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Arace v. PNC Bank, N.A.

A-2200-03T2 (N.J. Super. App. Div. 2004) (Unpublished)

EMPLOYMENT MANUALS; DISCLAIMERS—A disclaimer in an employee manual stating that the employer can fire employees at any time for any reason, if prominently displayed in the places an employee would be expected to look, overrides any program of disciplinary reviews set forth in that same manual. —

An employer fired two employees for sending inappropriate email messages while at work. The employees then sued for breach of an implied contract, breach of the implied covenant of good faith and fair dealing, and wrongful discharge in violation of public policy. The employees were originally at-will employees, hired by the employer’s predecessor. When the predecessor and the employer merged, the employer gave out an employee manual. The employees contended that the manual created an implied contract modifying their at-will status by requiring certain specific disciplinary steps before termination. The lower court granted the employer’s motion for summary judgment, holding that the manual did not create an implied contract and that the disclaimers in the manual effectively notified the employees of their continued at-will status. On appeal, the employees contended that the corrective action procedure in the manual provided them with a reasonable expectation of job security and gave rise to an implied contract. They also argued that the disclaimers were neither “prominent” nor “clear.”

The Appellate Division rejected the employees’ arguments and affirmed the lower court’s decision. Absent an employment contract, an employee is terminable at the will of the employer. If a discharged employee can demonstrate that a company manual was widely distributed and contained job security and disciplinary procedures which an employee reasonably could consider as establishing reciprocal rights and obligations, and that he or she, in reliance on the manual continued his or her employment, then the manual may be considered an implied contract of employment. However, a prominent and clear disclaimer may overcome such an implication. The focus of inquiry is the employee’s reasonable expectation, which encompasses consideration of the manual’s specific provisions and the context of its preparation and distribution.

The employees argued that by setting out a corrective action program, they had a reasonable expectation that compliance with the corrective action provisions was mandatory rather than permissive. The Court disagreed. Although the employer’s disciplinary guidelines provided a comprehensive pronouncement of its termination policy, the Court found that the guidelines were not sufficiently definitive for an employee to reasonably expect the manual to represent an employment contract. The disciplinary procedures were clearly not mandatory because the manual specifically told the employees that the procedures were not required and that the employer reserved the right to depart from them when, in its sole discretion, such departure was deemed warranted. The handbook did not include any express mandate that all preliminary steps must be exhausted before an employee could be terminated for cause. Furthermore, the handbook repeatedly stated that employees could be terminated at any time for any reason.

The employees also argued that the lower court erred in granting summary judgment by deciding as a matter of law that the disclaimer was both prominent and effective. The Appellate Division stated that even if the lower court had held that a reasonable employee could have read parts of the manual as establishing certain employee expectations, where the facts surrounding the content and placement of a disclaimer are themselves clear and uncontraverted, the effectiveness of a disclaimer can be resolved by a court as a question of law.

The employees also asserted that the employer failed to “set off in any way” the disclaimer, so as to attract a reader’s attention. However, the Court stated that the disclaimer does not require bold type, set-off, or any particular symbol to alert the employee. The placement of the disclaimer can be just as effective. In this case, disclaimers were pervasive throughout the manual, sometimes in bold face, sometimes prominently placed, and sometimes both. The Court pointed out that the disclaimer in the introduction of the manual was in bold print and placed in the first paragraph of the introduction, which was on the second page of the manual, following the welcome page. In the involuntary separation section, the logical place an employee would look to determine her or is rights, the disclaimer was in normal font but appeared in the first two sentences of the section.

For these reasons, the Appellate Division affirmed the lower court’s decision to grant the employer’s motion for summary judgment, holding that the employment manual provided straightforward statements of the employees continuing at-will status.


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