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Finch v. Cahners Healthcare Group

A-6805-99T3 (N.J. Super. App. Div. 2001) (Unpublished)

EMPLOYER-EMPLOYEE; HANDBOOKS—Where a company’s employees have a reasonable expectation that their employee handbook gives rise to contractual obligations, even a fired-at-will employee may be entitled to breach of contract damages.

Alleging that he had been terminated arbitrarily “without notice or good cause” and in breach of a “contractual implication, “a former employee sued his former employer. The lower court recognized the employee to be an at-will employee and dismissed the complaint. On appeal, the former employee agreed that he had been engaged at-will, but contended that he still had several enforceable contractual rights, including severance and other benefits. This was the second time that the employee had worked for his company. About seventeen months after first resigning his employment, he was re-employed, but without a written employment contract. He did receive an employee’s handbook covering such topics as vacation, paid holidays, sick pay, and severance pay. A year later, when the company was reorganized after a merger, the employee was terminated “allegedly due to a resulting reorganization.” He refused to sign a release that said if he “accepted the payment and signed the release he would be ‘giving up important rights.’” On appeal, the Court recognized that, generally, “employers may fire at-will employees ‘for good reason, bad reason, or no reason at all,’ ... and with or without notice.” On the other hand, an employment handbook can constitute an implied contract between the employer and employee. The “key consideration in determining whether an employment manual gives rise to contractual obligations is the reasonable expectation of the employees.” It didn’t matter to the Appellate Division that almost all prior cases exploring that principle dealt with whether certain disciplinary procedures must be followed by management before terminating an employee. To determine whether an implied contract exists, there are several factors to be explored usually involving “the specific provisions of the manual and the context in which the manual was prepared and delivered.” The handbook in question contained a detailed section explaining severance pay and the manner in which it would be calculated. The employer contended that when its former employee received the handbook, “he signed an ‘acknowledgment’ indicating that no contract was intended.” The Court did not read the acknowledgment form in the same way because it only stated “that the Employee Handbook contain[ed] a summary of the benefit programs currently offered to [the company’s] employees and that [the company] reserve[ed] the right to modify these programs at any time.” Nothing in the employment handbook or in the company’s personnel guidelines for its managers said that no contract was intended. Further, there was no evidence that the handbook specified that the benefits were not conditions of employment and were not intended to bind the company in a contractual way. According to the Court, “[t]he handbook only made clear that the company could change benefits at any time.” Therefore, the Court thought that there was a factual dispute regarding whether the reasonable expectations of the company’s employees, including this particular former employee, “understood that the handbook, and particularly its provision for severance pay, was intended to establish employment benefits.” This factual dispute was sufficient to withstand summary judgment of the severance claim and, although the employee’s unlawful termination agreement was properly dismissed, his claim with respect to breach of the contractual obligation, in particular the severance pay obligation, was remanded for a jury trial.


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