REVISITING WHEN AN EMPLOYEE HANDBOOK IS A CONTRACT UNDER MARYLAND LAW

Posted on by Craig Ballew in Labor & Employment.

Is your employee handbook a contract? Thirty years ago, Maryland’s courts ruled that a jury had to decide that question, unless the handbook contained a “clear and conspicuous” disclaimer stating that it was not a contract.  Since then, most Maryland employers have wisely introduced disclaimer language to avoid litigation seeking damages because something in the handbook was not followed exactly as written.  A recent Maryland case revisits this question and identifies a new problem created, in part, by our societal move into the digital age.

James Tucker was an employee of the Johns Hopkins University (“the University”). He was notified of his termination for misconduct. Following receipt of this notice, Tucker challenged his termination by using the University’s appeal system outlined in the Human Resources Policy Manual (“the Manual”). In the Manual, there was a detailed, multi-step procedure permitting the employee to appeal to various levels. The process culminated with a meeting in front of an Appeal Panel of three persons: the Chair of the Panel, a University member chosen by the Chair, and a University member chosen by the employee.

When Tucker reached the final step of the process and selected his panel member, he found that the individual was not able to attend the hearing. The University replaced Tucker’s selection with another member. When Tucker’s appeal was ultimately denied, he filed suit against the University for failing to uphold the provisions of the appeal process.

In 1987, Maryland’s Court of Special Appeals addressed whether a handbook’s appeal process created a contract:

(P)rovisions in personnel policy statements… that set forth a required procedure for termination of … employment may, if properly expressed and communicated to the employee, become contractual undertakings by the employer that are enforceable by the employee. Ultimately, because “the appellee expressly negated, in a clear and conspicuous manner, any contract based upon the handbook for a definite term and reserved the right to discharge its employees at any time,” we held that justifiable reliance by the appellant was precluded.

Castiglione v. Johns Hopkins Hosp., 69 Md. App. 325, 339-341 (1987)

 

This analysis was revisited in Haselrig v. Pub. Storage, Inc., 86 Md. App. 1116 (1991).

If we determine that the language of the provisions is ambiguous-an ambiguity exists when the language in the provision is, to a reasonably prudent layman, susceptible of more than one meaning, or where the placement of the provisions in the handbook has that effect-and/or equivocal, then the issue of appellant’s justification in relying on the other provisions is for the fact finder. Where the issue is, as it is here, the justifiability of an employee’s reliance on a handbook, we must consider both the placement of the provisions in the handbook and the language of the provisions.

Id.  at 128.

 

The court in Haselrig went on to say:

[o]f course, where the document containing the provision relied upon by the employee also contains “a clear disclaimer stating that the policies and procedures described therein are ‘subject to change … unilaterally and at any time’,” hence, that it is not to be interpreted as a contract of employment, it is “quite clear that the [employer] is promising nothing.”

Id. at 131

In the recent Tucker case, the University’s Manual was not a paper document; instead, the Manual existed online. Visitors to the online site found several options listed along the side of the webpage. One of those options contained a disclaimer:

This manual does not constitute an express or implied contract and its provisions are not intended to be contractually binding. Each staff member has the right to end employment with the University at any time for any reason and the University reserves this same right.

The University’s appeal process was contained in a separate link on the side of the webpage. The link to the appeal process did not contain its own disclaimer language.

The Circuit Court for Baltimore City found the disclaimer on the webpage sufficient and granted summary judgment in favor of the University. However, the Court of Special Appeals reversed that decision. The Court found that the separation of the disclaimer from the appeal process called into question whether the disclaimer was clear and conspicuous:

In order for a handbook disclaimer to effectively preclude contractual liability, it must be both clear and conspicuousSee Castiglione, 69 Md. App. at 340 (holding that the disclaimer at issue was sufficient because it “expressly negated, in a clear and conspicuous manner, any contract based upon the handbook[.]” (Emphasis added)). In the case at bar, the disclaimer clearly states that “[t]his manual does not constitute an express or implied contract and its provisions are not intended to be contractually binding.” However, it is not so obvious whether the disclaimer is conspicuous, at least with respect to the appeal process. The disclaimer, although express, is not presented in boldfaced or capitalized type or in an otherwise highlighted manner, and is not shown in the two places where the appeal process appears outside the Manual on the University’s Human Resources website. Therefore, whether such a disclaimer is sufficiently conspicuous to preclude liability relating to the University’s appeal process, which contains a highly detailed, three-step procedure, is an issue that requires resolution by a trier of fact rather than through entry of summary judgment.

Tucker v. Johns Hopkins Univ., No. 1150, SEPT.TERM, 2015, 2017 WL 1316060, at *9 (Md. Ct. Spec. App. Apr. 10, 2017)

For Johns Hopkins, posting its employee handbook online created unforeseen legal questions. The nuances of the Manual’s online format created enough of a question of fact to prevent summary judgment. Issues such as this one will continue to arise as more and more companies move to electronic postings. Using an online format may be more convenient, but an employer must ensure that clear and conspicuous disclaimer language appears in the correct places throughout the online manual. Otherwise, a jury may be deciding whether your handbook is a contract and whether it has been breached.