Minnesota Court Confirms that Handbook Disclaimer Trumps Contract Claim

In Barker v. County of Lyon, — N.W.2d —-, 2012 WL 1570133 (Minn. Ct. App. May 7, 2012), the Minnesota Court of Appeals recently held that it is unreasonable as a matter of law for an employee to rely on provisions of a personnel handbook if the handbook also contains a disclaimer warning that the employer can modify or eliminate any of the policies at any time.

The case involved the Lyon County personnel manual, which had been altered numerous times over the years.  In 1985, the manual guaranteed retiring employees certain benefits.  In 1991, the manual was amended to include a provision stating that the county reserved the right “to change any of these policies, after notice to and input from employees.” In 1995, the county added a clause on the front of the manual in large, bold-face capital letters stating, “THIS POLICY MANUAL IS NOT AN EMPLOYMENT CONTRACT.”

In 1999, the manual was amended yet again to cut off the retirement benefit for employees hired after May 1, 1997.  Finally, in 2009, another change to the manual capped the retirement benefit for all employees, including those hired before May 1, 1997.

Several current and former employees who lost benefits as a result of the amendments brought suit based on the theory of promissory estoppel, which is a legal term meaning “detrimental reliance.”  To succeed with such a claim, the employees needed to show that (1) the county made a “clear and definite promise”; (2) the county intended to induce the employees to rely on the promise; (3) the employees reasonably relied on the promise to their detriment; and (4) the promise must be enforced to prevent injustice.

Like the district court, the appellate court ruled against the employees, finding that their reliance on the pre-2009 versions of the manual was unreasonable because of the disclaimer.  The court further rejected the employees’ argument that they could rely on oral promises made by county representatives.  The court reasoned that “any reliance on oral promises that contradicted provisions in the policy manual was, as a matter of law, unreasonable” because such representations explicitly contradicted the manual’s disclaimer.

Bottom Line

The Barker decision appears to be the first published decision arising from Minnesota’s state courts declaring that it is unreasonable as a matter of law for an employee to rely on a provision contained in an employee handbook where the handbook contains a disclaimer warning it can be changed at any time.  If you haven’t already, employers should consider adding a similar disclaimer to their handbooks and manuals.