Conning the IADC newsletters.

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Recognizing that a wide range of practical and helpful material appears in the newsletters prepared by committees of the International Association of Defense Counsel, this section highlights interesting topics covered in recent newsletters.

Employee Handbooks: Guidance or Contracts?

Writing in the September 2004 newsletter of the Employment Law Committee, Lucinda McDaniel, a principal in the law firm of Womack, Landis, Phelps, McNeill & McDaniel of Jonesboro, Arkansas discusses employee handbooks.

The General Rule

Most states recognize the employment-at-will doctrine. The Arkansas Supreme Court explained in Sterling Drug, Inc. v. Oxford, 294 Ark. 239, 742 S.W.2d 380 (Ark. 1988) that "[t]he well established rule is that, when an employee's employment is for an indefinite term, either party may terminate the relationship without cause or at will."

Employee Handbooks

Employees at-will often assert upon termination that their handbook created a contract of employment, either implied or express, and that, therefore, they cannot be discharged in violation of any provisions of that handbook. Most courts have held that a handbook does not create a contract of employment. However, language and actions can transform a handbook into a contract so employers must carefully draft employee handbooks to ensure that they are only providing guidance and are not creating contracts.

In Arkansas, an employee handbook can give an employee contractual rights in his or her position if the handbook contains an express provision against termination except for cause. Under those circumstances, the employee is no longer one at-will but one who can be discharged only for cause.

The most recent Arkansas Supreme Court decision on this issue is Faulkner v. Arkansas Children's Hospital, 347 Ark. 941, 69 S.W.3d 393 (Ark. 2002). In Faulkner, Arkansas Children's Hospital terminated an employee without following its own internal procedures for leave and grievances. Plaintiff sued, asserting that ACH breached her contract of employment by failing to follow the procedures set out in its handbook. The court disagreed and explained:

Generally, an employer may terminate the employment of an at-will employee without cause ... An exception to the at-will doctrine is where an employee relies upon an express agreement, such as in an employment manual, which disallows termination except for cause ... Faulkner asserts that she is not an at-will employee because ACH adopted a grievance process through which employees could dispute adverse employment actions ... We conclude that Faulkner's breach of contract claim is meritless. ACH's alleged grievance process is not the same as a for-cause provision in an employment manual. Faulkner, 69 S.W.3d at 406. The most recent discussion of handbook provisions in Arkansas is from the...