A recent decision from the Illinois Court of Appeals highlights the importance of clear and effective disclaimers in employee handbooks. In Ross v. May Company, the plaintiff had been employed by the defendant company for more than 40 years. After the plaintiff was terminated, he filed suit claiming that his termination without cause was a breach of his employment contract. He claimed that a 1968 employee handbook, which articulated a progressive discipline policy, had created an implied-in-fact contract. The defendant argued in response that the handbook had been revised several times since 1968, with disclaimer language being inserted into the handbook in either 1987 or 1989, thereby precluding the creation of any employment contract.

The court held that the 1968 handbook, which did not contain a disclaimer, had in fact created a contractual relationship between the plaintiff and the company. Further, the court held that the company's attempts to revise the handbook since 1968 — and thereby return the employees subject to the 1968 handbook to at-will status — failed for lack of a bargained-for exchange and insufficient consideration. Despite the fact that the company had provided increased benefits to its employees in conjunction with the handbook revisions (including paid personal days, disability benefits, and a retirement savings plan), the court found that these benefits were not sufficient consideration because they were offered to all employees, not just those who were purportedly giving up their contractual rights because of the revisions.

In order for the revisions to effectively return the employees to at-will status, the court held that the company should have bargained with each affected employee, reached agreement, and provided consideration for the loss of those contractual rights. While the court provided no specifics as to how this process should play out or what would constitute sufficient consideration, the court did note that mere continued employment would not be consideration sufficient to support such a contract modification.

Older handbooks that lack clear, effective disclaimers regarding the creation of an employment contract could potentially pose problems for employers. If those handbooks set forth any policy regarding progressive discipline or provide for termination only "for cause," employees who were subject to that handbook may have an argument that a contractual relationship was created by that handbook, and that they are no longer at-will employees. A review of past employee handbooks, reaching back as far as your longest-tenured employee, could reveal the potential for such issues. Please contact any member of Schiff Hardin's Labor and Employment Group if you need help assessing potential issues or risks caused by an old handbook or related concerns.