Opinion ID: 2352789
Heading Depth: 1
Heading Rank: 2

Heading: personnel policy as contractual right.

Text: HAM claims that it cannot be required to pay Smith and Harrell under the on call provision of its personnel policy because that policy does not confer any contractual rights on its employees. We disagree. In Kentucky Unemployment Insurance Commission v. Goode, 631 S.W.2d 28 (Ky.App.1982), employees at Whirlpool Corporation's Danville, Kentucky, plant sought payment of unemployment compensation benefits during a two-week period when the plant was shut down. The Court of Appeals noted that a company handbook given to all new employees provided that [t]he company reserves the right to close the plant for a prescribed period of time each year, and to require employees to take their vacations during such period. Id. at 29. The panel upheld the Unemployment Insurance Commission's conclusion that this provision in the handbook was a part of the employment contract. Id. at 30. In effect, the employees agreed to the shutdown and vacation provisions by their acceptance and retention of their employment. Id. at 29. The same reasoning applies here. An express personnel policy can become a binding contract once it is accepted by the employee through his continuing to work when he is not required to do so. Hoffman-La Roche, Inc. v. Campbell, 512 So.2d 725, 733 (Ala.1987). See also Dahl v. Brunswick Corp., 277 Md. 471, 356 A.2d 221, 224 (1976) ([T]here is abundant support for the proposition that employer policy directives regarding aspects of the employment relation become contractual obligations when, with knowledge of their existence, employees start or continue to work for the employer.); Toussaint v. Blue Cross & Blue Shield of Mich., 408 Mich. 579, 292 N.W.2d 880, 885 (1980) ([S]uch a provision may become part of the contract either by express agreement, oral or written, or as a result of an employee's legitimate expectations grounded in an employer's policy statements.); Southwest Gas Corp. v. Ahmad, 99 Nev. 594, 668 P.2d 261, 261 (1983) (Her continued employment after formal delivery of the handbook provides sufficient consideration for modifying the employment agreement by inclusion of the handbook provisions.); Cook v. Heck's Inc., 176 W.Va. 368, 342 S.E.2d 453, 459 (1986) (We conclude that a promise of job security contained in an employee handbook distributed by an employer to its employees constitutes an offer for a unilateral contract; and an employee's continuing to work, while under no obligation to do so, constitutes an acceptance and sufficient consideration to make the employer's promise binding and enforceable.). [E]mployer statements of policy ... can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights in the employee, and, hence, although the statement of policy is signed by neither party, can be unilaterally amended by the employer without notice to the employee, and contains no reference to a specific employee, his job description or compensation, and although no reference was made to the policy statement in preemployment interviews and the employee does not learn of its existence until after his hiring. Toussaint, 292 N.W.2d at 892. The principle is akin to estoppel. Once an employer establishes an express personnel policy and the employee continues to work while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in effect. If the employer unilaterally changes the policy, the terms of the implied contract are also thereby changed. HAM's reliance on Nork v. Fetter Printing Co., 738 S.W.2d 824 (Ky.App.1987), and McCart v. Brown-Forman Corp., 713 F.Supp. 981 (W.D.Ky.1988), is misplaced. In Nork , a Court of Appeals panel considered three separate cases in which it was claimed that company policy expressed in an employee handbook or manual created an implied contract that overrode the terminable-at-will rule with respect to indefinite employment. In the first, the handbook expressed policies that the employer would merely strive to follow. The panel held this did not create an obligation on the part of the employer to follow those policies. Id. at 825. In the second, the manual contained the following disclaimer: I understand that this manual is a summary of the policies and rules which guide [employer] in its relationship with its employees. It is not a contract of employment, and I do not construe it as such. I understand it is terminable at the will of either the employee or the employer. Id. at 826. Similarly, the third contained this disclaimer: It should be clearly understood that the continued employment of any associate of the Company will depend upon the successful performance of all work assigned to the associate, and the general following of the guidelines of this booklet, during a trial period of up to ninety (90) days, and upon the continued successful performance and the further need of the associate's continued employment by the Company. Id. The panel held that the two disclaimers precluded the employees' claims that the handbook or manual constituted an agreement not to terminate the employment at will. Id. at 827. In McCart , the application signed by the employee contained the following provision: It is agreed and understood that by assigning any work ... that the relations between me and the Corporation shall be a hiring at will, terminable at any time by either of the parties thereto. The court held that the mere reference to an employment contract in a company handbook did not constitute an agreement superseding the terminable-at-will provision in the employment application form. 713 F.Supp. at 983. Here, the language used in the personnel policy is not precatory, like that held to be insufficient in the first policy addressed in Nork , and there is no disclaimer. The personnel policy adopted by HAM's board of directors created one rate of compensation for on call employees and another for subject to call employees. If a jury finds that Smith and Harrell were on call employees, the personnel policy created a contractual obligation to pay them at that rate. Accordingly, the Court of Appeals is affirmed in both of these appeals and these cases are remanded to the Shelby Circuit Court and the Bell Circuit Court, respectively, for further proceedings in accordance with the content of this opinion. All concur.