EMPLOYEE HANDBOOKS – WHEN DO THEY APPLY TO THE BOSS?

The trial of Don Marsh, former CEO of Marsh Supermarkets, is quickly turning into the lifestyles of the rich and famous, with discussions of family trips to New York for the Macy’s Day Parade, annual salmon fishing trips to Alaska for Marsh executives costing the company more than $90,000, and an eight-day trip to Tahiti for Don’s son, all on the company’s checkbook.  However, one significant legal issue that has arisen is whether Don Marsh was aware of the company’s Code of Conduct, which applied to all employees, even the CEO himself.  While most employees are not in the position of charging $739 for two sets of cufflinks from Neiman Marcus, what effect does an employer’s Code of Conduct have on subsequent litigation?

States like Illinois, Minnesota, and New Jersey have found that an employer’s handbook given to an employee can create a binding contract between an employee and employer, if it contains clear promissory language that makes the handbook an offer that the employee accepts by continuing to work after receiving it.  Indiana state courts, and federal courts interpreting Indiana law, however, have yet to go this far but often look for express limiting clauses within employer’s handbooks that state things such as: “This handbook is not a contract of employment and does not affect your rights as an employee.”
 
Therefore, if an employee handbook does not create enforceable obligations, what practicable protection does it serve employees and employers?  The answer is: Notice.  An employee’s handbook provides the employee with useful information and expectations of the employer during his or her course of employment, and if the relationship degrades, each will –for the most part – know why and what to expect from the other.  So, a requirement that all employees – even CEOs – read and sign the employee handbook is good practice for all. If it had occurred in Mr. Marsh’s case, it would have made it very hard for him to now say he did not know about that Company policy.

If you have questions about this or any other Labor & Employment Law issues, please contact us.
 

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