Have Your Cake And Eat It, Too? Handbook Contract Disclaimers & Mandatory Arbitration Policies

A New Jersey court recently used the so-called contract "disclaimer" language in an employer's handbook to preclude the employer from enforcing a mandatory arbitration program contained in that same handbook. The court's decision must of course be considered by employers who wish to enforce alternate dispute resolution procedures without falling into the same trap. However, as also shown herein the decision appears contrary to federal policy, enforced by a series of U.S. Supreme Court decisions that strongly favor enforcement of arbitration agreements.

As background, in New Jersey, as in most states, employment is presumed to be "at will," meaning that either the employer or the employee can freely terminate the employment relationship without a reason (cause) to do so. Under certain circumstances, however, express promises contained in an employer handbook can result in contractually binding terms and conditions of employment. There is a simple way to avoid any such binding effect. The employer can include in the handbook a "disclaimer," that is, language denying that it is making any promises or expressing any intent to be bound by statements in the document. See, e.g., Woolley v. Hoffmann-La Roche, 99 N.J. 284, 309 (N.J.), modified, 101 N.J. 10 (1985).

The Morgan Case

In a recent case, an employer's disclaimer language came back to haunt it. In Morgan v. Raymours Furniture Co., N.J. Super. ___ (App. Div. Jan. 7, 2016), the New Jersey Appellate Division held that the presence of language stating that nothing in the handbook was contractually binding against the employer meant that the employer could not enforce a mandatory arbitration procedure also included in the handbook.

The handbook disclaimer read:

Nothing in this Handbook or any other Company practice or communication or document, including benefit plan descriptions, creates a promise of continued employment, [an] employment contract, term or obligation of any kind on the part of the Company (emphasis supplied by Court).

In addition, the court noted that when electronically acknowledging receipt of the handbook, an employee signified only that he or she "received a copy of the Associate Handbook" (emphasis added by Court), and, further, that he or she:

... understand[s] that the rules, regulations, procedures and benefits contained therein are not promissory or contractual in nature and are subject to change by the company (emphasis supplied by Court).

The appellate court felt that...