employment status in offer letters and other initial, employment-related communications, as well as in their handbooks (see above!). Recently, the National Labor Relations Board (“NLRB”) has been closely scrutinizing this at-will language on the theory that employees may mistakenly understand the language to prevent them from joining a union. While this issue is still being disputed, it appears that the NLRB’s position is that a policy may be unlawful if it is written from the perspective of the employee. For example, “I understand that my at-will employment relationship cannot be altered absent written approval by the company president.” The NLRB seems willing, however, to accept the flip of this statement. For example “The company will not allow anyone but the president to bind the company.” So, at least until this issue is finally resolved, NLRB scrutiny should encourage employers to choose their words wisely.
Taken together, these two recent legal developments can make it seem that employers cannot win for trying. Keep in mind however, that careful drafting – with one eye on the goal and the other assessing collateral impact – is now even more critical than ever.
The contents of this Alert are for informational purposes only, and do not constitute legal advice. If you have any questions about this Alert, please contact a member of the Shulman Rogers Employment and Labor Law Group or the Shulman Rogers attorney with whom you regularly work.
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