June 12, 2014. Most handbooks include a disclaimer that the handbook does not give rise to an employment contract. If, however, a handbook does not contain such a disclaimer, a court may determine that the handbook constitutes a contract between employer and employee. In those cases, the employer will be bound to follow the terms of the handbook.
However, when the handbook of a private firm contains language specifying that it shall not be construed as a contract, an employer is not necessarily bound to follow its procedures. First, many handbooks allow discretion among the procedures detailed in the manual. For instance, a progressive discipline policy may state that an employer may take disciplinary actions up to and including suspension and termination. In that case, a manager enjoys considerable leeway on what actions to take to handle a problem employee. Next, a firm may decide to change an employee’s role in the company for business reasons. For instance, if a manager determines an employee is needed on a different shift, he can switch employees around, even if it is not the usual way the company handles employee schedules.
Note, however, that if employees are unionized, an employer’s handbook may be part of the union contract, and its policies will be more strictly enforced. In addition, an employer may not refuse to follow the company handbook when the effect of that refusal is discriminatory against a member of a protected class. Failure to follow the terms of the handbook as to a member of a protected class (based on minority, gender, national origin, etc.) may be evidence of a discriminatory act in violation of state and federal laws. Because of that risk, we recommend to our employers that they follow the rules laid out in a carefully written handbook. Finally, a state may have statutory requirements for policies, such as drug testing, which must be strictly followed. In addition, federal laws may limit this leeway for some employers. For instance a trucking company must comply with Department of Transportation testing rules. Federal and state contractors may additionally be subject to whistleblower laws which dictate how a firm may handle such a case.